Question

21.

When consumers respond to a price change but the percentage change in quantity demanded (in absolute value) is smaller than the percentage change in price (in absolute value), the demand is described as being _______.

Group of answer choices

perfectly inelastic

perfectly elastic

inelastic

unit elastic

elastic

22.

Assume that you manage a car wash, and you have previously calculated the price elasticity of demand to be 1.2 (in absolute value). To draw in more customers, you decide to decrease your price by 5%. Based on this information, you would estimate the quantity demanded will _______ by _______.

Group of answer choices

decrease, 4.17%

increase, 5%

increase, 6%

increase, 4.17%

decrease, 6%

23.

The difference between how much a consumer is willing to pay for the total amount of a good or service consumed and the amount actually paid is called total utility.

Group of answer choices

True

False

24.

Which of the following is true regarding the production possibility frontier model? There is more than one correct answer to this question. You must mark all of the correct answers to receive full credit for this question.

Group of answer choices

The PPF always slopes down because resources are limited.

Resource use is efficient in producing all of the combinations shown on a PPF.

Using only the PPF model, it is not possible to state that any one combination on a frontier is superior to any other combination on the same frontier.

If resources are not specialized, the PPF will be a straight, downward-sloping line.

The principle of increasing marginal opportunity cost only applies in cases when resources are specialized.

25.

Assume there is a decrease in the price of a complement, an increase in income, a decrease in the number of firms, an increase in the cost of an input, firms expect a higher price, and consumers expect a lower price. Based on all of this information, which of the following is correct?

Group of answer choices

The equilibrium price will decrease, and the equilibrium quantity will decrease.

The equilibrium price will increase, and the equilibrium quantity will decrease.

The equilibrium price will increase, and the equilibrium quantity will increase.

More information is needed to know what changes will occur in the equilibrium price/quantity.

The equilibrium price will decrease, and the equilibrium quantity will increase.

26.

Above the equilibrium price, there is a _______ and an automatic pressure for the price to _______.

Group of answer choices

shortage, increase

shortage, decrease

surplus, increase

surplus, decrease.

27.

A recent news broadcast made the following statement: “An increase in the price of coffee has caused a decrease in the demand for coffee.” Would an economist agree with this statement? (Carefully look at the wording.)

Group of answer choices

No, an economist would not agree with this statement.

Yes, an economist would agree with this statement.

28.

In which of the following cases will a firm’s total revenue decrease? There is more than one correct answer to this question. You must mark all of the correct answers to receive full credit for this question.

Group of answer choices

price increases and demand is inelastic

price decreases and demand is inelastic

price decreases and demand is elastic

price increases and demand is perfectly inelastic

price increases and demand is elastic

29.

A life-saving medication that has no substitutes is likely to have a price elasticity of demand that is less than one in absolute value.

Group of answer choices

True

False

30.

In a graph of a production possibility frontier, price is indicated on the vertical axis and quantity is shown on the horizontal axis.

Group of answer choices

True

False

Answer 1

Ans.
21. Option c

Price elasticity of demand = %Change in Quantity demanded / %Change in price

So, if %Change in Quantity demanded < %Change in price

=> Absolute price elasticity of demand < 1

This means that the demand is inelastic.

22. Option c

%Change in quantity demanded = Elasticity of demand*%Change in price level

=> %Change in quantity demanded = -1.2*(-5)

=> %Change in Quantity demanded = 6%
So, quantity demanded will increase by 6%

23. False

The difference between the willingness to pay for a good and actual amout paid for the same quantity is called the consumer surplus.

*Sorry, there is a cap on number of questions that can be attempted per upload. So, please reupload the other questions in smaller sets for solutions.