Question # 1

When two goods are substitutes a shock that raises the price of one good causes the price of the other goods to.

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Remain unchanged

Decrease

Increase

Change in an unpredictable manner

Economists tend to judge a model based upon

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the realty of its assumptions

The accuracy of its predications

Its simplicity

Its complexity

Consumers and firms are known as price takers only it

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No market exists to determine the equilibrium price

they can set the market price

They cannot effect the market price

Excess demand exists

If government regulations prohibit the production of a particular good the demand curve for that good will most likely.

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Shift leftward

Shift rightward

Remain unchanged

Disappear

If the price of automobiles were to decrease substantially the demand curve for public transpiration would most likely.

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shift rightward

Shift leftward

Remain unchanged

Remain unchanged while quantity demanded would change

If the demand curve for a good is horizontal and the price is positive then a leftward shift of the supply curve results in.

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a price of zero

An increase in price

A decrease in price

No change in price

A Horizontal demand curve for a good could arise because consumers.

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Are irrational

Are not sensitive to price changes

View this good as identical to another good

Have no equivalent substitutes for this good

The purpose of making assumptions in economic model building is to.

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Force the model to yield the correct answer

Minimize the amount of work an economist must do

simplify the model while keeping important details.

Express the relationship mathematically.

If a government imposed price celling causes the observed price in a market to be below the equilibrium price.

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There will be excess demand

There will be excess supply

The curves will shift to make a new equilibrium at the regulated price

None of the above

The percentage change in the quantity demanded in response to a percentage change in the price is known as the.

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slope of the demand curve

Excess demand

Price elasticity of demand

All of the above

To determine the total demand for all consumers sum the quantity each consumer demands.

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At a given price

At all prices and then sum this amount across all consumers

Both a and b will generate the same total demand

None of the above

A competitive equilibrium is described by

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A price only

A quantity only

The excess supply minus the exceess demand.

A price and a quantity

If the price of automobiles were to increase substantially the demand curve for gasoline would most likely

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Shift leftward

Shift right ward

Become flatter

Become steeper

It is appropriate to use the supply and demand model if in a market.

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Everyone is a price taker with full information about the price and quantity of the good.

Firms sell identical products

Costs of trading are low

All of the above

If price is initially above the equilibrium level.

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the supply curve will shift rightward

The supply curve will shift letward

Excess supply exists

All firms can sell as much as they want

If the price of orange juice rises 10% and as a result the quantity demanded falls by 8% the price elastic of demand for orange juice is.

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-1.25

Inelastic

Both a and b

Neither A nor B above

Holding all other factors constant consumers demand more of a good the

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Higher its price

Lower its price

Steeper the downward slope of the demand curve

Steeper the upward slope of the demand curve

If the price of automobile were to decrease substantially the demand curve for automobiles would most likely.

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shift rightward

Shift left eard

Remain unchanged

Become steeper

For a given positively sloped supply curve the price increase to consumers resulting from a specific tax imposed on sellers will be.

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Greater the more price elastic demand is

Greater the less price elastic demand is

Equal to the entire tax when demand is perfectly elastic

Equal to half of the tax whenever demand is unit elastic

A specific tax on sellers will

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shift the demand curve to the right

Shift the demand curve the left

Shift the supply curve to the right

Shift the supply curve to the left

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