EC202 MINDTAP QUESTIONS

A $1 per unit tax levied on consumers of a good is equivalent to

a $1 per unit tax levied on producers of the good -taxes levied on sellers and buyers are equivalent -only difference is who sends the money to the government

Suppose the price of leather jackets fall; Show the effect on the market for sweatshirts

demand curve shifts left -because they are substitutes and as the price of leather falls the demand increases and thus the demand for sweatshirts decreases

Movie tickets and DVDs are substitutes. If the price of DVDs increases, what happens in the market for movie tickets?

the demand curve shifts right (demand increases)

Which of the following would increase quantity supplied, increase quantity demanded, and decrease the price that consumers pay?

the repeal of a tax levied on producers! -altering a tax imposition would increase or decrease both benefits of producer/consumer

When war breaks out in Middle East, the price of gasoline rises and the price of a used Cadillac falls; Show the change in the market for gasoline

the supply curve shifts left -supply decreases because our oil supply is over there and thus there is a rise in equilibrium price of gasoline

When war breaks out in Middle East, the price of gasoline rises and the price of a used Cadillac falls; Show the change in the market for used Cadillacs

the supply curve shifts right and the demand curve shifts left t -with higher prices for gasoline, the cost of operating a gas automobile will increase so the demand will decrease -in addition, some people who already own Cadillacs will try to sell them so the supply in the the market increases -result is a decrease in the equilibrium price for Cadillacs

The burden of any tax is...

- shared by both producers and consumers -price paid by consumers rises -price received by producers falls -the difference between the two equals the amount of the tax

Suppose all colleges require morning exercise in sweatshirt attire. Show effect on market for sweatshirts

-demand curve shifts right

Suppose new knitting machines are invented. Show effect on market for sweatshirts.

-supply curve shifts right -because technology improvements increase supply

A senator wants to raise tax revenue and make workers better off. A staff member proposes raising the payroll tax paid by firms and using part of the extra revenue to reduce the payroll tax paid by workers.

-this WOULD NOT accomplish the senators goals because the burden of a tax depends on THE ELASTICITY OF SUPPLY AND DEMAND

When the government imposes a binding price floor, it causes

a surplus of the good to develop.

A total revenue curve is shaped like a bell and its maximum point is at the top point of the curve (half way), where the slope is ....

EQUAL TO ZERO

True or False: An increase in the demand for notebooks raises the quantity of notebooks demanded but not the quantity supplied.

FALSE -and increase i the demand for notebooks will shift the demand curve right, resulting in a movement along the supply curve upwards which would increase both the quantity of notebooks demanded and the quantity supplied

True or False: When the demand curve and the supply curve shift both shift right (increase), the effect on the equilibrium price is clear even without knowing the magnitude of the shifts.

False when two curves shift in the same direction; the PRICE is AMBIGUOUS and the quantity is certain

The mathematical slope of a steeper line is .... than that of a less steep line

GREATER THAN (explains why the slope of a horizontal line is zero)

If the economy goes into a recession and incomes fall, what happens in the markets for inferior goods?

Prices and quantities both rise (demand curve shifts right) - opposite for normal goods

If the actual price in this market were below the equilibrium price, suppliers could raise the price without losing sales.

TRUE -shortage -Quantity Demanded > Quantity Supplied so upward pressure on prices without losing sales

When the weather turns warm in New England every summer the price of hotel rooms in Caribbean resorts plummets; Show effect of market for hotels in Caribbean

The Demand curve shifts left -demand decreases because New England serves as a substitute for the Caribbean vacation i the summer

Which of the following might lead to an increase in the equilibrium price of jelly and a decrease in the equilibrium quantity of jelly sold

an increase in the price of grapes, an input to jelly (ie, get the supply curve to shift left)

A change in which of the following will not shift the demand curve for hamburgers? a. The price of hot dogs b. The price of hamburgers c. The price of hamburger buns d. The income of hamburger consumers

b. the PRICE of HAMBURGERS

When a good is taxed, the burden of the tax falls mainly on consumers if a. the tax is levied on consumers. b. the tax is levied on producers. c. supply is inelastic, and demand is elastic. d. supply is elastic, and demand is inelastic.

d. supply is elastic, and demand is inelastic tax burden falls more heavily on inelastic side (side that is more vertical; less willing to leave when price changes)

In a market with a binding price ceiling, an increase in the ceiling will ________ the quantity supplied, ________ the quantity demanded, and reduce the ________.

increase, decrease, shortage -draw pic (ceiling which is below equilibrium point will rise so the overall price will rise moving a point to the right on the supply curve and to the left on the demand curve and thus making the areas of the triangle which is the shortage smaller)

If the government places a $500 tax on luxury cars, the price paid by consumers will rise by

less than 500$ (the only exception would be if the supply curve was perfectly elastic and the demand curve were perfectly inelastic)

Suppose a hurricane in South Carolina images the cotton crop. Show effect on the market for sweatshirts

supply curve shifts left -damages input thus decrease supply and raises price of sweatshirts and price of cotton

When cold front hits Florida, the price of orange juice rises. Show the change in the market for orange juice.

supply curve shifts left -because oranges are an input and are damaged in cold front so thus there is less of them and the equilibrium price rises

The discovery of a large new reserve of crude oil will shift the ________ curve for gasoline, leading to a ________ equilibrium price.

supply, lower

An increase in ________ will cause a movement along a given demand curve, which is called a change in ________.

supply, quantity demanded (supply curve shifts to the right and that cause it to be at a different point on the demand curve thus the point moves along the demand curve and changes quantity demanded)

Which of the following would increase quantity supplied, decrease quantity demanded, and increase the price that consumers pay?

the imposition of a binding price floor