Question 1. Question : When the price of a good falls, there will be __________. an outward shift in the good’s demand curve both an outward shift in the good’s demand curve and a movement along the good’s demand curve a movement along the good’s demand curve no change in quantity demanded Question 2. Question : If the price of Pepsi increases, then there will be ________ of Pepsi. a decrease in the supply an increase in the supply an increase in the quantity supplied a decrease in the quantity supplied Question 3. Question : Refer to the figure below. The equilibrium price and quantity are __________. image $2 and 12 units $6 and 9 units $8 and 6 units $10 and 1 unit Question 4. Question : In the automobile industry, workers have just negotiated a new contract giving workers a large raise. There has also been an increase in the number of licensed drivers who are in the market for a new car. In the market for new automobiles, the effects that these changes will have on the equilibrium price and quantity are: __________. price will increase, and quantity will decrease price will increase, and the effect on quantity is indeterminate price will decrease, and quantity will increase price will decrease, and the effect on quantity is indeterminate Question 5. Question : In a market, the rationing function of prices results in __________. long queues or waiting lines a price ceiling equilibrium a shortage or surplus Question 6. Question : If a price floor is set below the current market clearing price, then __________. a surplus must immediately occur a shortage must immediately occur there will be incentives for black markets to develop quantity demanded will remain equal to quantity supplied at the current market clearing price Question 7. Question : A result of a positive externality in the production of a good is that __________. the price system will over-allocate resources to the production of that good or service the price system will under-allocate resources to the production of that good or service the market supply will be too high the market demand will be too high Question 8. Question : A fundamental aspect of public goods is that they __________. are just like private goods EXCEPT that everybody wants to consume the same amount have positive externalities are characterized by the principle of rival consumption can be consumed jointly by many people simultaneously Question 9. Question : The free-rider problem is encountered when __________. someone benefits from the consumption of a public good without paying his or her full share all individuals who consume a public good pay for it all goods consumed and produced are private goods all individuals are willing to pay for what they consume Question 10. Question : If a seller lowers the price of a product when demand is price inelastic, then the seller can expect revenues to __________. rise fall stay the same either rise or fall, but it is impossible to determine which Question 11. Question : When two goods are unrelated, __________. the demands for both goods will be inelastic cross price elasticity of demand will be 0 cross price elasticity of demand will be negative cross price elasticity of demand will be positive Question 12. Question : If one’s demand for peanut butter decreases as income rises, then the income elasticity of demand for the product is __________. elastic inelastic unit elastic negative Question 13. Question : On a hot summer day, a construction worker enters a McDonald’s fast-food restaurant. He orders the first Big Mac. He consumes it within 3 minutes. He then orders a second Big Mac and consumes it in 10 minutes. He eats only half of the third one in 18 minutes and throws away the rest. The store manager offers him the fourth for free. The construction worker says: “No thanks.” Why? For the construction worker, total utility increased at an increasing rate. Marginal utility
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