Economics Quiz part 2

Joe's Chicken Palace sells barbecue plates for $4.50 each, and serves an average of 525 customers per week. During a recent promotion, Joe cut his price to $3.50 and observed an increase in sales to 600 plates per week. Calculate Joe's price elasticity of demand.

• A) 0.53

• B) -0.59

• C) 0.59

• D) -0.53

Fill in the blanks: A price discriminating firm will tend to charge a ________ price for the category of customer with the ________ elasticity of demand.

• lower; lower

• higher; lower

• lower; higher

• 100% markup; infinite

Discrimination based upon the quantity consumed is referred to as ________ price discrimination.

• first-degree

• second-degree

• third-degree

• group

Use the following two statements about monopolistic competition to answer this question.

I. In the long run, the price of the good will equal the minimum of the average cost.

II. In the short run, firms may earn a profit.

• A) I and II are true.

• B) I is true, and II is false.

• C) I is false, and II is true.

• D) I and II are false.

Consumer surplus measures:

• A) the extra amount that a consumer must pay to obtain a marginal unit of a good or service.

• B) the excess demand that consumers have when a price ceiling holds prices below their equilibrium.

• C) the benefit that consumers receive from a good or service beyond what they pay.

• D) gain or loss to consumers from price fixing.

When government intervenes in a competitive market by imposing an effective price ceiling, we would expect the quantity supplied to ________ and the quantity demanded to ________.

• fall; rise
• fall; fall

• rise; rise

• rise; fall

Refer to Figure 19 above. Which levels of output are produced at the minimum possible cost per unit?

• A) q1

• B) q2

• C) q3

• D) All of the above.

The market supply and demand curves for wheat are given by the following equations: QD = 20,000,000 - 4,000,000P

QS = 7,000,000 + 2,500,000P

where QD and QS are quantity demanded and quantity supplied measured in bushels, and P = price per bushel.

What is the equilibrium quantity and price?

• A) 11,000,000 and 1.

• B) 12,000,000 and 2.

• C) 13,000,000 and 3.

• D) 14,000,000 and 4.

Competition would probably be abolished if society could find a way to abolish

• inequality

• scarcity

• money

• economists

How does the economist's measure of profit differ from the accountant's measure?

• Economists subtract total revenue from total cost; accountants do the opposite

• Economists subtract total costs from total revenue; accountants do the opposite

• Economists consider more sources of monetary revenue than accountants do

• Economists include all opportunity costs, accountants don't