1. Consumption of a good is said to be non-rival if

a. Once a unit is produced, it does not matter how many people try to consume it; b. once a unit is produced, you cannot stop people from consuming it; c. once a unit is produced, you cannot produce more; d. none of the above.

2. Exclusion is said to be nonfeasible if

a. Once a unit is produced, it does not matter how many people try to consume it; b. once a unit is produced, you cannot stop people from consuming it; c. once a unit is produced, you cannot produce more; d. none of the above.

3. If something is produced by the public sector, is it, in economic jargon, a pure public good?

a. yes b. no c. maybe, but not necessarily d. only on national holidays

"BOX"

Consumption is

                                                Rival                         Non-Rival

Exclusion is

Feasible                                     a                                     b

Nonfeasible                              c                                     d

4. A pure public good is one that would correspond to which letter in the box above?

a. b. c. d.

5. A pure private good is one that would correspond to which letter in the box above?

a. b. c. d.

6. "Economic efficiency" is defined such that improvements in efficiency come about if

a. costs exceed benefits b. benefits exceed costs c. distribution is fairer d. b. and c.

7. A good for which a market system can produce efficiency is one that would correspond to which letter in the box above?

a. b. c. d.

8. A good that would not be produced at all in a market system is one that would correspond to which letter in the box above?

a. b. c. d.

9. Goods that a market system can produce, but probably not efficiently, correspond to which letters in the box above?

a. a b. a & d c. b & c d. a & c

Suppose that a tax increase adds 50 cents to the price of gasoline overnight and without warning, and the tax increase is expected to be permanent. For each statement below, grid in bubble A for TRUE, B for FALSE, or C for UNKNOWN [i.e. not enough information to determine whether true or false]. Assume ceteris paribus for everything except what you are told above and in each numbered statement taken alone. [HINT: 'demand' and 'supply' are jargon words; how much you want to buy is (in jargon) 'quantity demanded,' not 'demand.']

10. The demand for gasoline decreases immediately.

11. The amount of gasoline that consumers want to buy will decrease immediately.

12. The demand for small cars will increase relative to the demand for large cars.

13. The price of small cars will increase compared to before the gas price increase.

14. If the supply of small cars also decreases because of the new restrictions on imports, the price of small cars will rise compared to before the change in the price of gas.

15. If the supply of small cars decreases as in 14., the quantity of small cars sold will tend to decrease but we cannot say what will happen to their price relative to before the gas price change.

16. If we give the market time to adjust, and the tax stays unchanged, the price of housing in rural areas of Leon county will probably fall relative to the price of housing close to downtown Tallahassee.

17. Although the demand for gasoline does not change immediately, over time as consumers shift to smaller cars and shorter commutes etc., the demand for gasoline will fall.

18. Question 17. illustrates that in the long run, demand is more inelastic than in the short run.
 

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