ECO 202 CH 13
The minimum wage was instituted to ensure workers a. employment. b. a minimally adequate standard of living. c. a middle-class standard of living. d. unemployment compensation.
b. a minimally adequate standard of living.
The price ceiling shown in graph (a) a. creates a surplus. b. is not binding. c. creates a shortage. d. is binding.
b. is not binding.
Using the midpoint method, if the price falls from $200 to $150, the price elasticity of demand is a. inelastic. b. unit elastic. c. elastic. d. zero.
c. elastic.
Which firm is experiencing diseconomies of scale? a. Firm A and Firm B only b. Firm C only c. Firm B only d. Firm A only
Firm C only
At a price of $70 per unit, sellers' total revenue equals a. $1,400. b. $700. c. $1,250. d. $1,050.
a. $1,400.
If the price of the good is $14, then producer surplus is a. $20.50. b. $19.50. c. $25.00. d. $22.50.
a. $20.50.
The following table shows the production costs for the Flying Elvis Copter Rides. What is the value of B? a. $25 b. $100 c. $200 d. $50
b. $100
Marginal cost is equal to average total cost when a. average variable cost is falling. b. marginal cost is at its minimum. c. average total cost is at its minimum. d. average fixed cost is rising.
c. average total cost is at its minimum.
A binding minimum wage causes the quantity of labor demanded to exceed the quantity of labor supplied. True False
False
A price ceiling set below the equilibrium price causes a shortage in the market. True False
True
At Nick's Bakery, the cost to make a cheese danish is $1.50 per danish. As a result of selling 10 danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his danishes for a. $5.00 each. b. $2.00 each. c. $0.50 each. d. $3.50 each.
d. $3.50 each.
Both the demand curve and the supply curve are straight lines. At equilibrium, consumer surplus is a. $24. b. $42. c. $36. d. $48.
d. $48.
What is the value of C? a. $200 b. $100 c. $50 d. $25
b. $100
The vertical distance between points A and B represents the tax in the market. a. $8. b. $24. c. $16. d. $10.
b. $24.
If the market price is $1,000, the producer surplus in the market is a. $700. b. $300. c. $1,700. d. $1000.
b. $300.
At equilibrium, producer surplus is represented by the area a. D+H+F. b. D+H+F+G+I. c. F+G. d. F.
a. D+H+F.
If a market is in equilibrium, then it is impossible for a social planner to raise economic welfare by increasing or decreasing the quantity of the good. True False
True
If the government imposes a binding price floor in a market, then the consumer surplus in that market will decrease. True False
True
In a competitive market, sales go to those producers who are willing to supply the product at the lowest price. True False
True
Marcus sells 300 candy bars at $0.50 each. His total costs are $125. His profits are a. $25 b. $124.50 c. $125 d. $150
a. $25
If the government imposes a price ceiling of $55 in this market, then total surplus will be a. $250.00. b. $266.67. c. $187.50. d. $125.00.
a. $250.00.
The equilibrium price is a. $4.00. b. $10.00. c. $8.00. d. $6.00.
a. $4.00.
The per-unit burden of the tax on buyers is a. $8. b. $14. c. $6. d. $24.
a. $8.
Which of the following statements about agriculture in the United States is correct? a. Increasing the supply of agricultural products typically benefits consumers but harms farmers as a group. b. Technological improvements typically increase both supply and revenue for individual farmers. c. From the 1950s to today, agricultural output has approximately doubled. d. Because technological improvements increase the supply of a product for which demand is inelastic, an individual farmer would be better off not adopting the new technology.
a. Increasing the supply of agricultural products typically benefits consumers but harms farmers as a group.
Assume the Wooden Chair Factory currently employs 5 workers. What is the marginal product of labor when the factory adds a 6th worker? a. 15 chairs per hour b. 5 chains per hour c. 70 chairs per hour d. 25 chairs per hour
a.15 chairs per hour
Demand is said to be price elastic if a. buyers respond substantially to changes in the price of the good. b. the price of the good responds substantially to changes in demand. c. demand shifts substantially when income or the expected future price of the good changes. d. buyers do not respond much to changes in the price of the good.
a. buyers respond substantially to changes in the price of the good.
A drought in California destroys many red grapes causing the prices of both red grapes and red wine to rise. As a result, the consumer surplus in the market for red grapes a. decreases, and the consumer surplus in the market for red wine decreases. b. increases, and the consumer surplus in the market for red wine increases. c. decreases, and the consumer surplus in the market for red wine increases. d. increases, and the consumer surplus in the market for red wine decreases.
a. decreases, and the consumer surplus in the market for red wine decreases.
