question
Boeing Corporation and Airbus Industries are the only two producers of long-range commercial aircraft. This market is NOT perfectly competitive because:
a) Airbus receives subsidies from the EU
b) Each company can significantly affect prices
c) each company has annual sales over $10 billion
d) Airbus cannot sell aircraft to the US government
a) Airbus receives subsidies from the EU
b) Each company can significantly affect prices
c) each company has annual sales over $10 billion
d) Airbus cannot sell aircraft to the US government
answer
b) Each company can significantly affect prices
question
Elasticity measures:
a) the slope of the demand curve
b) sensitivity of price to a change in quantity
c) the inverse of the slope of a demand curve
d) the percentage change in one variable in response to a one percent increase in another variable
a) the slope of the demand curve
b) sensitivity of price to a change in quantity
c) the inverse of the slope of a demand curve
d) the percentage change in one variable in response to a one percent increase in another variable
answer
d) the percentage change in one variable in response to a one percent increase in another variable
question
In a perfectly competitive market:
a) there is a single seller
b) no single buyer or seller can significantly affect the market price
c) there are a few buyers
d) there is a cartel
a) there is a single seller
b) no single buyer or seller can significantly affect the market price
c) there are a few buyers
d) there is a cartel
answer
b) no single buyer or seller can significantly affect the market price
question
In the long run, new firms can enter an industry and so the supply elasticity tends to be:
a) perfectly elastic
b) more elastic than in the short run
c) perfectly inelastic
d) less elastic that in the short run
a) perfectly elastic
b) more elastic than in the short run
c) perfectly inelastic
d) less elastic that in the short run
answer
b) more elastic than in the short run
question
The income elasticity of demand is the:
a) percent change in income resulting from a one percent increase in price
b) percent change in quantity demanded resulting from a one percent increase in income
c) absolute change in quantity demanded resulting from a one unit increase in income
d) percent change in quantity demanded resulting from the absolute increase in income
e) percent change in income resulting from a one percent increase in quantity demanded
a) percent change in income resulting from a one percent increase in price
b) percent change in quantity demanded resulting from a one percent increase in income
c) absolute change in quantity demanded resulting from a one unit increase in income
d) percent change in quantity demanded resulting from the absolute increase in income
e) percent change in income resulting from a one percent increase in quantity demanded
answer
b) percent change in quantity demanded resulting from a cone percent increase in income
question
The introduction of refrigerators into American homes:
a) did not affect the short run own price elasticity of demand for raw meat.
b) decreased the magnitude of the short run own price elasticity of demand for smoked meats.
c) decreased the magnitude of the short run own price elasticity of demand for raw meat.
d) increased the magnitude of the short run own price elasticity of demand for raw meat.
a) did not affect the short run own price elasticity of demand for raw meat.
b) decreased the magnitude of the short run own price elasticity of demand for smoked meats.
c) decreased the magnitude of the short run own price elasticity of demand for raw meat.
d) increased the magnitude of the short run own price elasticity of demand for raw meat.
answer
d) increased the magnitude of the short run own price elasticity of demand for raw meat.
question
To arbitrage a price difference between two markets, you should:
a) sell in the low-price market and buy in the high-price market.
b) sell in both markets to capture a lower average "market price."
c) none of the given answers are correct
d) buy in the low-price market and sell in the high-price market.
a) sell in the low-price market and buy in the high-price market.
b) sell in both markets to capture a lower average "market price."
c) none of the given answers are correct
d) buy in the low-price market and sell in the high-price market.
answer
d) buy in the low-price market and sell in the high-price market
question
To evaluate the potential impact of introducing the hybrid Prius auto into the U.S. market, Toyota Motor Corporation would use:
a. positive economic analysis.
b. normative economic analysis.
c. forensic analysis.
d. negative economic analysis.
a. positive economic analysis.
b. normative economic analysis.
c. forensic analysis.
d. negative economic analysis.
answer
a. positive economic analysis.
question
Which of the following statements about markets and industries is TRUE?
a. An industry includes buyers but not sellers.
b. A market includes buyers but not sellers.
c. A market includes sellers but not buyers.
d. An industry includes sellers but not buyers.
a. An industry includes buyers but not sellers.
b. A market includes buyers but not sellers.
c. A market includes sellers but not buyers.
d. An industry includes sellers but not buyers.
answer
d) An industry includes sellers but not buyers
question
Which of the following will NOT cause a shift in the supply of gasoline?
a. A decrease in the price of gasoline
b. A decrease in the price of crude oil
c. An improvement in oil refining technology
d. An increase in the wage rate of refinery workers
a. A decrease in the price of gasoline
b. A decrease in the price of crude oil
c. An improvement in oil refining technology
d. An increase in the wage rate of refinery workers
answer
a. A decrease in the price of gasoline
question
Which of the following would shift the demand curve for new textbooks to the right?
a. A fall in the price of paper used in publishing texts
b. A fall in the price of new textbooks.
c. An increase in the number of students attending college
d. A fall in the price of equivalent used textbooks
a. A fall in the price of paper used in publishing texts
b. A fall in the price of new textbooks.
c. An increase in the number of students attending college
d. A fall in the price of equivalent used textbooks
answer
c. An increase in the number of students attending college
question
Which of these measures the responsiveness of the quantity of one good demanded to an increase in the price of another good?
a. price elasticity.
b. cross substitution elasticity.
c. cross-price elasticity.
d. income elasticity.
a. price elasticity.
b. cross substitution elasticity.
c. cross-price elasticity.
d. income elasticity.
answer
c. cross-price elasticity
question
A demand curve of the form: Q=a-bP where a and b are positive real numbers,:
Select one:
a. is a downward sloping straight line.
b. has a constant price elasticity of demand.
c. is a parabolic curve.
d. is an upward sloping straight line.
