Quiz Questions :-

1). Suppose that the Board of Directors of the local concerto proposes that the admission price to
hear the orchestra be reduced as a means of raising additional funds to support music programs. Its
members are implicitly assuming that the price elasticity of demand for a ticket is

a)less than unity b) greater than unity c)unity d) it really says nothing about elasticity

2) Which of the following two goods is more likely to be inelastically demanded?

a)Demand for insulin

b) Demand for vitamins

c) None of these

3) Suppose there is an increase in both the demand for and supply of a good. What happens to
equilibrium price and quantity?

a) Equilibrium quantity increases, but the effect on equilibrium price is ambiguous.

b) Equilibrium price increases, but the effect on equilibrium quantity is ambiguous.

c) Equilibrium price decreases, but the effect on equilibrium quantity is ambiguous.

d) Equilibrium quantity decreases, but the effect on equilibrium price is ambiguous.

4) Consider an average Indian consumer who spends his monthly income on Goods (G) and Services
(S). The consumer's budget line can be written as G = 300 – 2S. If we know that the price of Goods is
Rs 1.35, then

a) The price of services is 2.7

b) The consumer's nominal income is Rs. 405

c) The consumer's real income in terms of the price of services is 150 Rs.

d) All of the above

5) You are given the following information about the market for motorcycles. Market Demand: P =
400 – 5Q. Market Supply: P = 5Q. Suppose that the government decides to impose an excise tax of
$60 per motorcycle on producers in this market. What will be the number of motorcycles sold in this
market once this tax is imposed?

6) American farmers lobby for a price support of $9/pumpkin. Supply of pumpkins is given by Q = 5P
- 10. Demand is Q = -6P + 67. The state makes excess pumpkins into pies to be given away for free
to the homeless at a cost to the state of $1/pumpkin. How much does this price support program
cost the State? In your calculation include the cost to the state of both purchasing the pumpkins as
well as making them available as pies to the homeless.
7) Consider a supply curve of the form: Q = c + dP. If d=0, then supply is

a) completely inelastic

b) inelastic but not completely inelastic’

c) elastic but infinitely elastic

d)infinetly elastic

8) i) In the graph shown, which of the demand curve is most elastic at point A?

ii) In the graph shown below, a given increase in price would result in the largest increase in total
revenue on which demand curve?

9) For an inferior good with a downward sloping demand curve:

a)The price elasticity of demand is positive; the income elasticity of demand is negative.

b)The price elasticity of demand is negative; the income elasticity of demand is negative.

c)The price elasticity of demand is negative; the income elasticity of demand is positive.

d) The price elasticity of demand is positive; the income elasticity of demand is positive.

10) If prices and income in a two-good society double, what will happen to the budget line?

a) The intercepts of the budget line will increase.

b) The intercepts of the budget line will decrease.

c) The slope of the budget line may either increase or decrease.

d) There is insufficient information to determine the effect on the budget line.

e) There will be no effect on the budget line.

11) Suppose that the market demand and market supply curves for a good are given by the following
equations: Market Demand: P = 100 – Q. Market Supply: Q = 4P. The government decides that they
would like to impose an excise tax on this good so that total consumption of the good falls to 40
units. The government should impose an excise tax of ????

a) $35 b)$45 c)$50 d)$75

12) Price ceilings are primarily targeted to help _______, while price floors generally benefit
_________.