The section of the demand curve from A to B represents the a. elastic section of the demand curve. b. unit elastic section of the demand curve. c. inelastic section of the demand curve. d. perfectly elastic section of the demand curve.
a. elastic section of the demand curve.
Average total cost is increasing whenever a. marginal cost is greater than average total cost. b. marginal cost is increasing. c. marginal cost is less than average total cost. d. total cost is increasing.
a. marginal cost is greater than average total cost.
A demand curve reflects each of the following except the a. quantity that each buyer will ultimately purchase. b. willingness to pay of all buyers in the market. c. value each buyer in the market places on the good. d. highest price buyers are willing to pay for each quantity.
a. quantity that each buyer will ultimately purchase.
A payroll tax is a a. tax on the wages that firms pay their workers. b. fixed number of dollars that every firm must pay to the government for each worker that the firm hires. c. tax on all wages above the minimum wage. d. tax that each firm must pay to the government before the firm can hire workers and operate its business.
a. tax on the wages that firms pay their workers.
If total cost is $2500 and average variable costs are $4 when output is equal to 500 units, then a. All of the above. b. Average fixed costs must be $1. c. Average fixed costs must be declining. d. fixed costs must be equal to $50
b. All of the above
Your younger sister needs $50 to buy a new bike. She has opened a lemonade stand to make the money she needs. Your mother is paying for all of the ingredients. She currently is charging 25 cents per cup, but she wants to adjust her price to earn the $50 faster. If you know that the demand for lemonade is elastic, what is your advice to her? a. Raise the price to increase total revenue. b. Lower the price to increase total revenue. c. There isn't enough information given to answer this question. d. Leave the price at 25 cents and be patient.
b. Lower the price to increase total revenue.
If economic profit is negative, a. accounting profit must be greater than explicit cost. b. accounting profit must be less than implicit cost. c. all of the above. d. accounting profit must be negative.
b. accounting profit must be less than implicit cost.
A firm produces 300 units of output at a total cost of $1,000. If fixed costs are $100, a. average total cost is $4. b. average variable cost is $3. c. average total cost is $5. d. average fixed cost is $10.
b. average variable cost is $3
A surplus results when a a. binding price floor is removed from a market. b. binding price floor is imposed on a market. c. nonbinding price floor is removed from a market. d. nonbinding price floor is imposed on a market.
b. binding price floor is imposed on a market.
When the price rises from P 1 to P 2 , consumer surplus a. increases by an amount equal to A. b. decreases by an amount equal to B+C. c. increases by an amount equal to B+C. d. decreases by an amount equal to C.
b. decreases by an amount equal to B+C.
Suppose the government imposes a 50-cent tax on the sellers of packets of chewing gum. The tax would a. create a 50-cent tax burden each for buyers and sellers. b. discourage market activity. c. shift the supply curve upward by less than 50 cents. d. raise the equilibrium price by 50 cents.
b. discourage market activity.
A difference between explicit and implicit costs is that a. explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do. b. implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do. c. explicit costs must be greater than implicit costs. d. implicit costs must be greater than explicit costs.
b. implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do.
Most labor economists believe that the supply of labor is a. more elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax. b. less elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax. c. more elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax. d. less elastic than the demand, and, therefore, firms bear most of the burden of the payroll tax.
b. less elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax.
The price ceiling a. causes a shortage of 60 units of the good. b. makes it necessary for sellers to ration the good using a mechanism other than price. c. is not binding because it is set below the equilibrium price. d. causes a shortage of 30 units of the good.
b. makes it necessary for sellers to ration the good using a mechanism other than price.
Average total cost start must increase once a. marginal cost intersects average variable cost b. marginal cost intersects average total costs c. all of the above d. diminishing returns set in.
b. marginal cost intersects average total cost
At a price of $2.00, total surplus is a. larger than it would be at the equilibrium price. b. smaller than it would be at the equilibrium price. c. the same as it would be at the equilibrium price. d. There is insufficient information to make this determination.
b. smaller than it would be at the equilibrium price.
