Download ECO 2301 Fall 2011 Sec 002 K. Becker Exam #2 Form 2

ECO 2301
Sec 002
Fall 2011
K. Becker
Exam #2
Form 2
Wednesday, November 9th
Name_______________________________
SIN: R__________________________
Choose the best answer to each of the following questions
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) The price elasticity of demand measures
1) _______
A) the slope of a budget curve.
B) the responsiveness of the quantity demanded to changes in price.
C) how often the price of a good changes.
D) how sensitive the quantity demanded is to changes in demand.
2) Dan sells newspapers. Dan says that a 4 percent increase in the price of a newspaper will decrease
the quantity of newspapers demanded by 8 percent. According to Dan, the demand for
newspapers is ________.
A) perfectly elastic
B) elastic
C) inelastic
D) unit elastic
2) _______
3) The price elasticity of demand for cigarettes is 0.4. If government wants to reduce smoking by 10
percent, by how much should it raise the price of cigarettes by imposing a tax?
A) by 25 percent
B) by 20 percent
C) by 10 percent
D) by 50 percent
3) _______
4) Along a straight-line demand curve, as the price falls the
A) demand is always unitary elastic.
B) elasticity of demand is constant.
C) demand becomes more elastic.
D) demand becomes less elastic.
4) _______
5) The demand for a good is elastic if
A) an increase in its price results in a decrease in total revenue.
B) a decrease in its price results in a decrease in total revenue.
C) an increase in its price results in an increase in total revenue.
D) the good is a necessity.
5) _______
6) A local transit authority charges $1 for a bus ride. An economics study suggests that in the price
range from $0.50 to $1.50, the elasticity of demand for bus trips is 1.1. To increase its revenue, the
transit authority should
A) lower the fare.
B) raise the fare.
C) leave the fare as it is.
6) _______
7) Toothpaste and toothbrushes are complements, so the ________ elasticity of demand is ________.
A) income; positive
B) cross; positive
C) cross; negative
D) income; negative
7) _______
8) The income elasticity of demand is ________ for a normal good and ________ for an inferior good.
A) positive; positive
B) positive; negative
C) negative; negative
D) negative; positive
8) _______
9) A market is allocatively efficient if
A) consumer surplus has been maximized.
B) the sum of the consumer surplus and the producer surplus has been maximized.
C) profit has been maximized.
D) producer surplus has been maximized.
9) _______
10) Allocative efficiency occurs when
A) marginal social benefit equals marginal social cost.
B) marginal social cost exceeds marginal social benefit.
C) marginal social benefit exceeds marginal social cost.
D) total social benefit exceeds total social cost.
10) ______
11) In the above figure, the amount of the tax per unit imposed on the sellers is
A) $1.00.
B) $0.50.
C) $1.50.
11) ______
12) In the above figure, the amount of tax revenue is
A) $8,000.
B) $6,000.
D) $2.00.
12) ______
C) $4,000.
D) $2,000.
13) In the above figure, the tax incidence is
A) split equally so that the buyers and sellers pay the same amount.
B) that neither the buyers nor the sellers pay it.
C) that most of it is paid by the sellers.
D) that most of it is paid by the buyers.
14) In the above figure, the deadweight loss due to the tax is
A) $1,000.
B) $2,000.
C) $4,000.
13) ______
14) ______
D) $8,000.
15) A country opens up to trade and becomes an importer of a sugar. In the sugar market, consumer
surplus will ________, producer surplus will ________, and total surplus will ________.
A) increase; decrease; increase
B) decrease; decrease; decrease
C) increase; decrease; decrease
D) decrease ; increase; increase
15) ______
The figure shows the market for helicopters in the United States, where D is the domestic demand curve and S is the
domestic supply curve. The United States trades helicopters with the rest of the world at a price of $36 million per
helicopter.
16) In the figure above, with international trade U.S. companies buy ________ helicopters per year.
A) 240
B) 360
C) 480
D) 720
16) ______
17) In the figure above, with international trade ________ helicopters per year are produced in the
United States.
A) 360
B) 720
C) 240
D) 480
17) ______
18) In the figure above, the United States ________ helicopters per year.
A) exports 720
B) exports 480
C) imports 240
18) ______
D) imports 480
The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic
supply curve. The world price is $20 per shirt.
19) In the figure above, with international trade American consumers buy ________ million shirts per
year.
A) 48
B) 32
C) 24
D) 16
19) ______
20) In the figure above, with international trade ________ million shirts per year are produced in the
United States.
A) 20
B) 48
C) 16
D) 32
20) ______
21) In the figure above, with international trade the United States ________ million shirts per year.
A) imports 48
B) exports 32
C) exports 16
D) imports 32
21) ______
22) In the figure above, international trade ________ consumer surplus in the United States by
________ .
A) decreases; $192 million
B) increases; $192 million
C) decreases; $320 million
D) increases; $320 million
22) ______
23) In the figure above, international trade ________ producer surplus in the United States by
________ .
A) decreases; $320 million
B) increases; $192 million
C) increases; $320 million
D) decreases; $192 million
23) ______
24) In the figure above, international trade ________ total surplus in the United States by ________ .
A) decreases; $256 million
B) decreases; $192 million
C) increases; $128 million
D) increases; $320 million
24) ______
25) A tariff is a
A) tax on an exported good or service.
C) subsidy on an exported good.
25) ______
B) subsidy on an imported good.
D) tax on an imported good or service.
26) Tariffs and import quotas both result in
A) lower levels of imports.
B) lower levels of domestic production.
C) higher levels of domestic consumption.
D) the domestic government gaining revenue.
26) ______
27) Increasing a tariff will ________ the domestic quantity consumed of the good, while ________ the
domestic production of the good.
A) decrease; decreasing
B) decrease; increasing
C) increase; increasing
D) increase; decreasing
27) ______
28) The United States imports cars from Japan. If the United States imposes a tariff on cars imported
from Japan,
A) U.S. tariff revenue equals the loss of U.S. consumer surplus.
B) U.S. car manufacturers gain revenue equal to the revenue lost by Japanese car
manufacturers.
C) U.S. consumers lose and U.S. producers gain.
D) U.S. consumers lose and Japanese producers gain.
28) ______
29) During the first 6 months of 2008, the United States imported more than 1.6 billion pounds of
coffee. Suppose the United States is considering placing trade restrictions on the importation of
coffee. What would be a potential consequence of such a trade restriction?
A) U.S. consumers would drink more coffee
B) U.S. consumer surplus from coffee would increase.
C) The U.S. price of coffee would increase
D) The quantity of coffee imported into the United States would increase
29) ______
30) The U.S.—Colombia Trade Promotion Agreement was signed on November 22, 2006, in
Washington, D.C. This comprehensive trade agreement eliminated tariffs and other barriers to
goods and services. Colombia will immediately eliminate tariffs on wheat, barley, peanuts, and
many other products in which Columbia does not have a comparative advantage. This policy
means that the price of peanuts in Columbia will become
A) equal to the free trade price
B) lower than the free trade price
C) higher than the price when a tariff was in place
D) higher than the free trade price
30) ______
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
12)
13)
14)
15)
16)
17)
18)
19)
20)
21)
22)
23)
24)
25)
26)
27)
28)
29)
30)
B
B
A
D
A
A
C
B
B
A
D
C
A
A
A
A
B
B
A
C
D
D
D
C
D
A
B
C
C
A