Econ 101 Practice Test
Econ 101 practice question for Exam 1 (answer key at the end)
1. Each month Jacquelyn spends exactly $50 on ice cream regardless of the price. Jacquelyn's price elasticity of demand for ice cream is:
A) zero.
B) one.
C) greater than one.
D) less than one, but greater than zero.
2. Egg producers know that the elasticity of demand for eggs is 0.1. The hens went crazy and laid 5% more eggs than usual. To sell all those additional eggs, they will have to lower price by:
A)
B)
C)
D)
0.1%
1%
5%
50%
3. Nations can gain from trade with other nations even if they are less productive in all industries than the nations they trade with.
A) True
B) False
4. If demand is perfectly inelastic, the deadweight loss caused by a tax …show more content…
B) your bouncer thinks the demand for drinks is inelastic, while your bartender thinks the demand for drinks is elastic.
C) both the bouncer and bartender think the demand for drinks is elastic.
D) both the bouncer and bartender think the demand for drinks is inelastic.
12. If they produce only hamburgers, then in a single day Sarah can produce 10 hamburgers while
Abe can produce 5 hamburgers. If they only make milkshakes, then in a single day Sarah can produce 10 milkshakes while Abe can produce 4 milkshakes. We then know that:
A) Sarah has an absolute advantage and a comparative advantage in making hamburgers.
B) Sarah has an absolute advantage and a comparative advantage in making milkshakes.
C) Abe has an absolute advantage and a comparative advantage in making hamburgers
D) Abe has an absolute advantage and a comparative advantage in making milkshakes
13. A group of dairy farmers are trying to raise milk prices by 10%. If the price elasticity of demand for is
0.75, and the price elasticity of supply for milk is 0, then by how much should farmers reduce their milk production to obtain the 10% increase?
A) 10%
B) 7.5%
C) 15%
D) 13%
Page 3
14. The total surplus generated in a market …show more content…
B) the surplus that exists when a good is not scarce, defined as the total amount (if any) by which quantity supplied exceeds quantity demanded at a zero price.
C) the net benefit to consumers, defined as the excess of consumer surplus over producer surplus.
D) the sum of consumer surplus and producer surplus.
15. The publisher of an economics textbook finds that when the book's price is lowered from $70 to
$60, sales rise from 10,000 to 15,000. The price elasticity of demand is:
A)
B)
C)
D)
500.
50%.
3.5.
2.6.
16. Sometimes airlines raise ticket prices as the flight departure date approaches in the hope of increasing revenue. The airlines raise their prices on the assumption that:
A) consumer demand becomes more price elastic as departure time approaches.
B) consumer demand becomes less price elastic as departure time approaches.
C) consumers are not aware of airline prices.
D) consumer demand is unrelated to prices.
Answer Key
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1. Each month Jacquelyn spends exactly $50 on ice cream regardless of the price. Jacquelyn's price elasticity of demand for ice cream is:
A) zero.
B) one.
C) greater than one.
D) less than one, but greater than zero.
2. Egg producers know that the elasticity of demand for eggs is 0.1. The hens went crazy and laid 5% more eggs than usual. To sell all those additional eggs, they will have to lower price by:
A)
B)
C)
D)
0.1%
1%
5%
50%
3. Nations can gain from trade with other nations even if they are less productive in all industries than the nations they trade with.
A) True
B) False
4. If demand is perfectly inelastic, the deadweight loss caused by a tax …show more content…
B) your bouncer thinks the demand for drinks is inelastic, while your bartender thinks the demand for drinks is elastic.
C) both the bouncer and bartender think the demand for drinks is elastic.
D) both the bouncer and bartender think the demand for drinks is inelastic.
12. If they produce only hamburgers, then in a single day Sarah can produce 10 hamburgers while
Abe can produce 5 hamburgers. If they only make milkshakes, then in a single day Sarah can produce 10 milkshakes while Abe can produce 4 milkshakes. We then know that:
A) Sarah has an absolute advantage and a comparative advantage in making hamburgers.
B) Sarah has an absolute advantage and a comparative advantage in making milkshakes.
C) Abe has an absolute advantage and a comparative advantage in making hamburgers
D) Abe has an absolute advantage and a comparative advantage in making milkshakes
13. A group of dairy farmers are trying to raise milk prices by 10%. If the price elasticity of demand for is
0.75, and the price elasticity of supply for milk is 0, then by how much should farmers reduce their milk production to obtain the 10% increase?
A) 10%
B) 7.5%
C) 15%
D) 13%
Page 3
14. The total surplus generated in a market …show more content…
B) the surplus that exists when a good is not scarce, defined as the total amount (if any) by which quantity supplied exceeds quantity demanded at a zero price.
C) the net benefit to consumers, defined as the excess of consumer surplus over producer surplus.
D) the sum of consumer surplus and producer surplus.
15. The publisher of an economics textbook finds that when the book's price is lowered from $70 to
$60, sales rise from 10,000 to 15,000. The price elasticity of demand is:
A)
B)
C)
D)
500.
50%.
3.5.
2.6.
16. Sometimes airlines raise ticket prices as the flight departure date approaches in the hope of increasing revenue. The airlines raise their prices on the assumption that:
A) consumer demand becomes more price elastic as departure time approaches.
B) consumer demand becomes less price elastic as departure time approaches.
C) consumers are not aware of airline prices.
D) consumer demand is unrelated to prices.
Answer Key
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.