The distinction between efficiency and equality can be described as follows: a. Efficiency refers to minimizing the price paid by buyers; equality refers to maximizing the gains from trade among buyers and sellers. b. Efficiency refers to maximizing the size of the pie; equality refers to producing a pie of a given size at the least possible cost. c. Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society. d. Efficiency refers to maximizing the number of trades among buyers and sellers; equality refers to maximizing the gains from trade among buyers and sellers.
c. Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society.
Along which of these segments of the supply curve is supply least elastic? a. AB b. AC c. GH d. CD
c. GH
For which pairs of goods is the cross-price elasticity most likely to be positive? a. Digital college textbooks and iPhones b. Peanut butter and jelly c. Pens and pencils d. Bicycle frames and bicycle tires
c. Pens and pencils
Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth, Marcus's a. income elasticity of demand for cigarettes is 0. b. demand for cigarettes is unit elastic. c. demand for cigarettes is perfectly inelastic. d. price elasticity of demand for cigarettes is infinite.
c. demand for cigarettes is perfectly inelastic.
A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it a. minimizes costs and maximizes output. b. minimizes the level of welfare payments. c. maximizes the combined welfare of buyers and sellers. d. maximizes both the total revenue for firms and the quantity supplied of the product.
c. maximizes the combined welfare of buyers and sellers.
The graph illustrates a typical a. marginal product of labor curve b. production possibilities frontier c. production function d. total-cost curve
c. production function
Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25). If there are five buyers in the market, then a. the average of the five buyers' willingness to pay for the 100th unit of the good is $25. b. the sum of the five buyers' willingness to pay for the 100th unit of the good is $25. c. the marginal buyer's willingness to pay for the 100th unit of the good is $25. d. all of the five buyers are willing to pay at least $25 for the 100th unit of the good.
c. the marginal buyer's willingness to pay for the 100th unit of the good is $25.
If a 25 percent change in price results in a 40 percent change in quantity supplied, then the price elasticity of supply is about a. 1.60, and supply is inelastic. b. 0.63, and supply is elastic. c. 0.63, and supply is inelastic. d. 1.60, and supply is elastic.
d. 1.60, and supply is elastic.
A manufacturer produces 400 units when the market price is $10 per unit and produces 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about a. 200. b. 0.45. c. 2.0. d. 2.2.
d. 2.2
For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? a. The relevant time horizon is short. b. There are no close substitutes for this good. c. The market for the good is broadly defined. d. The good is a luxury.
d. The good is a luxury.
Which of the following statements is not correct? a. When the price is $16, quantity supplied exceeds quantity demanded by 12 units. b. When the price is $12, there is a surplus of 4 units. c. When the price is $10, quantity supplied equals quantity demanded. d. When the price is $6, there is a surplus of 8 units.
d. When the price is $6, there is a surplus of 8 units
The slope of total product can be explain as the (multiple correct) a. change in total cost divided by the change in output b. change in total product divided by the change in output c. marginal cost of production d. change in total product divided by the change in the resource employed.
d. change in total product divided by the change in the resource employed
If the government wants to reduce the burning of fossil fuels, it should impose a tax on a. only the buyers of gasoline. b. whichever side of the market is less elastic. c. only the sellers of gasoline. d. either buyers or sellers of gasoline.
d. either buyers or sellers of gasoline.
The goal of rent control is to a. help the poor by assuring them an adequate supply of apartments. b. facilitate controlled economic experiments in urban areas. c. help landlords by assuring them a low vacancy rate for their apartments. d. help the poor by making housing more affordable.
d. help the poor by making housing more affordable.
Which of the following statements is not correct concerning government attempts to reduce the flow of illegal drugs into the country? Drug interdiction a. raises prices and total revenue in the drug market. b. shifts the supply curve of drugs to the left. c. can increase drug-related crime. d. shifts the demand curve for drugs to the left.
d. shifts the demand curve for drugs to the left.
Consider the market for gasoline. Buyers a. and sellers would lobby for a price floor. b. would lobby for a price floor, whereas sellers would lobby for a price ceiling. c. and sellers would lobby for a price ceiling. d. would lobby for a price ceiling, whereas sellers would lobby for a price floor.
d. would lobby for a price ceiling, whereas sellers would lobby for a price floor.
A tax on sellers increases supply True False
False
Using the midpoint method, which of the three supply curves represents the least elastic supply? a. Supply curve A b. Supply curve B c. Supply curve C d. All three supply curves have the same elasticity.
a. Supply curve A
The amount of the tax per unit is a. $8. b. $18. c. $14. d. $6.
c. $14.
