Homework set number 1. Oct 14th 2015
Answer all questions. Each question carries equal marks. Late submissions will not be
accepted. Fill in all answers using the answer grid below, placing an ‘X’ in the column with
the answer you choose.
Student number:
Question
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Answer
Questions:
Question 1.
Figure 4-3
Consumer 1
20
Consumer 2
price
30
18
27
16
24
14
21
12
18
10
15
8
12
6
9
4
6
2
price
3
D
2
4
6
8
10
D
12
14
16
quantity
5
10
15
20
25
30
35
40
quantity
Refer to Figure 4-3. If these are the only two consumers in the market, then the market
quantity demanded at a price of $15 is
a. 0 units.
b. 10 units.
c. 15 units.
d. 25 units.
Question 2.
Refer to Figure 4-3. If these are the only two consumers in the market, then the market
quantity demanded at a price of $6 is
a. 12 units.
b. 14 units.
c. 19 units.
d. 21 units.
Question 3.
Table 4-1
Price
$5
$4
$3
$2
$1
$0
Quantity Demanded Quantity Demanded
by Michelle
by Laura
5
4
6
6
7
8
8
10
9
12
10
14
Quantity Demanded
by Hillary
11
13
15
17
19
21
Refer to Table 4-1. If the market consists of Michelle and Laura only and the price falls by
$1, the quantity demanded in the market increases by
a.
b.
c.
d.
2 units.
3 units.
4 units.
5 units.
Question 4.
Refer to Table 4-1. If the market consists of Michelle, Laura, and Hillary and the price falls
by $1, the quantity demanded in the market increases by
a. 2 units.
b. 3 units.
c. 4 units.
d. 5 units.
Question 5.
A table that shows the relationship between the price of a good and the quantity demanded of
that good is called a
a. price-quantity schedule.
b. buyer schedule.
c. demand schedule.
d. demand curve.
Question 6.
Figure 4-1
price
P
A
B
P'
D
Q
Q'
quantity
Refer to Figure 4-1. The movement from point A to point B on the graph shows
a. a decrease in demand.
b. an increase in demand.
c. a decrease in quantity demanded.
d. an increase in quantity demanded.
Question 7.
Refer to Figure 4-1. It is apparent from the figure that the
a. good is inferior.
b. demand for the good decreases as income increases.
c. demand for the good conforms to the law of demand.
d. All of the above are correct.
Question 8.
A movement upward and to the left along a demand curve is called a(n)
a. increase in demand.
b. decrease in demand.
c. decrease in quantity demanded.
d. increase in quantity demanded.
Question 9.
Which of the following is not a characteristic of a perfectly competitive market?
a. Different sellers sell identical products.
b. There are many sellers.
c. Sellers must accept the price the market determines.
d. All of the above are characteristics of a perfectly competitive market.
Question 10.
In a competitive market, each seller has limited control over the price of his product because
a. other sellers are offering similar products.
b. buyers exert more control over the price than do sellers.
c. these markets are highly regulated by the government.
d. sellers usually agree to set a common price that will allow each seller to earn a
comfortable profit.
Question 11.
Which of the following is an example of a market?
a. a gas station
b. a garage sale
c. a barber shop
d. All of the above are examples of markets.
Question 12.
The market for ice cream is a
a. monopolistic market.
b. highly competitive market.
c. highly organized market.
d. Both b) and c) are correct.
Question 13.
Which of the following statements is correct?
a. Buyers determine supply, and sellers determine demand.
b. Buyers determine demand, and sellers determine supply.
c. Buyers determine both demand and supply.
d. Sellers determine both demand and supply.
Question 14.
Figure 5-2
Price
Pa
Pb
D1
D3
D2
Quantity
Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most
elastic demand?
a. D1
b. D2
c. D3
d. All of the above are equally elastic.
Question 15.
Refer to Figure 5-2. As price falls from Pa to Pb, we could use the three demand curves to
calculate three different values of the price elasticity of demand. Which of the three
demand curves would produce the smallest elasticity?
a. D1
b. D2
c. D3
d. All of the above are equally elastic.
Question 16.
Price
$10
$12
$14
$16
Total
Revenue
$100
$108
$112
$112
As price rises from $10 to $12, the price elasticity of demand using the midpoint method is
approximately
a. 0.08.
b. 0.18.
c. 0.42.
d. 0.58.
Question 17.
For a particular good, a 10 percent increase in price causes a 5 percent decrease in quantity
demanded. Which of the following statements is most likely applicable to this good?
a. There are many close substitutes for this good.
b. The good is a necessity.
c. The market for the good is narrowly defined.
d. The relevant time horizon is long.
Question 18.
If demand is price inelastic, then
a. buyers do not respond much to a change in price.
b. buyers respond substantially to a change in price, but the response is very slow.
c. buyers do not alter their quantities demanded much in response to advertising, fads,
or general changes in tastes.
d. the demand curve is very flat.
Question 19.
If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price results in
a
a. 0.4 percent decrease in the quantity demanded.
b. 2.5 percent decrease in the quantity demanded.
c. 4 percent decrease in the quantity demanded.
d. 40 percent decrease in the quantity demanded.
Question 20.
The forces that make market economies work are
a.
b.
c.
d.
work and leisure.
politics and religion.
supply and demand.
taxes and government spending.