- Description
ECO 365T Wk 3 – Practice Knowledge Check (2021 New)
Assume that Abby, Ben, Clara, Joe, and Matt are the only citizens in a community. A proposed public good has a total cost of $1,000. All five citizens will share an equal portion of this cost in taxes. The benefit of the public good is $220 to Abby, $210 to Ben, $210 to Clara, $180 to Joe, and $120 to Matt. Who will likely vote in favor of this proposal?
Multiple Choice
- Abby, Ben, Clara, and Joe
- Ben, Clara, Joe, and Matt
- Ben, Clara, and Joe
- Abby, Ben, and Clara
Price per Ticket Quantity Demanded
$ 13 1,000
11 2,000
9 3,000
7 4,000
5 5,000
3 6,000
Refer to the information and assume the stadium capacity is 5,000. The supply of seats for the game
Multiple Choice
varies inversely with ticket prices.
varies directly with ticket prices.
is perfectly inelastic.
is perfectly elastic.
People enjoy outdoor holiday lighting displays and would be willing to pay to see them, but can’t be made to pay. Because most people who put up lights are unable to charge others to view them, they don’t put up as many lights as people would like. This is an example of a
Multiple Choice
- negative externality.
- supply-side market failure.
- demand-side market failure.
- government failure.
Political corruption occurs in the following instances, except when
Multiple Choice
- government officials use their powers for personal gain.
- people pay a government official to do what she should be doing.
- people pay a bureaucrat to do something that he should not be doing.
- businesses pay property taxes and license fees.
An auto rental company lowers the price of its rentals to increase its market share. The price cut increases quantity demanded, but total revenue decreases. This result suggests that over this price range, the demand for the auto rentals is
Multiple Choice
elastic.
inelastic.
unit elastic.
perfectly elastic.
The larger the coefficient of price elasticity of demand for a product, the
Multiple Choice
larger the resulting price change for an increase in supply.
more rapid the rate at which the marginal utility of that product diminishes.
less competitive will be the industry supplying that product.
smaller the resulting price change for an increase in supply.
Suppose that the price of product X rises by 20 percent and the quantity supplied of X increases by 15 percent. The coefficient of price elasticity of supply for good X is
Multiple Choice
negative, and therefore X is an inferior good.
positive, and therefore X is a normal good.
less than 1, and therefore supply is inelastic.
more than 1, and therefore supply is elastic.
The supply of product X is perfectly inelastic if the price of X rises by
Multiple Choice
5 percent and quantity supplied rises by 7 percent.
8 percent and quantity supplied rises by 8 percent.
10 percent and quantity supplied stays the same.
7 percent and quantity supplied rises by 5 percent.
Price per Ticket Quantity Demanded
$ 13 1,000
11 2,000
9 3,000
7 4,000
5 5,000
3 6,000
Refer to the information. If the Mudhens’ management wanted to maximize total ticket revenue from the game, it would set the ticket price at
Multiple Choice
$5.
$7.
$9.
$13.
According to the paradox of voting,
Multiple Choice
- public goods that cost more than the total benefits they confer may get produced under majority voting.
- trading of votes may either add to or subtract from economic efficiency.
- the median voter decides what public goods all voters should have.
- majority voting fails, under some circumstances, to make consistent choices that reflect the community’s underlying preferences.
The total revenue received by sellers of a good is computed by
Multiple Choice
multiplying the price times the quantity sold.
adding the price and the quantity sold.
multiplying the percentage change in price times the percentage change in quantity.
dividing the percentage change in quantity by the percentage change in price.
Supply curves tend to be
Multiple Choice
perfectly elastic in the long run because consumer demand will have sufficient time to adjust fully to changes in supply.
more elastic in the long run because there is time for firms to enter or leave the industry.
perfectly inelastic in the long run because the law of scarcity imposes absolute limits on production.
less elastic in the long run because there is time for firms to enter or leave an industry.
