Question 1

Rent control is an example of which of the following market interventions?

Accepted Answer

a price ceiling.

Question 2

To affect the market outcome, a price ceiling must be set:

Accepted Answer

below the equilibrium price.

Question 3

Which of the following is NOT a result of imposing a rent ceiling?

Accepted Answer

Some consumer surplus is converted to producer surplus.

Question 4

The minimum wage is an example of:

Accepted Answer

a price floor.

Question 5

A price ceiling is a legally determined maximum price that sellers may charge. True or False?

Accepted Answer

True

Question 6

Price elasticity of demand measures:

Accepted Answer

how responsive quantity demanded is to a change in price.

Question 7

Suppose the value of the price elasticity of demand is minus 3. What does this mean?

Accepted Answer

A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent.

Question 8

If the percentage increase in price is 15 percent and the value of the price elasticity of demand is minus 3, then quantity demanded:

Accepted Answer

will decrease by 45 percent.

Question 9

The price elasticity of demand for Stork ice cream is minus 0.4. Suppose you're told that following a price increase, quantity demanded fell by 10 percent. What was the percentage change in price that brought this about?

Accepted Answer

2.5 percent.

Question 10

If demand is inelastic, the absolute value of the price elasticity of demand is:

Accepted Answer

less than one.

Question 11

Seth is a competitive body builder. He says he has to have his 12-oz package of protein powder to "feed his muscles" every day. On the basis of this information, what can you conclude about his price elasticity of demand for protein powder?

Accepted Answer

It is perfectly inelastic.

Question 12

If a 35 percent increase in price of golf balls led to an 42 percent decrease in quantity demanded, then the demand for golf balls is:

Accepted Answer

relatively elastic.

Question 13

If the demand for a lifesaving drug were perfectly price inelastic and the price doubled, the quantity demanded would:

Accepted Answer

remain constant.

Question 14

Economists use the concept of ______ to measure how one economic variable, such as quantity, responds to a change in another economic variable, such as price.

Accepted Answer

elasticity

Question 15

The price elasticity of demand is equal to:

Accepted Answer

the percentage change in quantity demanded divided by the percentage change in price.

Question 16

The price elasticity of demand for beef is estimated to be 0.60 (in absolute value). This means that a 20 percent increase in the price of beef, holding every thing else constant, will cause the quantity of beef demanded to:

Accepted Answer

decrease by 12 percent.

Question 17

If the absolute value of the price elasticity of demand for aspirin equals 0.8 then:

Accepted Answer

the demand for aspirin is inelastic.

Question 18

If demand is perfectly elastic, the absolute value of the price elasticity coefficient is:

Accepted Answer

infinity.

Question 19

When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell 4 percent. This indicates that the demand for tortilla chips is:

Accepted Answer

inelastic.

Question 20

If the demand for earbuds is price elastic, then:

Accepted Answer

the percentage change in quantity demanded is greater than the percentage change in price (in absolute value).

Microeconomics Study Guide: Price Controls and Elasticity of Demand

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