Chapter 4 & 5
End 0f Chapter Quiz/Review
Practice What You Know
Suppose that the price of candy bars increases
by 100%. As a result of this, you decide to
purchase 50% less candy bars. How would
you describe your demand for candy bars?
a.
b.
c.
d.
Demand is elastic.
Demand is unit elastic.
Demand is inelastic.
Demand is perfectly inelastic.
Practice What You Know
Suppose that Doug receives a pay increase at
work, and his income increases by 20%. As a
result, Doug decides to buy 12% less ground
beef. For Doug, ground beef is a(n) ________.
a.
b.
c.
d.
luxury good
necessity good
normal good
inferior good
Practice What You Know
Economists have studied that when the price of
chicken increases, people purchase less rice. With
these two goods, which of the following is true?
(EC = Cross-price elasticity)
a. EC < 0, chicken and rice are complements.
b. EC > 0, chicken and rice are complements.
c. EC < 0, chicken and rice are substitutes.
d. EC > 0, chicken and rice are substitutes.
Practice What You Know
In terms of price elasticity of demand, which of
the following goods do you think is the least
elastic (most inelastic)?
a.
b.
c.
d.
new house
electricity to power your home
a specific brand of breakfast cereal
new vehicle
Practice What You Know
Suppose a firm is selling a product at a price
on the inelastic portion of the demand line. This
firm could increase revenue by doing what?
a.
b.
c.
d.
lowering the price, selling more units
lowering the price, selling less units
increasing the price, selling more units
increasing the price, selling less units
Practice What You Know
What will be the effect of a non-binding price
ceiling?
a.
b.
c.
d.
A surplus will be created.
A shortage will be created.
There will be no effect.
The effect is unknown.
Practice What You Know
In the event of a binding price ceiling, what is
one function that a black market serves?
a.
b.
c.
d.
reduces the shortage caused by the price ceiling
decreases the price even further
creates a monopoly
causes a surplus of the good
Practice What You Know
What is one unintended consequence of rent
control?
a. People in rent-controlled units will relocate
more often.
b. Landlords may not maintain rental units.
c. Too many apartments will be built, creating a
surplus of units.
d. People will choose not to live in big cities.
Practice What You Know
Which of the following is true about labor
markets?
a.
b.
c.
d.
The minimum wage is a price ceiling.
Unemployment is a labor shortage.
Firms supply the labor.
None of the above.
Practice What You Know
Supply and demand generally become more
elastic in the long run. This means that
shortages caused by price ceilings _________
in the long run.
a.
b.
c.
d.
disappear completely
become smaller
become larger
become infinitely large