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Unit 2 Review
Unit 2 Review
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Questions
27
Answers
1
What happens to demand for inferior goods if income increases?
Demand for inferior goods decreases
Demand for inferior good increases
Demand for inferior goods increases in the short run but then decreases
Demand for inferior goods stays the same
2
A measurement of how CONSUMERS react to a change in price
Law of Supply
Elasticity of Supply
Elasticity of Demand
Law of Demand
3
Which of these is the formula for calculating elasticity?
I (Q0 - Q1) / (P0 - P1) I
I ((Q0 - Q1)/(Q1)) / ((P0 - P1)/(P1)) I
I Q0-P0 I
I ((Q0 - Q1)/(Q0)) / ((P0 - P1)/(P0)) I
4
A tax on the sale or production of a good is called a ____________ and it will shift __________________
Excise Tax; SUPPLY to the LEFT
Excise Tax; SUPPLY to the RIGHT
Excise TAX; SUPPLY DOWN
Subsidy; SUPPLY to the LEFT
5
How many sellers are there in a monopoly?
0
1
Many
2
6
Which of these would NOT change supply?
A change in demand
A change in input costs
A change in excise taxes
An increase in government regulation
7
A government payment to encourage production is called _________ and it will _____________
Excise Tax; Shift DEMAND to the RIGHT
Subsidy; shift SUPPLY to the RIGHT
Subsidy, shift SUPPLY to the LEFT
Subsidy; Shift DEMAND to the RIGHT
8
If the price of graham crackers drops from $10 to $9, and sales go up from 600 to 800, what is the elasticity of demand?
200
2.5
0.3
3.3
9
What kind of good will experience an increase in demand when income increases?
Normal good
Nondurable good
Durable good
Inferior Good
10
Rent control, which sets a maximum allowable price for rent, is an example of what kind of policy?
Subsidy
Excise Tax
Price Ceilling
Price Floor
11
If there are many firms selling products that are similar but that have some differences, the market structure is ______
Perfect Competition
Oligopoly
Monopoly
Monopolistic Competition
12
If there is excess supply, prices will
Increase back to equilibrium
Stay where they are
Increase above the equilibrium
Decrease back to equilibrium
13
Which of these best describes the economic relationship between chicken and beef?
They are substitutes
They are unrelated
They are subsidies
They are complements
14
Absent government interference, a market in disequilibrium will
Move back to equlibrium
Move away from equilibrium
Fail
Merge
15
This is what determines who gets goods and services in a market economy
Price
The government
Subsidies
Disequilibrium
16
According to the __________, Quantity supplied will increase as price increases
Elasticity of Supply
Elasticity of Demand
Law of Demand
Law of Supply
17
Which of these would be the likely result of a price floor (such as a minimum wage)?
Excess Demand
Shortages
Equilibrium
Excess Supply
18
Which of these describes what would happen if the price of a good increases?
The left graph
The middle graph
The right graph
None of these
19
What are the equilibrium price and quantity on this graph?
Price $1.50, Quantity 200
Price $1.50, Quantity 150
Price $2.00, Quantity 150
Price $2.00, Quantity 200
20
A measurement of how PRODUCERS react to a change in price
Elasticity of Supply
Elasticity of Demand
Law of Demand
Law of Supply
21
If a small number of firms produce the majority of output in a market, then the market structure is _________________
Perfect Competition
Oligopoly
Monopoly
Monopolistic Competition
22
If the last worker hired has a smaller marginal product of labor than the worker before him, a firm will experience
Negative Marginal Returns
Increasing marginal returns
Marginal Product of Labor
Diminishing Marginal Returns
23
Which of the following lists are all things that would change DEMAND in changed
Population, production costs, number of producers
Income, popularity, production costs
Production costs, number of producers
Population, income, popularity, prices of related good
24
Which is the market structure where there are many sellers selling identical products and having little/no market power?
Perfect Competition
Monopolistic Competition
Monopoly
Oligopoly
25
This is a latin phrase meaning "all other things held constant"
Mala prohibida
Laissez Faire
Mala en se
Ceteris Paribus
26
What market operates most efficiently with a single seller?
Monopoly
Government Monopoly
Oligopoly
Natural Monopoly
27
Offering a different color of a product, changing packaging, and providing better customer service are all examples of
Nonprice Competition
Perfect Competition
Commodities
Specialization
