WorksheetsUnit 1
Total questions: 25
Worksheet time: 13mins
Which one of the following would be most likley to cause the demand curve for cars to shift to the right?
A fall in the price of cars
An increase in public transport prices
A decrease in credit availability
A rise in petrol prices
Which of the following would shift the demand curve for alcohol to the left?
A health scare linking alcohol with heart disease
An increase in indirect tax on alcohol
A successful advertising campaign encouraging alcohol consumption
An increase in real income
In a market economy, changes in prices perform all the following functions except
signaling to the government those citizens in greatest need
equating the supply of and demand for goods and services
indicating changes in consumer tastes
inducing supply to respond to changes in demand
Which one of the following statements that refer to the price system is not true?
The consumer always has complete sovereignty in the market
Factor mobility is a key requirement for resource re-allocation to occur
High prices and profits tend to attract resources from less productive activities
High prices ration scarce goods in accordance with effective demand by consumers
In a perfectly competitive market, efficiency is maximized where
social surplus is zero
consumer surplus is greater than producer surplus
the sum of consumer surplus and producer surplus is maximized
consumer surplus is maximized
If the PED for a commodity is equal to one, a reduction in its price will lead to an increase in
quantity demanded
the seller's total revenue
expenditure on substitutes
the seller's marginal revenue
If the demand by motorists to cross a toll bridge is price elastic, then a policy of lowering toll charges for users of the bridge would
increase the amount of revenue generated by the bridge
reduce the consumers' surplus currently enjoyed by motorists
reduce the amount of traffic congestion approaching the bridge
reduce the demand for people to work at the toll booths
A good has a PED equal to one. If price falls by 2%, total revenue will
increase by 2%
remain constant
increase by an infinite amount
fall by 2%
The cross-elasticity of demand for good X with respect to a change in the price of good Y is zero. Good X and good Y are
substitute goods
complementary goods
merit goods
neither substitute nor complementary goods
Two products are perfect substitutes for each other. Their cross-elasticity of demand is
negative
zero
one
infinite
The demand for a product will tend to be elastic with respect to a change in its price if
its price is low in relation to income
it has several substitutes
its consumption is habit forming
it is a necessity
The elasticity of supply of a good will be greater if
it is easy for firms to enter the industry
there is a little spare capacity in the industry
close substitutes are available to consumers
it is difficult for firms to store stocks of the good
The prices of primary products fluctuate most when
demand is price inelastic and supply is price elastic
both demand and supply are price inelastic
both demand and supply are price elastic
both demand and supply are unit elastic
Due to the late frosts in Brazil a third of the coffee crop . is destroyed. Assuming there is no change in demand, the likely effect on the price of coffee is
a small increase in the price due to the high elasticity of supply for coffee
a large fall in the price due to the high price elasticities of demand and supply for coffee
a large rise in the price due to low price elasticities of demand and supply for coffee
a large rise in the price due to excess supply of coffee
If PES is 0.04, what does that mean? Choose an incorrect answer.
Supply is price inelastic
A 10% price increase will increase quantity supplied by 0.4%
Supply is price elastic
A change in price leads to a proportionately smaller change in quantity supplied
If rent controls are imposed on housing below the current market rent
the total rent income to owners of property will increase
the quantity of . rented property will rise
the supply of rented property will fall
housing shortages will disappear
If rice is subsidized
the supply curve will shift to the left
the supply curve will shift to the right
the demand curve will shift to the left
the demand curve will shift to the right
In which of the following situations is market failure least likely to be found? A situation where
externalities exist
many producers compete in a market
there is a sole producer in a market
there is a very uneven distribution of income and wealth
Which of the following statements is true about externalities?
When externalities exist, resources are allocated efficiently
When positive externalities exist efficiency is improved by taxing the product
From society's point of view the output of goods for which a positive externality exists is too low
The price system overproduces goods with positive externalities
When social costs are greater than private costs, there is a
positive externality
negative externality
less than socially optimal output
socially optimal output
Public goods, such as defence, are not supplied by the price system because
the capital cost is too high
the benefits would not be restricted to buyers but would be available to non-buyers as well
public goods are necessities and therefore cannot be left to the price system
monopolies would make super normal profit
Effective protection of common access resources requires international cooperation. A major obstacle to this is
cultural differences
the free-rider problem
scientific uncertainty
different tax regimes
Which one of the following does not apply to merit goods and services? They
provide private and social benefits
are limited in supply and require a system of allocation
could be paid for by the consumer if a market system were allowed to operate
have the characteristic of non-excludability
A tin-mining company is found guilty of polluting a river. Which one of the following government measures would an economist describe as an appropriate market-based response?
the imposition of regulations and direct controls on the company
a reduction of private property rights over the river
increased taxes on the tin produced
nationalization of the tin-mining company
A group of countries manage to reduce their total CO2 emissions through an agreed arrangement. Some countries buy the right to emit more than an agreed emissions cap from those countries investing in cleaner technologies. This type of incentive scheme is known as
tradable permits
a prisoners' dilemma
price regulation
yardstick competition
