QUESTION MULTIPLE CHOICE III Choose the correct option A. When a price ceiling i

Question

QUESTION MULTIPLE CHOICE III

Choose the correct option

A. When a price ceiling is imposed in a market
[1] a persistent shortage is created.
[2] a persistent surplus is created.
[3] sellers of the product are made better off.
[4] quantity supplied is greater than the quantity demanded.

B. In order for a price floor to be effective, it must be set ________ the equilibrium price, while a price ceiling must be set ________ the equilibrium price in order to be effective.

[1] above; below
[2] above; above
[3] below; above
[4] below; below

C. Price elasticity of demand gives us a measure of how sensitive or responsive the ________ of a good or service is to a change in the _________ of a good service.
[1] price; quantity demanded
[2] demand; price
[3] quantity demanded; price
[4] price; demand

D. If the price elasticity of beef is greater than the price elasticity of coffee, it means that households are
[1] more responsive or sensitive to a change in the price of beef than to a change in the price of coffee.
[2] more responsive or sensitive to a change in the price of coffee than to a change in the price of beef.
[3] more responsive or sensitive to a change in the demand for coffee than to a change in the demand for beef.
[4] more responsive or sensitive to a change in the demand for beef than to a change in the demand for coffee.

E. If the price elasticity of medical care is 0,31 it can be concluded that the demand for medical care is ________ since the percentage change in quantity demanded is ________ the percentage in price.
[1] price inelastic; less
[2] price inelastic; greater
[3] price elastic; less
[4] price elastic; greater

F. A possible reason that the demand for petrol is inelastic is because
[1] households spend a small proportion of their income on petrol.
[2] petrol is a luxury good.
[3] there is no close substitute for petrol.

G. Given that tomatoes has a price elastic demand the total revenue of tomato firms will
[1] increase if the price rises.
[2] decrease if the price rises.
[3] increase if the price fall.
[4] stay the same if the price rises.

H. If a 10% increase in income causes a 20% increase in the quantity demanded fora good or service. It can be concluded that
[1] the price elasticity of the good or service is greater than one.
[2] the income elasticity of the demand for the good or service is negative.
[3] the good or service is a necessity.
[4] the good or service is a luxury good.

I. Utility is best defined as
[1] usefulness of a good or service.
[2] satisfaction from consuming the good or service.
[3] the price a consumer is willing to pay for a good or service.
[4] the additional satisfaction derived from consuming a good or service.

J. Given the price of goods and services, which of the following indicates consumer equilibrium?
[1] The consumer spends his or her income in such a way that he or she attains the highest possible marginal utility.
[2] The consumer spends his or her income in such a way that the weighted marginal utility (marginal utility per rand) is the same for the goods.
[3] The consumer spends his or her income in such a way that he or she attains the lowest possible total utility.
[4] The consumer spends his or her income in such a way that the weighted marginal utility (marginal utility per rand) is at its lowest.

K. If you have R20 to spend on chicken pieces and pies how many chicken pieces will you consider buying to reach maximum satisfaction f the price is R4 per chicken piece and R4 for a pie?

[1] 1
[2] 2
[3] 3
[4] 4
[5] 5

Explanation / Answer

A. Answer is 1. a persistent shortage is created. B. Answer is 1. Above; below. C. Aswer is 3. Quantity demanded; price. D. Answer is 1. more responsive or sensitive to a change in price of beef than to change in price of coffee. E. Answer is 1. Price inelastic; Less F. Answer is 3. There is no close substitute for petrol. G. Answer is 4. Stays the same if the price rises. H. Answer is 4. The good or service is a Luxury goods. I. Answer is 2. Satisfaction from consuming the good or service. J. Answer is 2. The consumer spends his income in such a way that the weighted marginal utility is same for the goods. K. Answer is 2. 2

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