Brac Institute of Governance and Development

Brac University
DEV 300: Development and Economics
Fall 2023 Semester
QUIZ-2

FULL NAME: Mohamamd Abu Toyab ( 23262015)

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or
answers the question.

1. Demand is said to be inelastic if the

a. quantity demanded changes proportionately more than price.

b. price changes proportionately more than income.
c. quantity demanded changes proportionately less than price.
d. quantity demanded changes proportionately the same as price.

2. The midpoint method for calculating elasticities is convenient in that it allows us to

a. ignore the percentage change in quantity demanded and instead focus entirely on the
percentage change in price.
b. calculate the same value for the elasticity, regardless of whether the price increases
or decreases.
c. assume that sellers' total revenue stays constant when the price changes.
d. restrict all elasticity values to between 0 and 1.

3. The price elasticity of demand changes as we move along a

a. horizontal demand curve.

b. vertical demand curve.
c. linear, downward-sloping demand curve.
d. All of the above are correct.

4. When demand is inelastic, an increase in price will cause

a. an increase in total revenue.

b. a decrease in total revenue.
c. no change in total revenue but an increase in quantity demanded.
d. no change in total revenue but a decrease in quantity demanded.

5. To determine whether a good is considered normal or inferior, one could examine

the value of the

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a. income elasticity of demand for that good.
b. price elasticity of demand for that good.
c. price elasticity of supply for that good.
d. cross-price elasticity of demand for that good.

6. The cross-price elasticity of demand can tell us whether goods are

a. normal or inferior.
b. elastic or inelastic.
c. luxuries or necessities.
d. complements or substitutes.

7. All else equal, what happens to consumer surplus if the price of a good
decreases?

a. Consumer surplus increases.

b. Consumer surplus decreases.
c. Consumer surplus is unchanged.
d. Consumer surplus may increase, decrease, or remain unchanged.

8. Producer surplus is

a. represented on a graph by the area below the demand curve and above the supply
curve.
b. the amount a seller is paid minus the cost of production.
c. also referred to as excess supply.
d. All of the above are correct.

Figure 1-1

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9. Refer to Figure 1-1. The price that buyers effectively pay after the tax is imposed is

a. P1.
b. P2.
c. P3.
d. P4.

10. Refer to Figure 1-1, The price that sellers effectively receive after the tax is
imposed is

a. P1.
b. P2.
c. P3.
d. P4.

11. Refer to Figure 1-1. The amount of tax revenue received by the government is
equal to the area

a. P3ACP1.
b. ABC.
c. P2DAP3.
d. P1CDP2.

12. Refer to Figure 1-1. The loss in producer surplus caused by the tax is measured by
the area

a. ABC.
b. P1P3ABC.
c. P1P2BC.
d. P1C0.

13. Excludability is the property of a good whereby

a. one person's use diminishes other peoples’ use.

b. a person can be prevented from using it.
c. the government rations the quantity of a good that is available.
d. the resource is congestible.

14. Both public goods and common resources are

a. rival in consumption.
b. nonrival in consumption.
c. excludable.
d. nonexcludable.

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15. Goods that are rival in consumption and excludable would be considered

a. club goods.
b. common resources.
c. public goods.
d. private goods.

16. The phenomenon of free riding is most closely associated with which type of good?

a. private goods
b. club goods
c. common resources
d. public goods

17. National defense is a classic example of a public good because

a. there is no market for private security services.

b. it is difficult to exclude people from receiving the benefits from national defense once it is
provided.
c. everyone agrees that some level of national defense is important, but only the government
knows the optimal amount.
d. there are no private firms willing to supply defense goods such as tanks and weapons.

18. Which of the following is not equal to total surplus?

a. consumer surplus - producer surplus

b. buyers’ willingness to pay sellers’ costs
c. value to buyers - amount paid by buyers + amount received by sellers - cost to
sellers
d. value to buyers - cost to sellers

19. When the price of chai tea lattés is $5, Maxine buys 20 per month. When the
price is $4, she buys 30 per month. Maxine's demand for chai tea lattés is

a. elastic, and her demand curve would be relatively flat.

b. elastic, and her demand curve would be relatively steep.
c. inelastic, and her demand curve would be relatively flat.
d. inelastic, and her demand curve would be relatively steep.

20. The absence of incentives to prevent the overuse of a common resource that arises
when its users have no incentive to conserve it and use it sustainably is referred to as
a. sustainable production.
b. Free riding problem.
c. the tragedy of the commons.
d. irrational production.

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Please write your response in upper case letters below.

Question No. ANSWER Question No. ANSWER

1 C 11 A
2 B 12 C
3 C 13 B
4 A 14 D
5 A 15 D
6 D 16 D
7 A 17 B
8 B 18 A
9 C 19 A
10 A 20 C