Question 1:
Economic inefficiency means:
A. a good cannot be profitably produced
B. a dead weight loss is created
C. producer surplus is greater than consumer surplus
D. Consumer surplus is greater than producer surplus
Question 2:
An externality:
A. occurs because the government tries to regulate it
B. equals 1 when supply equals demand
C. only affects manufacturing companies
D. is a cost or benefit that affects someone other than the seller or the buyer of a good
Question 3:
Assume that the demand for a good is relatively more elastic than its supply. The actual burden of
a tax, imposed on this good will be on:
A. buyers
B. sellers
C. both buyers and sellers, but buyers pay more
D. both buyers and sellers, but sellers pay more
Question 4:
An effective production quota imposed on tomato farmers will:
A. decrease both the market price and market quantity of tomatoes
B. increase the market price but decrease the market quantity of tomatoes
C. decrease the market price but increase the market quantity of tomatoes
D. increase both the market price and the market quantity of tomatoes
Question 5:
The average monthly income in an area increases from $40,000 to $44,000. At the same time,
sales of cars increase by 10%. The income elasticity of demand for cars is:
A. 0.1
B. 1
C. 4
D. 10
Question 6:
You are the owner of a store selling coffee, and you know that the price elasticity of demand for
coffee is -2. If you increase the price of each cup of coffee you are selling, then your revenues
(earnings from selling coffee) will:
A. increase
B. decrease
C. remain constant
D. none of the above