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Chapter 12: Quiz
The Partial Equilibrium Competitive Model
1.
An increase in the price of good x may, but won’t necessarily be accompanied by
a.
a shift in the market demand curve for good x.
b.
a shift in the market demand curve for good y.
c.
a movement along the market demand curve for good x.
d.
both b and c.
2.
A demand curve for an inferior good will shift out for any of the following reasons except
a.
preference for the good increases.
b.
price of a substitute falls.
c.
income rises.
d.
price of a complement rises.
3.
If a 5 percent increase in price leads to a 7 percent increase in quantity supplied,
a.
supply is inelastic.
b.
supply is elastic.
c.
demand is inelastic.
d.
demand is elastic.
4.
If the market for kartofi is characterized by a very elastic supply curve and a very
inelastic demand curve, an outward shift in the supply curve would be reflected primarily
in the form of
a.
higher prices.
b.
higher output.
c.
lower prices.
d.
lower output.
5.
Under perfect competition, if an industry is characterized by positive economic profits in
the short run,
a.
firms will leave the market in the long run and the short-run supply curve will
shift outward.
b.
firms will enter the market in the long run and the short-run supply curve will
shift outward.
c.
firms will enter the market in the long run and the short-run supply curve will
shift inward.
d.
firms will leave the market in the long run and the short-run supply curve will
shift inward.
6.
For a decreasing cost industry, the long-run supply curve has a(n) _____________
elasticity of supply
a.
infinite.
b.
negative.
c.
positive.
d.
zero.
7.
Long-run elasticity of supply is defined as
a.
percentage change in quantity demanded in the long run divided by percentage
change in price.
b.
percentage change in price divided by percentage change in quantity supplied in
the long run.
c.
percentage change in price divided by percentage change in quantity demanded in
the long run.
d.
none of the above.
The following two questions refer to a market with 100 identical firms in the short run in which
every firm’s cost function is given by
C(q) = 200 + 2q2
And market demand is given by
P(Q) = 600 – Q/100
8.
The short run equilibrium price will be
a.
10.
b.
20.
c.
120.
d.
480.
9.
Which of the following statements about long run equilibrium in this market are true?
I.
firms will enter the market in the long run.
II.
the long run equilibrium price will be 40.
III.
each firm will produce 40 units in the long run.
a.
b.
c.
d.
e.
I.
II.
I and II.
I and III.
I, II and III.
10.
The short-run market supply curve is the horizontal sum of each firm’s
a.
marginal cost curve above its average cost curve.
b.
marginal cost curve above its average variable cost curve.
c.
individual short run supply curve.
d.
both b and c.
11.
In a competitive market, an efficient allocation of resources is characterized by
a.
marginal value being greater than the price.
b.
the absence of possibilities for additional mutually beneficial exchanges.
c.
consumer surplus being equal to total expenditures.
Chapter 14/Traditional Models of Imperfect Competition 
d.
surpluses of all goods.
12.
A deadweight loss of consumer and/or producer surplus occurs when
a.
marginal value and marginal cost are not equated.
b.
there are no further opportunities for mutually benefits exchanges.
c.
consumer surplus and producer surplus are equated.
d.
none of the above.
13.
Price ceilings
a.
always either increase consumer surplus or increase producer surplus.
b.
always create shortages.
c.
may make non-price rationing necessary.
d.
all of the above.
14.
Holding equilibrium price and quantity constant, which of the following is true?
a.
total gains from trade will be greater if demand and supply are more elastic.
b.
producer surplus will be larger if demand is more inelastic.
c.
consumer surplus will be larger if supply is more elastic.
d.
consumer surplus will be larger if demand is more inelastic.
15.
If demand is given by QD = 140 – P then, at a price of 70:
a.
demand is elastic.
b.
demand is inelastic.
c.
consumer surplus is maximized.
d.
none of the above.
16.
In the long run in a perfectly competitive market, the burden of a per unit tax will be
borne:
a.
entirely by consumers.
b.
entirely by producers.
c.
by the party with the more elastic demand/supply curve.
d.
by the government.
17.
When a domestic market is opened up to international trade
a.
the price paid by domestic consumers may fall.
b.
losses by domestic producers will outweigh gains by domestic consumers.
c.
the addition to domestic gains from trade will be represented by a rightward
pointing arrow.
d.
the imposition of a tariff will result in no dead weight loss.
18.
When a tax is imposed, the excess burden of a tax is
a.
the difference between consumer surplus lost and producer surplus lost.
b.
the sum of the reductions in consumer surplus and producer surplus.
c.
the difference between the reduction in gains from trade and the tax revenue
collected.
d.
larger when demand is more inelastic, other things being the same.
19.
The excess burden or dead weight loss resulting from a specific tax will be minimized if:
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a.
b.
c.
d.
the tax is imposed only on goods consumed by wealthy people.
the tax is imposed on goods for which demand is inelastic, such as drugs.
the tax is imposed on goods for which demand is elastic, such as imported cheese.
both a and b.
20.
If demand is given by QD = 160 – 2P and supply is given by QS = P – 20:
a.
if the market price is set by law at $70, consumers may wait in line to purchase
the good.
b.
the burden of a tax will be borne mostly by consumers.
c.
a tax of $3 will lower the price received by the supplier by $2.
d.
the dead weight loss from a tax of $12 will be $36.
21.
In the opening of free trade, if world prices of a good are less than domestic prices of that
same good,
a.
domestic producers will experience a gain in surplus.
b.
world prices will rise to the domestic price level.
c.
the addition to domestic gains from trade will be larger when the difference
between the world and domestic prices is larger.
d.
the addition to domestic gains from trade will be larger when domestic demand is
relatively inelastic.
22.
Quotas that limit the quantity of imports of a foreign good provide an incentive for
foreign suppliers to
I.
provide lower-priced goods.
II.
flood the market with low-priced products.
III.
supply higher quality and higher-priced units.
IV.
seek other open markets elsewhere.
Which of the above statements are true?
a.
I and II
b.
I and III
c.
II and IV
d.
II, III, and IV
e.
III and IV
23.
If price elasticity of demand is -0.5 and price elasticity of supply is 1.1 and a tax of
$8/unit is applied to the market, the burden of the tax will be:
a.
$1.00 per unit on the supplier.
b.
$2.50 per unit on the supplier.
c.
$4.00 per unit on both the consumer and on the supplier.
d.
$6.00 per unit on the supplier.
e.
$0.66 per unit on the supplier.
24.
If supply and demand are given by QS = 2P – 20 and QD = 100 – P then:
a.
consumer surplus at the equilibrium is $1400.
b.
the burden of a per unit tax will be borne equally by consumers and producers.
c.
a price ceiling of $25 will result in a dead weight loss of $500.
Chapter 14/Traditional Models of Imperfect Competition 
d.
none of the above.
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