If the price elasticity of supply is 1.2, and price increased by 5 percent, quantity supplied would a. decrease by 4.2 percent. b. increase by 4.2 percent. c. increase by 6 percent. d. decrease by 6 percent.
c. increase by 6 percent.
A $1.50 tax levied on the buyers of pomegranate juice will shift the demand curve a. upward by exactly $1.50. b. upward by less than $1.50. c. downward by less than $1.50. d. downward by exactly $1.50.
d. downward by exactly $1.50.
A binding price ceiling may not help all consumers, but it does not hurt any consumers. True False
False
A discovery that increases wheat yields per acre helps farmers by increasing both supply and total revenues. True False
False
Along the elastic portion of a linear demand curve, total revenue rises as price rises. True False
False
A tax on buyers usually causes buyers to pay more for the good and sellers to receive less for the good than they did before the tax was levied. True False
True
All else equal, an increase in demand will cause an increase in producer surplus. True False
True
To determine the incidence of a tax, it is necessary to have information on both the elasticity of demand and the elasticity of supply. True False
True
Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the a. further to the right the demand curve will sit. b. flatter the demand curve will be. c. closer to the vertical axis the demand curve will sit. d. steeper the demand curve will be.
b. flatter the demand curve will be.
A good will have a more inelastic demand, the a. longer the period of time. b. more it is regarded as a luxury. c. broader the definition of the market. d. greater the availability of close substitutes.
c. broader the definition of the market.
Suppose that a tax is placed on books. If the buyers pay the majority of the tax, then we know that the a. government has required that sellers remit the tax payments. b. government has required that buyers remit the tax payments. c. supply is more inelastic than the demand. d. demand is more inelastic than the supply.
d. demand is more inelastic than the supply.
Between point A and point B on the graph, demand is a. unit elastic. b. inelastic. c. perfectly elastic. d. elastic, but not perfectly elastic.
d. elastic, but not perfectly elastic.
As a result of a decrease in price, a. existing buyers exit the market, increasing consumer surplus. b. existing buyers exit the market, decreasing consumer surplus. c. new buyers enter the market, decreasing consumer surplus. d. new buyers enter the market, increasing consumer surplus.
d. new buyers enter the market, increasing consumer surplus.
As the number of workers increases, a. marginal product increases but at a decreasing rate. b. marginal product decreases. c. total output decreases. d. total output increases at an increasing rate.
a. marginal product decreases
A legal minimum on the price at which a good can be sold is called a a. price floor. b. price ceiling. c. price subsidy. d. tax.
a. price floor.
If economic profit is negative but the accounting profit is positive then, a. the accounting profit must be less the the opportunity costs. b. All of the above c. the firm is incurring an accounting loss. d. the accounting profit is greater than implicit cost but not explicit costs.
a. the accounting profit must be less then the opportunity costs.
If the sellers bid against each other for the right to sell the good to a consumer, then the good will sell for a. $150 or slightly less. b. $50 or slightly more. c. $100 or slightly less. d. $200 or slightly more.
c. $100 or slightly less.
A discovery that increases wheat yields per acre hurts farmers by increasing supply and lowering their total revenues. True False
True
A government program that reduces land under cultivation can help farmers by raising prices but hurts consumers. True False
True
A price floor set at $60 would create a surplus of 20 units. True False
True
A tax on buyers decreases demand. True False
True
Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually has to pay for it. True False
True
Cross-price elasticity is used to determine whether goods are substitutes or complements. True False
True
Demand for a good is said to be inelastic if the quantity demanded increases slightly when the price falls by a large amount. True False
True
Elasticity measures how responsive quantity is to changes in price. True False
True
If demand is perfectly inelastic, the demand curve is vertical, and the price elasticity of demand equals 0 True False
True
If the government places a $2 tax in the market, the buyer pays $6. True False
True
If the price elasticity of supply is 2 and the quantity supplied decreases by 6%, then the price must have decreased by 3%. True False
True
Necessities tend to have inelastic demands, whereas luxuries tend to have elastic demands. True False
True
Price elasticity of supply measures how much the quantity supplied responds to changes in the price. True False
True
Between point A and point B, price elasticity of demand is equal to a. 1.5. b. 0.33. c. 0.67. d. 2.67.
a. 1.5.
For each of the three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day. If the market price of an orange is $0.90, then the market quantity of oranges demanded per day is a. 4. b. 2. c. 3. d. 5.
a. 4.