Refer to the diagram. Between prices of $5.70 and $6.30,
Multiple Choice
D1 is more elastic than D2.
D2 is an inferior good and D1 is a normal good.
D1 and D2 have identical elasticities.
D2 is more elastic than D1.
As it relates to the political process, the principal-agent problem results from the
Multiple Choice
- negative externalities that are created by some policy actions.
- political rules that encourage elected officials to engage in unethical and illegal behavior.
- inconsistency between voters’ interest in programs and politicians’ interest in reelection.
- paradox of voting.
Which statement best describes the special-interest effect?
Multiple Choice
- It is a program or policy that is adopted during a special session of Congress or a state legislature.
- It is a policy issue in which both the supporters and opponents employ paid lobbyists to represent their interests.
- It is a program or policy which one political party strongly supports and other political parties strongly oppose.
- It is a program or policy in which a large number of people will suffer small costs, while a small number will receive large gains.
Alex, Kara, and Susie are the only three people in a community. Alex is willing to pay $40 for the third unit of a public good; Kara is willing to pay $25. If the marginal cost of producing the third unit is $100, what is the minimum amount that Susie must be willing to pay for it to be efficient for government to produce the third unit?
Multiple Choice
- $35
- $100
- $65
- The amount cannot be determined with the information provided.
Public choice theory focuses on the economics of
Multiple Choice
- fiscal and monetary policy.
- the behavior of business firms.
- antitrust and regulatory policy.
- government decision making, politics, and elections.
Refer to the diagram. If price falls from P1 to P2, total revenue will become area(s)
Multiple Choice
B + D.
C + D.
A + C.
C.
Sony is considering a 10 percent price reduction on its HD televisions. If the price-elasticity coefficient for the sets in this price range is 0.75, then the price cut will cause
Multiple Choice
sales quantity to increase and revenues to also increase.
sales quantity to increase but revenues to decrease.
sales quantity to decrease and revenues to also decrease.
sales quantity to decrease but revenues to increase.
When the percentage change in price is greater than the resulting percentage change in quantity demanded,
Multiple Choice
a decrease in price will increase total revenue.
demand may be either elastic or inelastic.
an increase in price will increase total revenue.
demand is elastic.
Consider the demand curve above. If the price is OA, then the total revenues of sellers would be the area
Multiple Choice
D-A-B-E.
0-A-B-C.
0-D-E-F.
C-B-E-F.
The supply of product X is perfectly inelastic if the price of X rises by
Multiple Choice
5 percent and quantity supplied rises by 7 percent.
8 percent and quantity supplied rises by 8 percent.
10 percent and quantity supplied stays the same.
7 percent and quantity supplied rises by 5 percent.
In corporations, owners are __________________ and managers are ________________.
Multiple Choice
- agents; principals
- stockholders; bondholders
- agents; employees
- principals; agents
An auto rental company lowers the price of its rentals to increase its market share. The price cut increases quantity demanded, but total revenue decreases. This result suggests that over this price range, the demand for the auto rentals is
Multiple Choice
elastic.
inelastic.
unit elastic.
perfectly elastic.
When the percentage change in price is greater than the resulting percentage change in quantity demanded,
Multiple Choice
a decrease in price will increase total revenue.
demand may be either elastic or inelastic.
an increase in price will increase total revenue.
demand is elastic.
People enjoy outdoor holiday lighting displays and would be willing to pay to see them, but can’t be made to pay. Because most people who put up lights are unable to charge others to view them, they don’t put up as many lights as people would like. This is an example of a
Multiple Choice
- negative externality.
- supply-side market failure.
- demand-side market failure.
- government failure.
Refer to the graph above. Which demand curve is relatively most elastic between P1 and P2?
Multiple Choice
D1
D2
D3
Assume there is no way to prevent someone from using an interstate highway, regardless of whether or not he or she helps pay for it. This characteristic is called
Multiple Choice
- nonrivalry.
