03.20 quiz- enrichment

What can be concluded about a good with a positive cross-elasticity of demand?

• Its price will be sensitive to changes in prices of close substitutes

• Its price will be sensitive to changes in quantity demanded of close substitutes.

• The quantity demanded for this good will be sensitive to changes in the price of close substitutes

• The quantity demanded for this good will be sensitive to changes in quantity demanded of close substitutes.

The quantity of a good supplied by a firm is Q. Each of these goods sells for a price of P. The area under the supply curve for Q goods is equal to C.

What is the producer surplus of the firm?

• P-C

• P x Q

• (P x Q) - C

• (P - Q) x Q

After a series of poor harvests, a government imposes an effective maximum price on cereals.

What would be a consequence of this policy?

• Both rich and poor people would satisfy their demands equally

• Illegal buying and selling through a black market would be prevented

• Rationing would be necessary to ensure a fair distribution of cereals

• The market would fail to clear leaving a surplus of cereals.

A government wishes to impose a tax on a good so that the consumer pays most of the tax increase.

What type of elasticity would best achieve this aim?

• High price elasticity of supply

• Low price elasticity of supply

• Unitary price elasticity of supply

• perfectly inelastic price elasticity of supply

A government introduces a subsidy for product X and the market price of X falls by 5%. The cross elasticity demand for product Y, with respect to the price of product X, is +0.4.

What will happen to the demand for product Y?

• It will decrease by 2%.

• It will decrease by 12.5 %

• It will increase by 2%.

• It will increase by 12.5%

What is necessary for an action to be classed as a transfer payment?

• It must include a cash payment

• It must involved a banking transaction.

• It must originate from government activity

• It must relate to a non-productive activity.

Why does the production of public goods have to be financed by the government?

• One person's consumption of a public good means it is not available for anyone else.

• People are able to consume public goods without paying for them.

• Private sector firms will charge a price significantly above cost for public goods.

• The cost of producing public goods is higher in the private sector.

What is likely to cause a decrease in aggregate demand?

• an appreciation in the exchange rate

• an improvement in consumer confidence

• an increase in government expenditure

• an increase in the money supply

What would cause a shift in a short-run aggregate supply curve but not the long-run aggregate supply curve?

• advances in technology

• a change in the money wage rate

• emigration of people of working age

• gross investment exceeding depreciation

Which statement about inflation is correct?

• Inflation will lead to a rise in exports

• Inflation will lead to a rise in real incomes

• Inflation will lead to a rise in the cost of living

• Inflation will lead to a rise in the purchasing power of money