Pretest

Question 1

A consumer might respond to a negative incentive by

Revolt · Accepted Answer

decreasing use of the product to save money.

Question 2

In the market, actions known as incentives affect

Revolt · Accepted Answer

consumers or producers.

Question 3

What is the difference between a price floor and a price ceiling?

Revolt · Accepted Answer

A price floor is the minimum price allowed for a good. A price ceiling is the maximum price allowed for a good.

Question 4

Tasty Treat Tea is a popular iced tea drink. When the manufacturer begins to use imported tea leaves, the price rises by 10 percent , and the quantity demanded falls by 20 percent The fact that quantity demanded changed by more than the price change suggests that

Revolt · Accepted Answer

The demand for Tasty Treat Tea is elastic.

Question 5

Price controls on goods can be set by

Revolt · Accepted Answer

governments.

Question 6

Which statement best explains how elasticity and incentives work together?

Revolt · Accepted Answer

An elastic good, such as a game, is more likely to respond to incentives.

Question 7

Which statement best describes incentives?

Revolt · Accepted Answer

Incentives can be positive or negative.

Question 8

The lowest amount a manufacturer can pay factory workers is an example of

Revolt · Accepted Answer

a price floor.

Question 9

Which is an example of a positive incentive for consumers?

Revolt · Accepted Answer

a coupon clipped from a newspaper

Question 10

Which is an example of a negative incentive for producers?

Revolt · Accepted Answer

a sharp increase in production costs

Pretest Answers

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