When markets are competitive, property rights are well defined, and decision-mak

Question

When markets are competitive, property rights are well defined, and decision-makers are well informed, then

Question 2 options:

a)

the market equilibrium is not economically efficiency.

b)

the total gains from trade (the combined area of producer and consumer surplus) are minimized.

c)

all of these are true.

d)

all units with a benefit greater than or equal to cost have been produced.

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Question 3 (1 point)

Which is required for a free market to result in an efficient use of resources?

Question 3 options:

a)

well informed decision-makers

b)

well regulated supply and demand

c)

businesses that care about people instead of profits

d)

the availability of low cost resources

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Question 4 (1 point)

Which is a function performed by market prices?

Question 4 options:

a)

Market prices coordinate the decisions of buyers and sellers.

b)

Market prices motivate entrepreneurs to produce those products that are currently most desired relative to their costs of production.

c)

Market prices communicate information to buyers and sellers.

d)

All of these are functions performed by market prices.

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Question 5 (1 point)

Todd is a cattle rancher. In June and July he spent his clothing budget on jeans and cowboy hats. Each pair of jeans cost $50 and each hat cost $100. At Todd’s optimal choice, his marginal utility from the last pair of jeans purchased is 200. This means that his marginal utility from the last cowboy hat purchased is

Question 5 options:

a)

450

b)

550

c)

400

d)

500

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Question 6 (1 point)

A vertical supply curve is

Question 6 options:

a)

perfectly elastic.

b)

equal to infinity.

c)

unit elastic.

d)

perfectly inelastic.

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Question 7 (1 point)

The demand for a product is likely to be less elastic

Question 7 options:

a)

when fewer substitutes for the product are available.

b)

when fewer complementary products are available.

c)

the larger the share of the total budget spent on the product.

d)

in the long run than in the short run.

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Question 8 (1 point)

Which demand is most inelastic?

Question 8 options:

a)

gasoline

b)

fresh tomatoes

c)

provolone cheese

d)

Chevrolet automobiles

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Question 9 (1 point)

Rebel Records announces it is increasing the prices of its recordings by 2%. If Rebel is seeking to increase revenues, it must believe that the elasticity of demand for recordings is

Question 9 options:

a)

inelastic.

b)

unit elastic.

c)

elastic.

d)

perfectly inelastic.

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Question 10 (1 point)

Which is true?

Question 10 options:

a)

The price elasticity of supply will be smaller when inputs can be easily used to produce other goods.

b)

The price elasticity of supply will be greater in the short run.

c)

The price elasticity of supply is always positive.

d)

All of these are true.

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Question 11 (1 point)

Which would have a greater price elasticity of supply?

Question 11 options:

a)

high end electronics

b)

ice cream

c)

oranges

d)

oil

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Question 12 (1 point)

A 5% decrease in the quantity of good M demanded is caused by a 25% decrease in the price of good X. Which form of elasticity can be calculated with this data?

Question 12 options:

a)

Price elasticity of demand

b)

Cross-price elasticity of demand

c)

Price elasticity of supply

d)

Income elasticity of demand

a)

the market equilibrium is not economically efficiency.

b)

the total gains from trade (the combined area of producer and consumer surplus) are minimized.

c)

all of these are true.

d)

all units with a benefit greater than or equal to cost have been produced.

Explanation / Answer

Answer:- 4. Option (D) is correct. Functions of market prices include- Market prices communicate information to buyers and sellers. Market prices coordinate the decisions of buyers and sellers. Market prices motivate entrepreneurs to produce those products that are currently most desired relative to their costs of production.

Answer:- 5. Option (C) is correct. That means, his marginal utility from the last cowboy hat purchased is 400.

Answer- 6. Option (D) is correct. We know that a perfectly inelastic supply curve is a vertical line at a given quantity, which shows a constant supply regardless of price.

Answer 8:- Option (A) is correct. Because gasoline consumption is a necessity good which has inelastic demand.

Answer:- 12. Option (B) is correct. A 5% decrease in the quantity of good M demanded is caused by a 25% decrease in the price of good X then we can calculate the Cross-price elasticity of demand.

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