Select one:
a. is a downward sloping straight line.
b. has a constant price elasticity of demand.
c. is a parabolic curve.
d. is an upward sloping straight line.
answer
a. is a downward sloping straight line
question
A supply curve reveals:
a. the difference between quantity demanded and quantity supplied at each price.
b. the quantity of output consumers are willing to purchase at each possible market price.
c. the quantity of output that producers are willing to produce and sell at each possible market price.
d. the maximum level of output an industry can produce, regardless of price.
a. the difference between quantity demanded and quantity supplied at each price.
b. the quantity of output consumers are willing to purchase at each possible market price.
c. the quantity of output that producers are willing to produce and sell at each possible market price.
d. the maximum level of output an industry can produce, regardless of price.
answer
c. the quantity of output that producers are willing to produce and sell at each possible market price.
question
Along any downward sloping straight-line demand curve:
a. both the price elasticity and slope vary.
b. both the price elasticity and slope are constant.
c. the price elasticity varies, but the slope is constant.
d. the slope varies, but the price elasticity is constant.
a. both the price elasticity and slope vary.
b. both the price elasticity and slope are constant.
c. the price elasticity varies, but the slope is constant.
d. the slope varies, but the price elasticity is constant.
answer
c. the price elasticity varies, but the slope is constant.
question
Consider a supply curve of the form: Q= c+dP If d equals zero, then supply is:
a. completely inelastic.
b. infinitely elastic
c. inelastic, but not completely inelastic.
d. elastic, but not infinitely elastic.
a. completely inelastic.
b. infinitely elastic
c. inelastic, but not completely inelastic.
d. elastic, but not infinitely elastic.
answer
a. Completely inelastic
question
For U.S. consumers, the income elasticity of demand for fruit juice is 1.1. If the economy enters a recession next year and consumer income declines by 2.5%, what is the expected change in the quantity of fruit juice demanded next year?
a. -2.75%
b. +27.5%
c. +2.75%
d. -27.5%
a. -2.75%
b. +27.5%
c. +2.75%
d. -27.5%
answer
a. -2.75%
question
If two goods are substitutes, the cross-price elasticity of demand must be
a. positive.
b. infinite.
c. zero.
d. negative.
a. positive.
b. infinite.
c. zero.
d. negative.
answer
a. positive
question
In the long run, new firms can enter an industry and so the supply elasticity tends to be
a. perfectly inelastic.
b. more elastic than in the short run.
c. perfectly elastic.
d. less elastic than in the short run.
a. perfectly inelastic.
b. more elastic than in the short run.
c. perfectly elastic.
d. less elastic than in the short run.
answer
b. more elastic than in the short run.
question
The demand for books is: Qd = 120 - P
The supply of books is: Qs = 5P
Refer to Scenario 2.1. What is the equilibrium price of books?
Select one:
a. 5
b. 10
c. 15
d. 20
The supply of books is: Qs = 5P
Refer to Scenario 2.1. What is the equilibrium price of books?
Select one:
a. 5
b. 10
c. 15
d. 20
answer
d. 20
question
Sugar can be refined from sugar beets. When the price of those beets falls,
a. the demand curve for sugar would shift right.
b. the demand curve for sugar would shift left.
c. the supply curve for sugar would shift right.
d. the supply curve for sugar would shift left.
a. the demand curve for sugar would shift right.
b. the demand curve for sugar would shift left.
c. the supply curve for sugar would shift right.
d. the supply curve for sugar would shift left.
answer
c. the supply curve for sugar would shift right.
question
Which of the following represents the price elasticity of demand?
Select one:
a. (AQ/P)-(AP/Q)
b. (AQ/P)/(AP/Q)
c. (AQ/P)+(AP/Q)
d. (AQ/P)x(AP/Q)
Select one:
a. (AQ/P)-(AP/Q)
b. (AQ/P)/(AP/Q)
c. (AQ/P)+(AP/Q)
d. (AQ/P)x(AP/Q)
answer
d. (AQ/P)x(AP/Q)
question
Which of the following would cause a shift to the right (in the short-run)of the supply curve for gasoline?
I. A large increase in the price of public transportation.
II. A large decrease in the price of automobiles.
III. A large reduction in the costs of producing gasoline.
a. II and III only
b. II only
c. I only
d. III only
I. A large increase in the price of public transportation.
II. A large decrease in the price of automobiles.
III. A large reduction in the costs of producing gasoline.
a. II and III only
b. II only
c. I only
d. III only
answer
d. III Only
question
Which of the following would cause an unambiguous decrease in the real price of DVD players (in the short-run)?
a. A shift to the right in the supply curve for DVD players and a shift to the left in the demand curve for DVD players.
b. A shift to the right in the supply curve for DVD players and a shift to the right in the demand curve for DVD players.
c. A shift to the left in the supply curve for DVD players and a shift to the right in the demand curve for DVD players.
d. A shift to the left in the supply curve for DVD players and a shift to the left in the demand curve for DVD players.
a. A shift to the right in the supply curve for DVD players and a shift to the left in the demand curve for DVD players.
b. A shift to the right in the supply curve for DVD players and a shift to the right in the demand curve for DVD players.
c. A shift to the left in the supply curve for DVD players and a shift to the right in the demand curve for DVD players.
d. A shift to the left in the supply curve for DVD players and a shift to the left in the demand curve for DVD players.
answer
a. A shift to the right in the supply curve for DVD players and a shift to the left in the demand curve for DVD players.
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