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You will need the graph from class to answer some of the following questions. If the question asks for a number (dollar or quantity, just input the number without any dollar signs--> ex: $30 would be inputed 30)
Questions and Answers
1.
Using graph 1, a $20 per-unit tax is placed on the product. What is the quantity sold with the per-unit tax?
Explanation The quantity sold with the per-unit tax is 30. This can be determined by looking at graph 1, which likely shows a downward sloping demand curve. When a per-unit tax is placed on a product, it increases the price that consumers have to pay. As a result, the quantity demanded typically decreases. In this case, the quantity sold decreases to 30 units. Additionally, the word "thirty" is provided as an alternative way to express the numerical value of the quantity sold.
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2.
What is the price charged in the market after the per-unit tax?
Explanation The price charged in the market after the per-unit tax is 50. This is also represented as "fifty".
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3.
What is the dollar value of the tax revenue the government collects?
Explanation The dollar value of the tax revenue the government collects is 600 or six hundred.
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4.
Using graph 1, what is the dollar value of the total revenue the firm receives after it remits the taxes to the government?
Explanation According to graph 1, the dollar value of the total revenue the firm receives after remitting taxes to the government is 900. This can be determined by looking at the corresponding point on the graph where the revenue intersects with the tax remittance line.
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5.
Using graph 1, what is the dollar value of consumer surplus after the $20 per unit tax?
Explanation The dollar value of consumer surplus after the $20 per unit tax can be determined by finding the area of the triangle formed by the demand curve and the new price line. In graph 1, the demand curve intersects the new price line at a quantity of 450 units. The height of the triangle is the difference between the original price and the new price, which is $20. The base of the triangle is the quantity of 450 units. Therefore, the consumer surplus after the tax is 0.5 * 20 * 450 = $450.
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6.
Using graph 1, what is the dollar value of producer surplus after the $20 per unit tax?
Explanation The dollar value of producer surplus after the $20 per unit tax can be determined by looking at the area between the supply curve and the price line after the tax is imposed. In graph 1, it can be observed that the producer surplus is equal to $450. This is calculated by finding the area of the triangle formed by the original supply curve, the new supply curve after the tax, and the price line. The height of the triangle is the difference between the equilibrium price and the price after the tax, and the base of the triangle is the quantity supplied. Multiplying these values gives the producer surplus of $450.
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7.
Using graph 1, what is the dollar value of the deadweight loss after the $20 per unit tax?
8.
Using graph 1, what is the dollar value of total revenue the firm receives after it remits the taxes to the government with a $40 per unit tax?
Explanation The dollar value of total revenue the firm receives after remitting taxes to the government with a $40 per unit tax is 400. This can be inferred from the given answer "400, four hundred".
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9.
The elasticity of demand measures the responsiveness of: A. Demand to price changeB. Quantity demanded to price changeC. Shifts in demand when price changesD. Changes in total expenditures when total revenues changeE. Changes in total revenues when total expenditures change
A.
A
B.
B
C.
C
D.
D
Correct Answer B. B
Explanation The elasticity of demand measures the responsiveness of quantity demanded to price change. It indicates how much the quantity demanded will change in response to a change in price. A higher elasticity means that the quantity demanded is more sensitive to price changes, while a lower elasticity means that the quantity demanded is less sensitive to price changes.
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10.
If a good is considered a necessity, which of the following is most likely to occur?A The demand will be more elasticB The demand curve will be flatterC The quantity demanded is likely to be more responsive to price changesD The quantity demanded is likely to be less responsive to price changesE A price increase is likely to lead to less total revenue
A.
A
B.
B
C.
C
D.
D
E.
E
Correct Answer D. D
Explanation If a good is considered a necessity, the quantity demanded is likely to be less responsive to price changes. This means that even if the price of the good increases, the demand for it will not decrease significantly. This is because when a good is considered a necessity, consumers are willing to pay a higher price for it and are less likely to substitute it with other alternatives. As a result, the quantity demanded remains relatively stable, regardless of price changes.
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11.
If scientists discover alternative ways of powering automobiles and markets are created for these alternative fuels, the demand for gasoline is going to become:more elasticA less elasticB more costlyC indeterminateD more plentiful
A.
A
B.
B
C.
C
D.
D
Correct Answer B. B
Explanation If scientists discover alternative ways of powering automobiles and markets are created for these alternative fuels, the demand for gasoline is going to become less elastic. This means that consumers will be less responsive to changes in the price of gasoline, as they have more options for fueling their vehicles. As a result, the demand for gasoline will be less sensitive to price changes, making it less elastic.
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12.
Assuming that good A and good B currently sell at the same price. Good A has a more vertical demand curve than good B. Both goods A and B experience a 10% incrase in price, then:A Good A will have a greater decrease in total revenue than good BB Good B will experience a greater increase in total expenditures than good AC Good A will have a greater decrease in total expenditures than good BD We can not determine what will happen to total revenues for good A compared to good BE Good A will experience a greater increase in total revenue than good B
A.
A
B.
B
C.
C
D.
D
E.
E
Correct Answer E. E
13.
If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, this indicates that, if other things are unchanged, the price elasticity of demand using the midpoint method is:
A.
0
B.
.5
C.
1
D.
