### Multiple Choice Questions Microeconomics In Tutorial Library

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### TITLE: Multiple Choice Questions Microeconomics

#### CLASS / COURSE: Microeconomics

QUESTION DESCRIPTION:

1.When demand is inelastic, a decrease in price will cause:

( )an increase in total revenue

( )a decrease in total revenue

( )no change in total revenue, but an increase in quantity demand

( )no change in total revenue, but a decrease in quantity demand

2.  An example of a price floor is

( )the regulation of gasoline prices in the U.S. in the 1970's

( )rent control

( )the minimum wage

( )any restriction on price that leads to a shortage

3. Figure 6-4

For a price floor to be binding in this market, it would have to be set at

( )any price below \$6

( )a price between \$3 and \$6

( )a price between \$6 and \$9

( )any price above \$6.

4. A tax levied on the sellers of blueberries will  do what to sellers cost, how will at affect profits, and
increases sellers’ costs, reduces profits, and shifts the supply curve up.
increases sellers’ costs, reduces profits, and shifts the supply curve down.
decreases sellers’ costs, increases profits, and shifts the supply curve up.
decreases sellers’ costs, increases profits, and shifts the supply curve down.

5. A tax imposed on the sellers of a good will
lower the price paid by buyers and lower the equilibrium quantity.
lower the price paid by buyers and raise the equilibrium quantity.
lower the effective price received by sellers and lower the equilibrium quantity.
lower the effective price received by sellers and raise the equilibrium quantity.

6. Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Alex, Barb, and Carlos are the only three buyers of oranges, and only three oranges can be supplied per day.

 First Orange Second Orange Third Orange Alex \$2.00 \$1.50 \$0.75 Barb \$1.50 \$1.00 \$0.80 Carlos \$0.75 \$0.25 \$0

Refer to Table 7-5. If the market price of an orange is \$0.40,
6 oranges are demanded per day, and total consumer surplus amounts to \$4.45.
6 oranges are demanded per day, and total consumer surplus amounts to \$5.10.
7 oranges are demanded per day, and total consumer surplus amounts to \$5.35.
7 oranges are demanded per day, and total consumer surplus amounts to \$5.50.

7. Kelly is willing to pay \$68 for a pair of shoes for a wedding. She finds a pair at her favorite outlet shoe store for \$48. Kelly's consumer surplus is
\$10.
\$20.
\$48.
\$68.

8. All else equal, what happens to consumer surplus if the price of a good decreases?
Consumer surplus increases.
Consumer surplus decreases.
Consumer surplus is unchanged.
Consumer surplus may increase, decrease, or remain unchanged.

9. Figure 7-5

Refer to Figure 7-5.  What happens to the consumer surplus if the price rises from \$100 to \$150?

The new consumer surplus is half of the original consumer surplus.
The new consumer surplus is 25 percent of the original consumer surplus.
The new consumer surplus is double the original consumer surplus.
The new consumer surplus is triple the original consumer surplus.

10. Ivana produces cookies. Her production cost is \$6 per dozen. She sells the cookies for \$8 per dozen. Her producer surplus per dozen cookies is
\$2.
\$6.
\$8.
\$14.

11. Economists typically measure efficiency using
the quantity supplied by sellers.
total surplus.
profits to firms.

12. Figure 8-1

Refer to Figure 8-1.  Suppose the government imposes a tax of P’ - P’’’.  The area measured by M represents

consumer surplus after the tax.
consumer surplus before the tax.
producer surplus after the tax.  or

producer surplus before the tax.

13. Figure 8-2

The vertical distance between points A and B represents a tax in the market.

Refer to Figure 8-2.  Consumer surplus without the tax is
\$6, and consumer surplus with the tax is \$1.50.
\$6, and consumer surplus with the tax is \$4.50.
\$10, and consumer surplus with the tax is \$1.50.
\$10, and consumer surplus with the tax is \$4.50.

14. When a tax is imposed on a good for which both demand and supply are very elastic,
sellers effectively pay the majority of the tax.
buyers effectively pay the majority of the tax.
the tax burden is equally divided between buyers and sellers.
None of the above is correct; further information would be required to determine how the burden of the tax is distributed between buyers and sellers.

15. The amount of deadweight loss from a tax depends upon the
price elasticity of demand.
price elasticity of supply.
amount of the tax per unit.
All of the above are correct.
16. Suppose the tax on liquor is increased so that the tax goes from being a "medium" tax to being a "large" tax. As a result, it is likely that
tax revenue increases, and the deadweight loss increases.
tax revenue increases, and the deadweight loss decreases.
tax revenue decreases, and the deadweight loss increases.
tax revenue decreases, and the deadweight loss decreases.

17. A tariff is a tax placed on
an exported good and it lowers the domestic price of the good below the world price.
an exported good and it ensures that the domestic price of the good stays the same as the world price.
an imported good and it lowers the domestic price of the good below the world price.
an imported good and it raises the domestic price of the good above the world price.

18. When the nation of Mooseland first permitted trade with other nations, domestic producers of sugar experienced a decrease in producer surplus of \$5 million and total surplus in Mooseland’s sugar market increased by \$2 million.  We can conclude that
Mooseland became an exporter of sugar.
the overall economic well-being of participants in the sugar market in Mooseland fell because of trade.
consumer surplus in Mooseland  increased by \$7 million.
the opening of trade caused the domestic demand curve for sugar in Mooseland to shift to the right.

19. Figure 9-15

Refer to Figure 9-15. Producer surplus with trade and without a tariff is
G.
C + G.
A + C + G.
A + B + C + G.

20. Figure 9-19.  On the diagram below, Q represents the quantity of textiles and P represents

the price of textiles.

Refer to Figure 9-19.  With free trade, consumer surplus in the textile market amounts to

\$210.
\$320.
\$405.

\$910

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