Question

10) According to the textbook, which of the following methods for coordinating the supplies and demands for scarce goods tends to work best to enhance the freedom and power of people who want the goods?

A) A lottery

B) Equal shares for all

C) First come, first served

D) Highest money bid

14) Medical service by physicians

A) could be made a free good through universal health insurance.

B) is a good for which the demand is completely inelastic.

C) is a good for which there is no satisfactory substitute.

D) would become a free good if physicians did not charge monetary fees.

E) would cost some patients more in non-monetary terms than they now pay if physicians did not charge monetary fees.

16) Were the price of gasoline to permanently increase by 10% overnight and stay there for the foreseeable future. Other things constant,

A) the demand for gasoline would fall immediately.

B) the quantity demanded for gasoline would fall immediately.

C) the quantity demanded for gasoline would fall more dramatically over time

D) the quantity demanded for gasoline would remain unchanged, because cars can only be run on gasoline.

17) What effect would an increase in the price of pork have on the demand for beef?

A) It would decrease the demand for beef.

B) It would decrease the demand for beef only if the demand for beef is elastic.

C) It would increase the demand for beef.

D) It would increase the demand for beef only if the demand for beef is inelastic.

19) If textbook prices rise by 5% this year, and textbook purchases fall by 5% this year, then the price elasticity of demand is:

A) .05.

B) .10.

C) .55.

D) .95.

E) 1.0.

20) If each 10 percent increase in the price of gasoline reduces by 2 percent the quantity purchased, the price elasticity of demand for gasoline is

A) .2.

B) 5.

C) 8.

D) 12.

Answer 1

10) (Option C)

14) There are no substitutes for medical services. (Option C)

16) If price change is permanent then commuters would respond more strongly because there is no delay in decision to switch to some other measures which is usually the case when price hike is temporary. (Option C)

17) Pork and beef are substitutes so if pork is expensive, people will go for beef and this increases the demand for beef. (Option C)

19) Price elasticity = %change in Q/%change in P = 5%/5% = 1 (Option E)

20) Price elasticity = %change in Q/%change in P = 2%/10% = 0.2 (Option A)