Question : (TCO 2) At the point where the demand and supply curves intersect Student Answer: the buying and selling decisions of consumers and producers are inconsistent with one another. the market is in disequilibrium. there is neither a surplus nor a shortage of the product. quantity demanded exceeds quantity supplied. 13. Question : (TCO 2) Which of the following is a consequence of rent controls established to keep housing affordable for the poor? Student Answer: Less rental housing is available as prospective landlords find it unprofitable to rent at restricted prices. The quality of rental housing declines as landlords lack the funds and incentive to maintain properties. Apartment buildings are torn down in favor of office buildings, shopping malls, and other buildings where rents are not controlled. All of the above are consequences of rent controls. 14. Question : (TCO 2) An increase in demand for oil along with a simultaneous increase in supply of oil will Student Answer: decrease price and increase quantity. increase price and decrease quantity. increase quantity, but whether it increases price depends on how much each curve shifts. increase price, but whether it increases quantity depends on how much each curve shifts 15. Question : (TCO 2) If Product Y is an inferior good, a decrease in consumer incomes will Student Answer: make buyers want to buy less of Product Y. not affect the sales of Product Y. shift the demand curve for Product Y to the left. shift the demand curve for Product Y to the right. 16. Question : (TCO 2) When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. In this range of prices, demand for this product is Student Answer: elastic. inelastic. cross-elastic. unitary elastic. 17. Question : (TCO 2) When the price of movie tickets in a certain town was reduced, the movie-theaters’ revenues did not change. This suggests that the demand for movie tickets in that town has a price-elasticity coefficient of Student Answer: 1.0. greater than 1. 0.5. zero. 18. Question : (TCO 2) The demand for Cheerios cereal is more price-elastic than the demand for cereals as a whole. This is best explained by the fact that Student Answer: Cheerios are a luxury. cereals are a necessity. there are more substitutes for Cheerios than for cereals as a whole. consumption of cereals as a whole is greater than consumption of Cheerios. 19. Question : (TCO 2) A state government wants to increase the taxes on cigarettes to increase tax revenue. This tax would only be effective in raising new tax revenues if the price elasticity of demand is Student Answer: unity. elastic. inelastic. perfectly elastic. 20. Question : (TCO 2) Movie theaters charge lower prices to see a movie in the afternoon than in the evening because there is an Student Answer: inelastic supply of movies in the evening. elastic demand to see movies in the evening. elastic demand to see movies in the afternoon. inelastic demand to see movies in the afternoon.