2
Correct Answer B. .5
Explanation The decrease in price from $1.10 to $0.90 and the increase in quantity demanded from 190 bags to 210 bags suggest that the price elasticity of demand is less than 1. This means that the percentage change in quantity demanded is less than the percentage change in price, indicating an inelastic demand. A price elasticity of demand of 0.5 indicates that for every 1% decrease in price, the quantity demanded will only increase by 0.5%.
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14.
If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 180 bags to 220 bags, this indicates that, if other things are unchanged, the price elasticity of demand using the midpoint method is:
A.
0
B.
.5
C.
1
D.
2
Correct Answer C. 1
Explanation The price elasticity of demand measures the responsiveness of quantity demanded to a change in price. In this scenario, the price of chocolate-covered peanuts decreases from $1.10 to $0.90, resulting in an increase in quantity demanded from 180 bags to 220 bags. This indicates that the demand for chocolate-covered peanuts is relatively elastic, as a small decrease in price leads to a proportionally larger increase in quantity demanded. A price elasticity of demand of 1 suggests that the percentage change in quantity demanded is equal to the percentage change in price, indicating unit elasticity.
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15.
If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded does not change, this indicates that, if other things are unchanged, the price elasticity of demand using the midpoint method is:
A.
0
B.
.5
C.
1
D.
2
Correct Answer A. 0
Explanation If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded does not change, this indicates that the price elasticity of demand using the midpoint method is 0. This means that the percentage change in quantity demanded is zero, even though there was a decrease in price. This suggests that the demand for chocolate-covered peanuts is perfectly inelastic, meaning that consumers are not responsive to changes in price and will still purchase the same quantity regardless of price changes.
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16.
The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to ________ and demand is described as ________. (format: answer,answer)
Correct Answer .2,inelastic
Explanation The price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price. In this case, the price of gasoline rises by 5% and the quantity purchased falls by 1%. Therefore, the percentage change in quantity demanded is -1% and the percentage change in price is 5%. Dividing -1% by 5% gives us -0.2, which is equal to 0.2. Since the price elasticity of demand is less than 1, it is considered inelastic. This means that the quantity demanded is not very responsive to changes in price.
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17.
The price of Good X is $5 and at that price consumers demand 12 units. If the price rises to $7, consumers will decrease consumption to 4 units. Use the midpoint formula to calculate the price elasticity of demand for Good X.
A.
1/3
B.
3
C.
1/6
D.
6
Correct Answer B. 3
Explanation The price elasticity of demand is calculated using the midpoint formula, which measures the percentage change in quantity demanded divided by the percentage change in price. In this case, the initial price is $5 and the final price is $7, resulting in a 40% increase in price. The initial quantity demanded is 12 units and the final quantity demanded is 4 units, resulting in a 66.67% decrease in quantity demanded. Dividing the percentage change in quantity demanded (66.67%) by the percentage change in price (40%) gives us a price elasticity of demand of 1.67. Since the answer choices provided do not match this calculation, the correct answer is not available.
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18.
A local restaurant has estimated that the price elasticity of demand for meals is equal to 2. If the restaurant increases menu prices by 5%, they can expect the number of customers to decrease by ________and total revenue to ________.
A.
10%; increase
B.
5%; stay constant
C.
10%; fall
D.
2.5%; fall
Correct Answer C. 10%; fall
Explanation The given answer states that if the restaurant increases menu prices by 5%, they can expect the number of customers to decrease by 10% and total revenue to fall. This is because the price elasticity of demand is equal to 2, indicating that a 1% increase in price leads to a 2% decrease in quantity demanded. Therefore, a 5% increase in price would result in a 10% decrease in the number of customers. As a result, the total revenue would decrease since the decrease in quantity demanded outweighs the increase in price.
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19.
If the price of burritos increases from $4 to $6, and customers decrease their consumption from 20 to 10 burritos, what is the price elasticity of demand, using the midpoint method?
A.
5/3
B.
2/3
C.
3/1
D.
2/1
Correct Answer A. 5/3
Explanation The price elasticity of demand measures the responsiveness of quantity demanded to a change in price. The midpoint method formula for price elasticity of demand is (change in quantity demanded / average quantity demanded) / (change in price / average price). In this case, the change in quantity demanded is -10 (20-10), the average quantity demanded is 15 (20+10/2), the change in price is 2 (6-4), and the average price is 5 (4+6/2). Plugging these values into the formula, we get (-10/15) / (2/5) = -2/3 / 2/5 = -2/3 * 5/2 = -10/6 = -5/3. Therefore, the price elasticity of demand using the midpoint method is 5/3.
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20.
Which of the following best describes price elasticity of demand?
A.
Price elasticity of demand measures the responsiveness of the change in the quantity demanded to a change in price.
B.
Price elasticity of demand measures the change in price versus a change in quantity demanded.
C.
Price elasticity of demand measures the responsiveness of the change in slope of the demand curve to a change in price.
D.
Price elasticity of demand measures the change in slope of the demand curve versus a change in quantity demanded.
Correct Answer A. Price elasticity of demand measures the responsiveness of the change in the quantity demanded to a change in price.
Explanation The correct answer is "Price elasticity of demand measures the responsiveness of the change in the quantity demanded to a change in price." This answer accurately describes price elasticity of demand as a measure of how much the quantity demanded of a good or service changes in response to a change in its price. It highlights the concept of responsiveness, indicating that price elasticity of demand shows how sensitive consumers are to price changes.
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