1.

(Points: 1)  
The government fixes a maximum price for petrol that is below the market price. You are asked to suggest a rationing scheme, which will minimise
the misallocation of resources. Which should you suggest?

a. Using rationing on a first-come, first-served basis.

  b. Using rationing coupons which can be resold.

c. Using rationing coupons which cannot be resold.

d. Using rationing only on weekdays.

2.
(Points: 1)  
The old system of EU support for farmers where high intervention prices were set resulted in

a. an increase in farmers' incomes.

b. a reduction in imports of food.

  c. lower food prices.

d. higher exports of food.

e. A, B and C.

f. A, B and D.

3.
(Points: 1)  
The following table refers to the market demand for flour

Quantity demanded Price

(kgs) (pence per bag)
60 10
50 20
40 30
30 40
20 50

  Which of the following answers is correct for price elasticity of demand (using the mid-point method) as price changes from 30p per kg to 40p per
kg?

a. -1

b. -10

c. -0.75

d. -0.29

e. -1.33

4.
(Points: 1)  
Some economists have suggested that drugs which are currently illegal in the UK should instead be legal and taxed in the same way as alcohol or
tobacco. If this were done the most likely result(s) would be

a. less crime.

b. more tax revenue.

  c. more drug use.

d. B and C

e. A, B and C
5.
(Points: 1)  
The average or 'mid-point' formula for price elasticity of demand is

a. Q/midQ) / P/midP)

  b. (midPP) / (midQQ)

c. (midQQ) / (midPP)

d. P/midP) / Q/midQ)

6.
(Points: 1)  
In a free market, price increases will distribute scarce goods in favour of those who are willing and able to pay the most. This process is known as

a. arbitrage.

  b. equity.

c. market clearing.

d. rationing by price.

7.
(Points: 1)  
If a tax is imposed on a good, the consumer share of the tax will be greater

a. the lower the price elasticity of demand and the higher the price elasticity of supply.

b. the higher the price elasticity of demand and the lower the price elasticity of supply.
 

c. the lower the price elasticity of demand and supply.

d. the higher the price elasticity of demand and supply.

8.
(Points: 1)  
The adjustment of ________ is the rationing mechanism in free markets

a. price

  b. supply

c. quantity

d. demand

9.
(Points: 1)  
A supermarket decides to reduce the price of its own brand of baked beans as a special offer for one week only. During this week it discovers that
its total revenue on these baked beans increases. This indicates that

a. the demand for its own brand of baked beans is inelastic with respect to income.

b. the demand for its own brand of baked beans is elastic with respect to price.
 

c. its own brand of baked beans is an inferior good.

d. the demand for its own brand of baked beans is elastic with respect to income.

e. its own brand of baked beans is inelastic with respect to price.

10.
(Points: 1)  
  The price elasticity of supply of butter is 0.2 and a guaranteed price is originally set at 100 and the quantity produced is 1000 tonnes. Which of the
following quantities will represent the planned level of production for butter if the guaranteed price is reduced by 10%?

a. 200 tonnes

b. 980 tonnes
c. 20 tonnes

d. 800 tonnes