Economics Quiz Year 1

A market supply curve tells us how much:

• a firm will sell at various prices.

• an individual will buy at various prices.

• firms will sell at various prices.

• individuals will buy at various prices.

The price of a can of iced tea increases from $1.00 to $1.10. The quantity demanded falls from 300 cans a week to 240 cans a week. Calculate the price elasticity of demand.

• −0.5

• −2.5

• −2.0

• −2.22

Which of these products is most likely to have a perfectly elastic PES?

• seats to watch athletics finals at the Olympic Games

• music downloads to an electronic device

• an original painting by the famous French artist Monet

• a limited edition Hublot wristwatch

A more equitable distribution of income and wealth is likely to lead to which of the following consequences for an economy?

• Rich people will leave the country.

• A budget deficit is required to pay for additional government spending.

• Workers will be able to retire earlier.

• People will be better motivated to work harder to improve the standard of living.

A new subsidy is paid to farmers who grow corn (maize). Which of these is the most likely consequence?

• More corn is produced at a higher price to consumers.

• More corn is produced at a lower price to consumers.

• More corn is produced at a price to consumers that is determined by market demand and supply.

• There will be a decrease in the price of corn oil for consumers.

Governments restrict the consumption of demerit goods because:

• resources used in their production can be put to better use.

• consumers of demerit goods are irresponsible in their consumption.

• consumers lack proper information on the effects of consumption.

• the value of imported demerit goods has an adverse effect on the balance of trade.

The state provision of which of these services is most likely to lead to an improvement in the distribution of income in a lower middle-income country?

• free primary education up to 11 years

• free university education

• free child vaccinations

• free meals for the elderly

Healthcare is often provided by the government because:

• no private firm is prepared to do so

• healthcare is a merit good and people deserve it

• information failure means most people do not appreciate the benefits of staying healthy

• it is appropriate to fund healthcare from tax revenue

The diagram shows the supply and demand curves - S1 and D1 for Red Bull, a caffeine drink, in a market. The market equilibrium is at X.

Which point , A, B, C, or D, on the diagram will be the new equilibrium position if there is a fall in the production costs of Red Bull and a rise in price of Eastroc Super, another caffeine drink.

• A

• B

• C

• D

In the diagram, D is the demand curve for a chocolate bar and S is the initial supply.

An increase in production causes the supply curve to shift to S1. What is the gain in consumer surplus?

• a + b + e

• b + e + f

• b + c

• d + e