Multiple choice questions:
1)The expectation of higher future prices actually causes higher prices now because:
A. demand will increase now as people try to buy before price rises.
B. supply will increase now as firms try to sell more before the price rises.
C. quantity demanded will increase now.
D. quantity supply will decrease now.
2) If a firm raised its price and found that its total revenue increased, then the demand for its product is:
A. unit-elastic.
B. relatively elastic.
C. perfectly elastic.
D. relatively inelastic.
3)If a firm wanted to know whether the demand for its product was elastic, unit-elastic, or inelastic, then the firm could:
A. change price a little bit and observe what happens to total revenue.
B. survey competitors and ask them what they think demand elasticity for the product is.
C. talk to its customers.
D. do not do anything as there is no way to find an elasticity value.
4) If 20 units are sold at a price of $60 and 30 units are sold at a price of $40, then the elasticity of demand calculated using the midpoint formula is:
A. minus 1.8.
B. minus 1.0.
C. minus 0.16.
D. positive 0.16.
5) How does elasticity of demand behave on a downward sloping straight line demand curve?
A. It is elastic at high prices and inelastic at low prices.
B. It is the same value at every point.
C. It is inelastic at high prices and elastic at low prices.
D. None of these options are correct.
6)If the price of petrol increases by 30 per cent and this causes the quantity demanded to fall by 15 per cent, the elasticity of demand is equal to:
A. minus 450.
B. minus 15.
C. minus 0.5.
D. minus 2
7)Which of the following is the result of government intervention in the free market?
a. All of these occur because of government intervention.
b. There is a loss of economic efficiency.
c. Some people lose.
d. Some people win.
8) A price floor often creates a surplus of the commodity affected, which means:
a. the price of the good subject to the price floor has fallen.
b. the commodity is no longer scarce.
c. at the price floor, quantity supplied is greater than quantity demanded.
d. at the price floor, quantity demanded is greater than quantity supplied.
9)Consumer surplus can be defined as:
a. marginal benefit to consumers from participating in the market.
b. total benefit to consumers from participating in the market.
c. net benefit to consumers from participating in the market.
d. average benefit to consumers from participating in the market.
10) A characteristic of the short run is:
a. that supply is fixed.
b. it is usually a time period that is more than one day and less than one year.
c. it is usually sufficient time to allow the quantity of labour hired to be changed.
d. there are no technological constraints.