# ECO 365T Wk 3 - Practice Knowledge Check

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ECO 365T Wk 3 - Practice Knowledge Check

Assume that Abby, Ben, Clara, Joe, and Matt are the only citizens in a community. A proposed public good has a total cost of \$1,000. All five citizens will share an equal portion of this cost in taxes. The benefit of the public good is \$220 to Abby, \$210 to Ben, \$210 to Clara, \$180 to Joe, and \$120 to Matt. Who will likely vote in favor of this proposal?

Multiple Choice

•      Abby, Ben, Clara, and Joe
•      Ben, Clara, Joe, and Matt
•      Ben, Clara, and Joe
•      Abby, Ben, and Clara

Price per Ticket      Quantity Demanded

\$ 131,000

11    2,000

9     3,000

7     4,000

5     5,000

3     6,000

Refer to the information and assume the stadium capacity is 5,000. The supply of seats for the game

Multiple Choice

•

varies inversely with ticket prices.

•

varies directly with ticket prices.

•

is perfectly inelastic.

•

is perfectly elastic.

People enjoy outdoor holiday lighting displays and would be willing to pay to see them, but can't be made to pay. Because most people who put up lights are unable to charge others to view them, they don't put up as many lights as people would like. This is an example of a

Multiple Choice

•      negative externality.
•      supply-side market failure.
•      demand-side market failure.
•      government failure.

Political corruption occurs in the following instances, except when

Multiple Choice

•      government officials use their powers for personal gain.
•      people pay a government official to do what she should be doing.
•      people pay a bureaucrat to do something that he should not be doing.

An auto rental company lowers the price of its rentals to increase its market share. The price cut increases quantity demanded, but total revenue decreases. This result suggests that over this price range, the demand for the auto rentals is

Multiple Choice

•
•
•

unit elastic.

•

perfectly elastic.

The larger the coefficient of price elasticity of demand for a product, the

Multiple Choice

•

larger the resulting price change for an increase in supply.

•

more rapid the rate at which the marginal utility of that product diminishes.

•

less competitive will be the industry supplying that product.

•

smaller the resulting price change for an increase in supply.

Suppose that the price of product X rises by 20 percent and the quantity supplied of X increases by 15 percent. The coefficient of price elasticity of supply for good X is

Multiple Choice

•

negative, and therefore X is an inferior good.

•

positive, and therefore X is a normal good.

•

less than 1, and therefore supply is inelastic.

•

more than 1, and therefore supply is elastic.

The supply of product X is perfectly inelastic if the price of X rises by

Multiple Choice

•

5 percent and quantity supplied rises by 7 percent.

•

8 percent and quantity supplied rises by 8 percent.

•

10 percent and quantity supplied stays the same.

•

7 percent and quantity supplied rises by 5 percent.

Price per Ticket      Quantity Demanded

\$ 131,000

11    2,000

9     3,000

7     4,000

5     5,000

3     6,000

Refer to the information. If the Mudhens' management wanted to maximize total ticket revenue from the game, it would set the ticket price at

Multiple Choice

•

\$5.

•

\$7.

•

\$9.

•

\$13.

According to the paradox of voting,

Multiple Choice

•      public goods that cost more than the total benefits they confer may get produced under majority voting.