Question

37)

Price per Constant- Quality of X	Quantity of X Demanded per Time Period	Quantity of X Supplied per Time Period
$10	0	150
8	20	120
6	40	90
4	60	60
2	80	30
0	100	0

Based on the table above, if other influences remain constant and the market is free to adjust, a stable equilibrium price will be established at

Select one:

a. $4.

b. $6.

c. $8.

d. $2.

A shortage will occur when

Select one:

a. the price is below the market-clearing level.

b. the price equals the market-clearing level.

c. there is excess supply.

d. the price is above the market-clearing level.

41)

The price elasticity of demand measures

Select one:

a. the responsiveness of the quantity of a good demanded to changes in the price of the good.

b. the quantity demanded of a good at a given price.

c. the demand for a product holding prices constant.

d. the horizontal shift in the demand curve when the price of a good changes.

A price elasticity of 0.4 indicates that

Select one:

a. a 4 percent increase in price leads to a 10 percent decrease in quantity demanded.

b. a 1 percent increase in price leads to a 4 percent decrease in quantity demanded.

c. a 0.4 percent decrease in price leads to a 1 percent increase in quantity demanded.

d. a 10 percent decrease in price leads to a 4 percent increase in quantity demanded.

Suppose 1000 units of a good are being sold at $10 a unit. If price increases to $15 and total revenue increases to $15 000, then rises by $1000 for every dollar increase in price after that, we know that

Select one:

a. demand is perfectly elastic.

b. the demand curve is vertical.

c. the demand curve is downward-sloping and the firm is on the inelastic portion of the demand curve.

d. the demand curve is a rectangular hyperbola.

A firm wants to increase its revenues. If the price elasticity of demand for the good it sells is 1.46, ceteris paribus the firm can achieve its goal by

Select one:

a. increasing its price.

b. lowering its price.

c. keeping its price the same.

d. changing price, but more information is needed to determine whether up or down.

If quantity supplied stays the same no matter what the price of a good, then supply of the good is

Select one:

a. perfectly inelastic.

b. perfectly elastic.

c. unitary elastic.

d. neither elastic nor inelastic.

A situation in which a cost or benefit associated with an economic activity spills over to third parties is called

Select one:

a. an external cost.

b. a public good.

c. the free-rider problem.

d. a merit good.

Which of the following is an example of a public good?

Select one:

a. medical care

b. Canada Post

c. national defense

d. CN Railway

Queuing is a way to ration goods and services

Select one:

a. through markets.

b. through prices.

c. through the use of political power.

d. on a first-come, first-serve basis.

A price ceiling below equilibrium will usually result in

Select one:

a. non-price rationing.

b. an excess supply.

c. an increase in the market clearing price.

d. a decrease in the market clearing price.

Economists use what term to describe the want-satisfying power of a good or service?

Select one:

a. demand

b. utility

c. marginal propensity to consume

d. income elasticity

As an individual consumes more of a particular commodity, ceteris paribus, the total amount of utility derived from that consumption usually

Select one:

a. increases at a constant rate.

b. increases at an increasing rate.

c. increases at a decreasing rate.

d. decreases at an increasing rate.

Answer 1

1) Equilibrium is where QD=QS

P = 4

2) A shortage will occur when the QD>QS which occurs when the price is below the equilibrium level

the price is below the market-clearing level.

3) Elasticity = percentage change in demand/percentage change in price

a. the responsiveness of the quantity of a good demanded to changes in the price of the good.

4)

A price elasticity of 0.4 indicates that

A 1% increase/decrease in price will decrease QD by 0.4 so a 10% increase in price will decrease/increase QD by 4%

d. a 10 percent decrease in price leads to a 4 percent increase in quantity demanded.