1. Suppose that in a month the price of sausage increases from $2 to $2.20. At the same time the quantity of sausage supplied increases from 100 to 120. Supply of sausage calculated (using the midpoint formula) is
a. perfectly elastic
b. inelastic
c. unitary elastic
d. elastic
e. perfectly inelastic
 

2. Suppose that the government wants to reduce teenage smoking by 50%. Suppose further that the government knows that the teenage elasticity of demand for a pack of cigarette is 2. By what percentage would the government have to increase the price of cigarettes (through tax) in order to cut teenage smoking by 50%.
a. 100%
b. 25%
c. 50%
d. 250%
e. 20%
 

3. Which of the following reduce the elasticity of demand for a particular product
a. more time to shop around
b. no close substitutes
c. big part of the budget
d. luxury item
e. all of the above reduce the elasticity of demand
 

4. The difference between the market price of the product and the minimum amount the producer is willing to accept for the product is
a. market demand for the product
b. the consumer surplus for the product
c. the demand elasticity for the product
d. producer surplus
e.the supply elasticity for the product
 

5. An effective price floor leads to
a. a price above the equilibrium price
b. a quantity below the equilibrium quantity
c. inefficient markets
d. all of the above
e. none of the above
 

6. Suppose that quantity demanded equal Qd=100-P and the quantity supplied equals Qs=P. If the government sets the price floor of $40, the resultant market quantity will be
a. 40
b. 50
c. 60
d 100
e. none of the above