Download S9 Practice Test

Section 9 Practice Test
Multiple Choice
Identify the choice that best completes the statement or answers the question.
1. If the price of a good is increased by 20% and the quantity demanded changes by 15%, then the price elasticity of
demand is equal to:
a. 0.75.
b. approximately 0.33.
c. approximately 1.33.
d. 1.
e. zero.
2. If the demand curve is downward sloping, as calculated the price elasticity of demand is:
a. always positive.
b. always greater than 1.
c. usually equal to 1.
d. always negative.
e. always equal to zero.
3. Gas prices recently increased by 25%. In response, purchases of gasoline decreased by 5%. Based on this data, the
price elasticity of demand for gas is:
a. 5.
b. 2.
c. 0.2.
d. 0.5.
e. 1.5.
Figure 47-1: Demand for Shirts
4. (Figure 47-1: Demand for Shirts) The absolute value of the price elasticity of demand for the segment AB is:
a. less than the price elasticity of demand for segment BC.
b.
c.
d.
e.
is less than the price elasticity of demand for segment EF.
is zero.
is equal to the price elasticity of demand for segment BC.
is greater than the price elasticity of demand for segment BC.
5. Suppose the price of barley increases by 16.53%. If breweries buy 3.28% less barley after the price increase, the
total revenue for barley producers will ________ due to the ________ effect being greater than the ________
effect.
a. decrease; quantity; price
b. increase; price; quantity
c. not change; quantity; price
d. increase; quantity; price
e. decrease; price; quantity
6. If total revenue goes down when price falls, the price elasticity of demand is said to be:
a. price-inelastic.
b. price unit-elastic.
c. price-elastic.
d. perfectly price-elastic.
e. equal to one.
7. Suppose the price of cereal rose by 25% and the quantity of milk sold decreased by 50%. Then we know that the:
a. cross-price elasticity between cereal and milk is –2.
b. cross-price elasticity between cereal and milk is –0.5.
c. price elasticity of demand for milk is 2.
d. cross-price elasticity of demand for milk is 2.
e. price elasticity of demand for cereal is 0.5.
8. If your purchases of shoes decrease from 11 pairs per year to 9 pairs per year when the price of shirts increases
from $8 to $12, then, for you, shoes and shirts are considered:
a. inferior goods.
b. luxury goods.
c. substitute goods.
d. complementary goods.
e. unrelated goods.
Table 48-1: Johnson’s Income and Expenditures
Quantity Purchased per Month
Monthly
Income
Steaks
Magazines
Movies
Pizzas
$2,000
2
4
6
8
$3,000
2
6
6
6
Table 48-1: Johnson's Income and Expenditures
9. (Table 48-1: Johnson's Income and Expenditures) Johnson's income elasticity of demand for magazines is:
a. negative.
b. 0.
c. greater than 0 but less than 1.
d. 1.
e. greater than 1.
Table 49-1: Consumer Surplus and Phantom Tickets
Student
Willingness to Pay
Jessica
$150
Jacquelyn
125
Brad
105
Robert
60
Gwen
25
Table 49-1: Consumer Surplus and
Phantom Tickets
10. (Table 49-1: Consumer Surplus and Phantom Tickets) If the box-office price of a ticket to see Phantom of the
Opera is $50, and there is no other market for tickets, then total consumer surplus for the five students is:
a. $100.
b. $175.
c. $230.
d. $240.
e. $200.
This table shows some Atlanta college
students' willingness to pay to see The
Nutty Nutcracker, by the Atlanta Ballet.
Student
Willingness to Pay
Lois
$100
Miguel
90
Narum
65
Oscar
50
Pat
15
Table 49-2: Consumer Surplus
11. (Table 49-2: Consumer Surplus) If the price of a ticket to see The Nutty Nutcracker is $50, then Narum's consumer
surplus is:
a. $60.
b. $50.
c. $15.
d. $240.
e. $115.
Figure 49-2: Consumer Surplus II
12. (Figure 49-2: Consumer Surplus II) At a price of P1, consumer surplus equals the area:
a. ABP2.
b. AFP1.
c. AQ30.
d. P1P2BF.
e. 0P1FQ1.
13. Suppose the government imposes a $10 excise tax on the sale of sweaters by charging suppliers $10 for each
sweater sold. If the demand curve for sweaters is downward sloping, we would predict that:
a. the price of sweaters will increase by $10.
b. consumers of sweaters will bear the entire burden of the tax.
c. the quantity of sweaters purchased will increase.
d. the price of sweaters will decrease by $10.
e. the price of sweaters will increase by less than $10.
Scenario 50-1: Market for Taxi Rides
Fare
(per ride)
$7.00
6.50
6.00
5.50
5.00
4.50
4.00
3.50
3.00
Quantity Demanded
(millions of
rides per year)
6
7
8
9
10
11
12
13
14
Quantity Supplied
(millions of
rides per year)
14
13
12
11
10
9
8
7
6
14. (Scenario 50-1: Market for Taxi Rides) The figure represents a competitive market for taxi rides. If the government
now imposes an excise tax of $3 per ride (causing the supply curve to shift upward by that amount), then the
government will collect tax revenues of ________, which might be used for worthwhile purposes, but there will be
a deadweight loss to society of ________ caused by this tax.
a. $9 million; $1 million
b. $16 million; $2 million
c. $21 million; $4.5 million
d. $24 million; $6 million
e. $12 million; $4 million
Figure 50-6: Market for Yachts
15. (Figure 50-6: Market for Yachts) If the government imposes a $30,000 tax on yachts (collected from the
producers), consumers will pay ________ of the tax and producers will pay ________.
a. $20,000; $10,000
b. $15,000; $15,000
c. $10,000; $20,000
d. $5,000; $25,000
e. $30,000; $0
Figure 50-8: The Gas Market
16. (Figure 50-8: The Gas Market) The figure represents the market for gasoline. An excise tax has been levied on
each gallon of gasoline supplied by producers. What is the tax rate?
a. $1.50 per gallon
b. $1 per gallon
c. $22,500
d. $15,000
e. $4 per gallon.
17. Assume that the marginal utilities for the first three units of a good consumed are 200, 150, and 125, respectively.
The total utility for the first unit is:
a. 125.
b. 150.
c. 200.
d. 350.
e. 475.
Units
Total Utility
0
0
1
2
3
4
20 35 45 50
Table 51-1: Utility
5
50
6
45
7
35
18. (Table 51-1: Utility) The marginal utility for the fifth unit is:
a. 15.
b. 10.
c. 5.
d. 0.
e. 50.
Hours of
Exercise
Total Utility
0
0
1
5
2
15
3
23
4
29
5
33
Table 51-2: Exercise and Total Utility
19. (Table 51-2: Exercise and Total Utility) The table shows a consumer's total utility from consuming hours of
exercise at the gym. Given this information, what can be said about this consumer's marginal utility curve for
exercise?
a. Marginal utility initially decreases, but eventually increases as more exercise is consumed.
b. Marginal utility always decreases as more exercise is consumed.
c. Marginal utility always increases as more exercise is consumed.
d. Marginal utility initially increases, but eventually stays constant as more exercise is
consumed.
e. Marginal utility initially increases, but eventually decreases as more exercise is consumed.
Figure 51-1: Budget Lines for Tea and Scones
20. (Figure 51-1: Budget Lines for Tea and Scones) For months now, Agnes has had $20 per month to spend on tea
and scones. The price of each cup of tea and each scone has been $1. Which chart(s) in the figure show(s) what
will happen to her budget line if her income decreases to $10?
a. Chart A
b. Chart B
c. Chart C
d. Chart D
e. Chart B and C