Question 1

Which of the following best describes a 'mixed market economy' as discussed in the study materials?

Accepted Answer

An economy that combines elements of free markets with government intervention.

Question 2

Suppose the government imposes a binding price ceiling on gasoline. Which of the following is the most likely immediate outcome?

Accepted Answer

A shortage of gasoline as quantity demanded exceeds quantity supplied.

Question 3

Which of the following statements is a normative statement?

Accepted Answer

The government ought to provide free public transportation.

Question 4

If the price of a product increases and the total expenditure on the product decreases, what can you conclude about the price elasticity of demand?

Accepted Answer

Demand is elastic.

Question 5

Which of the following would cause a rightward shift in the demand curve for electric vehicles?

Accepted Answer

An increase in consumer preference for environmentally friendly transportation.

Question 6

A binding minimum wage is imposed in a competitive labor market. According to the study materials, which of the following is a predicted effect?

Accepted Answer

Some workers lose their jobs, while others earn higher wages.

Question 7

Which of the following best explains why products with many close substitutes tend to have more elastic demand?

Accepted Answer

Consumers can easily switch to alternatives if the price rises.

Question 8

Suppose the government introduces an excise tax of $$2 per unit on a product. If the price paid by consumers rises by 1.20 $$and the price received by producers falls by $0.80, what is the amount of the tax?

Accepted Answer

$2.00

Question 9

Which of the following is an example of an inferior good?

Accepted Answer

Public transportation, for which demand decreases as income rises.

Question 10

If the supply of a product increases, what is the predicted effect on equilibrium price and quantity, ceteris paribus?

Accepted Answer

Equilibrium price decreases and equilibrium quantity increases.

Question 11

Which of the following best describes the difference between correlation and causation?

Accepted Answer

Correlation means two variables move together, but not necessarily because one causes the other.

Question 12

Given the demand function $$Q_d = 100 - 2P$$, calculate the price elasticity of demand when $$P = 20. $$Use the formula $$E_d = \frac{dQ}{dP} 	imes \frac{P}{Q}.$$

Accepted Answer

$$0.67$$

Question 13

Which of the following is NOT a condition for a perfectly competitive market?

Accepted Answer

Firms can set prices above market equilibrium.

Question 14

If a product's price increases by 10% and the quantity supplied increases by 25%, what is the price elasticity of supply?

Accepted Answer

$$2.5$$

Question 15

Which of the following would NOT shift the supply curve for smartphones?

Accepted Answer

A decrease in the price of smartphones.

Question 16

A theory predicts that reducing the tax rate will increase household spending. In this theory, which is the exogenous variable?

Accepted Answer

Tax rate.

Question 17

If a product is a necessity, what can you infer about its income elasticity of demand?

Accepted Answer

It is positive and less than one.

Question 18

Which of the following is a likely effect of binding rent controls in a city?

Accepted Answer

A shortage of rental housing.

Question 19

Suppose the demand for a product is unit elastic. If the price increases by 5%, what happens to total expenditure on the product?

Accepted Answer

Total expenditure remains unchanged.

Question 20

Which of the following best explains why the long-run price elasticity of demand is usually greater than the short-run elasticity?

Accepted Answer

More substitutes become available and consumers can change their consumption habits over time.

Microeconomics: Economic Systems, Market Mechanisms, and Elasticity

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