MULTIPLE CHOICE1. In general, elasticity is a measure

MULTIPLE CHOICE1. In general, elasticity is a measure ofa.the extent to which advances in technology are adopted by producers.b.the extent to which a market is competitive.c.how firms†profits respond to changes in market prices.d.how much buyers and sellers respond to changes in market conditions.2. Elasticity isa.a measure of how much buyers and sellers respond to changes in market conditions.b.the study of how the allocation of resources affects economic well-being.c.the maximum amount that a buyer will pay for a good.d.the value of everything a seller must give up to produce a good.3. When studying how some event or policy affects a market, elasticity provides information on thea.equity effects on the market by identifying the winners and losers.b.magnitude of the effect on the market.c.speed of adjustment of the market in response to the event or policy.d.number of market participants who are directly affected by the event or policy.4. How does the concept of elasticity allow us to improve upon our understanding of supply and demand?a.Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept.b.Elasticity provides us with a better rationale for statements such as “an increase in x will lead to a decrease in y†than we would have in the absence of the elasticity concept.c.Without elasticity, we would not be able to address the direction in which price is likely to move in response to a surplus or a shortage.d.Without elasticity, it is very difficult to assess the degree of competition within a market.5. When consumers face rising gasoline prices, they typicallya.reduce their quantity demanded more in the long run than in the short run.b.reduce their quantity demanded more in the short run than in the long run.c.do not reduce their quantity demanded in the short run or the long run.d.increase their quantity demanded in the short run but reduce their quantity demanded in the long run.6. If a price ceiling is not binding, thena.there will be a surplus in the market.b.there will be a shortage in the market.c.the market will be less efficient than it would be without the price ceiling.d.there will be no effect on the market price or quantity sold.7. If a nonbinding price ceiling is imposed on a market, thena.the quantity sold in the market will decrease.b.the quantity sold in the market will stay the same.c.the price in the market will increase.d.the price in the market will decrease.8. A price ceiling will be binding only if it is seta.equal to the equilibrium price.b.above the equilibrium price.c.below the equilibrium price.d.either above or below the equilibrium price.9. A price ceiling is binding when it is seta.above the equilibrium price, causing a shortage.b.above the equilibrium price, causing a surplus.c.below the equilibrium price, causing a shortage.d.below the equilibrium price, causing a surplus.10. To say that a price ceiling is binding is to say that the price ceilinga.results in a surplus.b.is set above the equilibrium price.c.causes quantity demanded to exceed quantity supplied.d.All of the above are correct.11. Consumer surplus is thea.amount of a good consumers get without paying anything.b.amount a consumer pays minus the amount the consumer is willing to pay.c.amount a consumer is willing to pay minus the amount the consumer actually pays.d.value of a good to a consumer.12. Consumer surplus is equal to thea.Value to buyers – Amount paid by buyers.b.Amount paid by buyers – Costs of sellers.c.Value to buyers – Costs of sellers.d.Value to buyers – Willingness to pay of buyers.13. On a graph, the area below a demand curve and above the price measuresa.producer surplus.b.consumer surplus.c.deadweight loss.d.willingness to pay.14. On a graph, consumer surplus is represented by the areaa.between the demand and supply curves.b.below the demand curve and above price.c.below the price and above the supply curve.d.below the demand curve and to the right of equilibrium price.15. Consumer surplus in a market can be represented by thea.area below the demand curve and above the price.b.distance from the demand curve to the horizontal axis.c.distance from the demand curve to the vertical axis.d.area below the demand curve and above the horizontal axis.16. When a tax is imposed on the buyers of a good, the demand curve shiftsa.downward by the amount of the tax.b.upward by the amount of the tax.c.downward by less than the amount of the tax.d.upward by more than the amount of the tax.17. When a tax is imposed on the sellers of a good, thea.demand curve shifts downward by less than the amount of the tax.b.demand curve shifts downward by the amount of the tax.c.supply curve shifts upward by less than the amount of the tax.d.supply curve shifts upward by the amount of the tax.18. A tax placed on buyers of tires shifts thea.demand curve for tires downward, decreasing the price received by sellers of tires and causing the quantity of tires to increase.b.demand curve for tires downward, decreasing the price received by sellers of tires and causing the quantity of tires to decrease.c.supply curve for tires upward, decreasing the effective price paid by buyers of tires and causing the quantity of tires to increase.d.supply curve for tires upward, increasing the effective price paid by buyers of tires and causing the quantity of tires to decrease.19. Suppose a tax is imposed on the buyers of fast-food French fries. The burden of the tax willa.fall entirely on the buyers of fast-food French fries.b.fall entirely on the sellers of fast-food French fries.c.be shared equally by the buyers and sellers of fast-food French fries.d.be shared by the buyers and sellers of fast-food French fries but not necessarily equally.20. It does not matter whether a tax is levied on the buyers or the sellers of a good becausea.sellers always bear the full burden of the tax.b.buyers always bear the full burden of the tax.c.buyers and sellers will share the burden of the tax.d.None of the above is correct; the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax.21. In the long run, a firm will exit a competitive industry ifa.total revenue exceeds total cost.b.the price exceeds average total cost.c.average total cost exceeds the price.d.Both a and b are correct.22. In the long run, a profit-maximizing firm will choose to exit a market whena.average fixed cost is falling.b.variable costs exceed sunk costs.c.marginal cost exceeds marginal revenue at the current level of production.d.total revenue is less than total cost.23. A firm that exits its market has to paya.its variable costs but not its fixed costs.b.its fixed costs but not its variable costs.c.both its variable costs and its fixed costs.d.neither its variable costs nor its fixed costs.23. The competitive firm’s long-run supply curve is that portion of the marginal cost curve that lies above averagea.fixed cost.b.variable cost.c.total cost.d.revenue.24. The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?a.A competitive firm maximizes profit at the point where marginal revenue equals marginal cost; a monopolist maximizes profit at the point where marginal revenue exceeds marginal cost.b.A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost.c.For a competitive firm, marginal revenue at the profit-maximizing level of output is equal to marginal revenue at all other levels of output; for a monopolist, marginal revenue at the profit-maximizing level of output is smaller than it is for larger levels of output.d.For a profit-maximizing competitive firm, thinking at the margin is much more important than it is for a profit-maximizing monopolist.25. Angelo is a wholesale meatball distributor. He sells his meatballs to all the finest Italian restaurants in town. Nobody can make meatballs like Angelo. As a result, his is the only business in town that sells meatballs to restaurants. Assuming that Angelo is maximizing his profit, which of the following statements is true?a.Meatball prices will be less than marginal cost.b.Meatball prices will equal marginal cost.c.Meatball prices will exceed marginal cost.d.Costs are irrelevant to Angelo because he is a monopolist.26. A monopoly’s marginal cost willa.be less than its average fixed cost.b.be less than the price per unit of its product.c.exceed its marginal revenue.d.equal its average total cost.27. Which of the following statements is correct for a monopolist?i)The firm maximizes profits by equating marginal revenue with marginal cost.ii)The firm maximizes profits by equating price with marginal cost.iii)Demand equals marginal revenue.iv)Average revenue equals price.a.i), iii), and iv) onlyb.i) and iv) onlyc.i), ii), and iv) onlyd.i), ii), iii), and iv)