- nonexcludability.
- nontaxability.
- nondiscrimination.
Answer the question based on the following information for four highway programs of increasing scope. All figures are in millions of dollars.
Program Total Cost Total Benefit
A $ 2 $ 9
B 6 16
C 12 21
D 20 23
Based on the data, we can say that
Multiple Choice
- Program D is the most efficient on economic grounds.
- Program C is the most efficient on economic grounds.
- Program B is the most efficient on economic grounds.
Political corruption occurs in the following instances, except when
Multiple Choice
- government officials use their powers for personal gain.
- people pay a government official to do what she should be doing.
- people pay a bureaucrat to do something that he should not be doing.
- businesses pay property taxes and license fees.
Some people argue that the three main television networks all have similar programming. If true, this observation might best be explained by the
Multiple Choice
- paradox of voting.
- median-voter model.
- law of diminishing marginal utility.
- ability-to-pay principle.
Suppose a college economics department decides to use a single economics text for all sections of principles of economics. Also assume that the three individual members of the textbook selection committee have the following preferences.
Professor Ideal Textbook Analytical Level of the Textbook
Adams C/F Very Difficult
Bennett M/B Moderately Difficult
Clay O/S Relatively Easy
Assuming all other textbook qualities except analytical level are the same, majority voting will result in the committee
Multiple Choice
- being deadlocked and unable to decide on a book.
- selecting the C/F book.
- selecting the M/B book.
- selecting the O/S book.
Which of the following factors will make the demand for a product relatively elastic?
Multiple Choice
There are few substitutes.
The time interval considered is long.
The good is considered a necessity.
Purchases of the good require a small portion of consumers’ budgets.
The larger the coefficient of price elasticity of demand for a product, the
Multiple Choice
larger the resulting price change for an increase in supply.
more rapid the rate at which the marginal utility of that product diminishes.
less competitive will be the industry supplying that product.
smaller the resulting price change for an increase in supply.
Refer to the diagram. Between prices of $5.70 and $6.30,
Multiple Choice
D1 is more elastic than D2.
D2 is an inferior good and D1 is a normal good.
D1 and D2 have identical elasticities.
D2 is more elastic than D1.
Price per Ticket Quantity Demanded
$ 13 1,000
11 2,000
9 3,000
7 4,000
5 5,000
3 6,000
Refer to the information and assume the stadium capacity is 5,000. The supply of seats for the game
Multiple Choice
varies inversely with ticket prices.
varies directly with ticket prices.
is perfectly inelastic.
is perfectly elastic.
Regulatory capture is said to have occurred when which of the following is true?
Multiple Choice
- Rules and enforcement in an industry are heavily influenced by the industry being regulated.
- One firm controls an entire market, having captured customers away from other firms.
- Government imposes excessive regulations in an industry, resulting in inefficiencies.
- Consumers make all the rules for an industry, forcing firms into inefficient production methods.
Public choice theory focuses on the economics of
Multiple Choice
- fiscal and monetary policy.
- the behavior of business firms.
- antitrust and regulatory policy.
- government decision making, politics, and elections
Answer the question on the basis of this table showing the marginal benefit that a particular public project will provide to each of the three members of a community. No vote trading is allowed.
Voter Marginal Benefit
Xavier $ 500
Yoho 200
Zest 2,000
If the tax cost of this proposed project is $300 per person, a majority vote will
Multiple Choice
- defeat this project and resources will be underallocated to it.
- pass this project and resources will be allocated efficiently.
- pass this project and resources will be underallocated to it.
- defeat this project and resources will be overallocated to it.
Which types of goods are most adversely affected by recessions?
Multiple Choice
Goods for which the income elasticity coefficient is relatively low or negative.
Goods for which the income elasticity coefficient is relatively high and positive.
Goods for which the cross elasticity coefficient is positive.
Goods for which the cross elasticity coefficient is negative.