Economics Revision Dec21

A price floor

• always determines the price at which a good must be sold

• sets the legal maximum on the price at which a good can be sold

• is not a binding constraint if it is set above the equilibrium price

• sets a legal minimum on the price at which a good can be sold

A binding price ceiling creates

• a shortage or a surplus depending on whether the price ceiling is set above or below the equilibrium price

• a surplus

• a shortage

• an equilibrium

The burden of tax falls more heavily on the sellers in a market when

• both supply and demand are elastic

• both supply and demand are inelastic

• demand is inelastic and supply is elastic

• demand is elastic and supply is inelastic

The burden of tax falls more heavily on the buyers in a market when

• both supply and demand are inelastic

• demand is elastic and supply is inelastic

• both supply and demand are elastic

• demand is inelastic and supply is elastic

Which of the following is an example of market failure?

• externalities

• low prices

• excess supply

• public goods

If the government imposes a price ceiling of £1 per gallon of gasoline, which of the following will result?

• a surplus of 6 billion gallons

• a shortage of 6 billion gallons

• a surplus of 12 billion gallons

• a shortage of 12 billion gallons

Given the position of the marginal social cost curve, one can conclude that the

• private cost of producing good X exceeds the social cost of production at all levels of output

• production of good X creates a negative externality

• market quantity, Q3, is the socially optimal quantity

• free market will produce too little of good X

Which of the following best defines opportunity cost?

• It is the cost of producing those goods most desired by a given economy

• It is the amount of one product that must be given up in order to produce an additional unit of another good.

• It is the use of the least-cost method of production

• It isthe cost of labour used int the production process

In order to minimize short-run losses, a profit-maximizing firm will shut down production under which of the following conditions.

• Total revenue is less than total cost

• Marginal cost is greater than average total cost

• Marginal cost is less than marginal revenue

• Average revenue is less than average variable cost

• Average revenue is less than the average total cost

According to the law of diminishing marginal utility, which of the following is true?

• Total satisfaction decreases as more units of a good are consumed.

• The additional satisfaction received from consuming extra units of a good decreases as consumption of the good increases

• The additional satisfaction received from consuming extra units of a good increases as consumption of the good increases

• The additional satisfaction received from consuming extra units of a good decreases as consumption of the good decreases