Question

11.    Imposing an excise tax in a market for a good that exhibits inelastic demand
    a.    reduces market supply and generates tax revenue
    b.    increases market supply and generates tax revenue
    c.    reduces market demand and fails to generate tax revenue
    d.    reduces market supply and fails to generate tax revenue


12.    All the combinations of two products that will yield the same total utility to a consumer are reflected in
    a.    the budget line
    b.    an indifference curve
    c.    the marginal rate of substitution
    d.    the position of consumer equilibrium


13.    A decrease in the price of a good will cause the consumer to attain a new equilibrium
    a.    on a lower indifference curve
    b.    on a higher indifference curve
    c.        on the same indifference curve but with a combination of goods containing more of the good whose price has fallen
    d.    on the same indifference curve but with a combination of goods containing less of the good whose price has fallen


14.    A consumer’s indifference map consists of a
    a.    set of intersecting indifference curves
    b.    series of budget lines and preferences
    c.    set of non-intersecting indifference curves
    d.    single indifference curve and several budget lines


15.    Suppose we observe the supply of corn in the immediate run. If there is an increase in the demand for corn,
    a.    equilibrium price and quantity will both increase
    b.    equilibrium price will increase, but equilibrium quantity will decrease
    c.    equilibrium price will decrease, but equilibrium quantity will increase
    d.    equilibrium price will increase, but equilibrium quantity will be unchanged

16.   Price elasticity of supply describes the ratio of the
   a.   quantity supplied to the price  
   b.   quantity supplied as a percentage of the price to the quantity demanded as a percentage of the price
   c.    change in quantity supplied to the change in price
   d.   percentage change in quantity supplied to the percentage change in price


17.   The market period is a length of time in which
   a.   none of the factors of production can be changed
   b.   all of the factors of production can be changed
   c.    the supply of a good is perfectly elastic
   d.   some of the factors of production can be changed but at least one other cannot


18.   Convex indifference curves
   a.   are upward sloping straight lines, reflecting constant marginal utility  
   b.   get flatter as you move down the curves to the right  
   c.    will never be tangent to a budget line
   d.   are downward sloping straight lines, reflecting diminishing marginal utility


19.   An indifference curve shows
   a.   combinations of goods that can be produced if all resources are fully employed
   b.   all combinations of two commodities that are equally desirable to a consumer
   c.    number of units of beef the consumer must sacrifice to obtain one more unit of chicken
   d.   how decisions are made in a nonmarket economy\


20.   The slope of an indifference curve is called the
   a.   bliss gradient
   b.   happiness slope
   c.    marginal rate of substitution
   d.   marginal rate of transformation

Answer 1

20) C. Slope of IC is MrS. Where MRS is the no of unit sacrificed in order to gain an additional unit of other good that leaves the consumer on same level of satisfaction.

19)B. IC shows different combination that gives same level of satisfaction.

18)B. Convex becomes flatter and flatter as we moves down.

17)D. Market period is when it is of short period and atleast one factor is fixed.

16)C. Elasticity is the responsiveness of quantity supplied as a result of some % change in price.

15)D. In short run, supply is inelastic and increase in demand will increase the price but leaves equilibrium quantity same.

14)C. Indifference map is a set of non intersecting indifference curves.