FINAL QUIZ

The price elasticity of demand for bottled water in Yorkshire is -2, while the price elasticity of demand for bottled water in London is -0.8. In other words, demand in Yorkshire is ________ and demand in London is ________.

• elastic, unitarily elastic

• highly inelastic, slightly inelastic

• elastic, inelastic

• inelastic, elastic

The owner of a local hot dog stand has estimated that if she lowers the price of hot dogs by a low margin she will increase sales from 400 to 500 hot dogs per day (seems like demand is highly responsive to the price). The demand for hot dogs is

• unitarily elastic.

• inelastic.

• elastic. 

• perfectly elastic

There are two goods A and B. In which of the following cases will good A have the more price elastic supply? 34

• A higher proportion of national income is spent on A than on B.

• The cost of producing extra units increases more rapidly in the case of A than in the case of B.

• Consumers find it easier to find alternatives to A than to B

• If it is less costly to shift from producing A to another product than it is to shift from producing B to another product.

The following table shows costs and revenue schedules for a firm. How much total profit will the firm make at the profit-maximising level of output?

• £40  

• £16

• £0

• £48

When the price of a good falls and customers tend to buy more of it instead of other goods, economists call this the ________ effect.

• diminishing marginal utility

• substitution

• income

• ceteris paribus

Inferior goods are best defined as

• goods whose supply falls as people's income rises

• goods that only those who are relatively poor purchase

• goods whose demand falls as people's income rises

• goods that have higher-quality alternatives

The government is going to increase the tax on petrol to raise additional revenue for road repairs. The government will be able to raise more revenue by raising the petrol tax if the demand for petrol is

• relatively elastic

• perfectly elastic

• relatively inelastic

• unitarily elastic

A movement upward along the demand curve to the left could be caused by

• a rise in income

• a decrease in supply

• a rise in inflation

• a fall in the price of substitutes

Which one of the following correctly describes how price adjustments eliminate a surplus?

• As the price rises, the quantity demanded will increase while the quantity supplied will decrease

• As the price rises, the quantity demanded will decrease while the quantity supplied will increase

• As the price falls, the quantity demanded will increase while the quantity supplied will decrease

• As the price falls, the quantity demanded will decrease while the quantity supplied will increase

A university decides to raise tuition fees to increase the total revenue it receives from students. This strategy will work if the demand for this institution's education is

• inversely related to price

• unitarily elastic

• inelastic

• elastic