Question 1

Suppose the government imposes a price ceiling on apartment rents below the market equilibrium price. What is the most likely outcome in the rental market?

Accepted Answer

A shortage of apartments, as quantity demanded exceeds quantity supplied.

Question 2

Which of the following is NOT a factor that shifts the supply curve according to the NESTS acronym?

Accepted Answer

Demand

Question 3

If a $$4 per-unit tax is imposed on sellers, and the original supply equation is  Q_s = 2P - 10$$ $, what is the new supply equation after the tax?

Accepted Answer

$$ Q_s = 2(P - 4) - 10 $$

Question 4

A market is in equilibrium at a price of $$20$$ and quantity of $$200. If $$the government sets a price floor at $$25$$, what will happen?

Accepted Answer

A surplus will occur, as quantity supplied exceeds quantity demanded.

Question 5

If the price of a product increases from $$50 to$$ $$60$$, what is the percentage change in price?

Accepted Answer

$$ 20\% $$

Question 6

Which of the following best describes consumer surplus?

Accepted Answer

The difference between what a consumer is willing to pay and what they actually pay.

Question 7

If the price elasticity of demand for a good is $$1.5$$, which of the following is true?

Accepted Answer

The good is elastic; quantity demanded changes more than price.

Question 8

A tax on gasoline is justified using which tax equity principle?

Accepted Answer

Benefits principle

Question 9

If the cross-price elasticity of demand between tea and coffee is positive, what does this imply?

Accepted Answer

Tea and coffee are substitutes.

Question 10

Suppose the income elasticity of demand for bus rides is $$-0.5. $$What does this indicate?

Accepted Answer

Bus rides are an inferior good.

Question 11

If a $$3$$ per-unit tax is imposed and $$100$$ units are sold after the tax, what is the total tax revenue collected by the government?

Accepted Answer

$$ 300 $$

Question 12

Which of the following best describes deadweight loss from a tax?

Accepted Answer

The loss in total surplus due to reduced quantity traded below equilibrium.

Question 13

If the demand for a product is perfectly inelastic, how will a tax on the product affect the market?

Accepted Answer

Buyers will bear the entire burden of the tax.

Question 14

Which of the following is true about the price elasticity of supply?

Accepted Answer

It is always positive.

Question 15

A hurricane destroys a large portion of the orange crop in Florida. What happens to the supply curve for oranges?

Accepted Answer

Supply shifts left.

Question 16

If the price of a good increases and total revenue decreases, what can you conclude about the price elasticity of demand?

Accepted Answer

Demand is elastic.

Question 17

Given the following data: Price increases from $$10 to$$ $$15$$, Quantity increases from $$100 to$$ $$150. $$Using the midpoint method, what is the price elasticity of supply?

Accepted Answer

$$ 1.0 $$

Question 18

Which of the following statements about market equilibrium is correct?

Accepted Answer

At equilibrium, quantity demanded equals quantity supplied.

Question 19

If a good has many close substitutes and is considered a luxury, its price elasticity of demand is likely to be:

Accepted Answer

Elastic

Question 20

Which of the following is maximized at market equilibrium?

Accepted Answer

Total (economic) surplus

Advanced Supply & Demand, Government Intervention, Elasticity, and Consumer Choice: Exam-Ready Study Notes

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