Kristi and Rebecca sell lemonade on the corner for $0.50 per cup. It costs them $0.10 to make each cup. On a certain day, their producer surplus is $20. How many cups did Kristi and Rebecca sell? a. 50 b. 8 c. 40 d. 200
a. 50
If average variable costs are decreasing with increased production then a. marginal cost must be below average variable cost, b. average total cost must be declining. c. marginal product must be increasing at an increasing rate. d. marginal cost must be falling.
a. marginal cost must be below average variable cost.
Zero economic profit implies that a. Implicit costs are greater than explicit costs. b. Accounting profit is negative. c. Accounting profit is equal to the firm's opportunity costs. d. All of the above
Accounting profit is equal to the firm's opportunity costs.
If the price of the product is $110, then who would be willing to purchase the product? a. Calvin, Sam, and Andrew b. Calvin, Sam, Andrew, and Lori c. Calvin and Sam d. Calvin
a. Calvin, Sam, and Andrew
A price floor is a. a legal minimum on the price at which a good can be sold. b. a source of efficiency in a market. c. often imposed when buyers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price floor. d. a legal maximum on the price at which a good can be sold.
a. a legal minimum on the price at which a good can be sold.
If long-run average cost decreases as the quantity of output increases, the firm is experiencing a. economies of scale. b. diseconomies of scale. c. coordination problems arising from the large size of the firm. d. fixed costs greatly exceeding variable costs.
a. economies of scale
Suppose that a firm's long-run average total costs of producing televisions decreases as it produces between 10,000 and 20,000 televisions. For this range of output, the firm is experiencing a. economies of scale. b. diseconomies of scale. c. coordination problems. d. constant returns to scale.
a. economies of scale
An example of an explicit cost of production would be the a. lease payments for the land on which a firm's factory stands. b. value of the time the business could've spent producing something else. d. lost opportunity to invest in capital markets when the money's invested in one's business.
a. lease payments for the land on which a firm's factory stands.
A key determinant of the price elasticity of supply is the a. time horizon. b. income of consumers. c. price elasticity of demand. d. importance of the good in a consumer's budget.
a. time horizon.
If a firm produces nothing, which of the following costs will be zero? a. variable cost b. fixed cost c. opportunity cost d. total cost
a. variable cost
If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is a. zero. b. negative, and the consumer would not purchase the product. c. positive, and the consumer would purchase the product. d. There is not enough information given to answer this question.
a. zero.
The following table shows the production costs for The Flying Elvis Copter Rides. What is the value of D? a. $200 b. $50 c. $25 d. $100
b. $50
Both the demand curve and the supply curve are straight lines. At equilibrium, total surplus is a. $96. b. $72. c. $44. d. $56.
b. $72.
A shortage results when a a. nonbinding price ceiling is removed from a market. b. binding price ceiling is imposed on a market. c. binding price ceiling is removed from a market. d. nonbinding price ceiling is imposed on a market.
b. binding price ceiling is imposed on a market.
When a tax is placed on the buyers of lemonade, the a. sellers bear the entire burden of the tax. b. burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal. c. burden of the tax will always be equally divided between the buyers and the sellers. d. buyers bear the entire burden of the tax.
b. burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal.
If a tax is levied on the sellers of flour, then a. sellers will bear the entire burden of the tax. b. buyers and sellers will share the burden of the tax. c. the government will bear the entire burden of the tax. d. buyers will bear the entire burden of the tax.
b. buyers and sellers will share the burden of the tax.
A tax on the sellers of coffee will increase the price of coffee paid by buyers, a. increase the effective price of coffee received by sellers, and increase the equilibrium quantity of coffee. b. decrease the effective price of coffee received by sellers, and decrease the equilibrium quantity of coffee. c. increase the effective price of coffee received by sellers, and decrease the equilibrium quantity of coffee. d. decrease the effective price of coffee received by sellers, and increase the equilibrium quantity of coffee.
b. decrease the effective price of coffee received by sellers, and decrease the equilibrium quantity of coffee.
A binding price ceiling is shown in a. graph (a) only. b. graph (b) only. c. neither graph (a) nor graph (b). d. both graph (a) and graph (b).
b. graph (b) only.
A firm's opportunity costs of production are equal to its a. implicit costs only. b. explicit costs + implicit costs. d. explicit costs + implicit costs + total revenue. d. explicit costs only.
b. implicit costs only
If the price decreased from $36 to $12, total revenue would a. decrease by $4,800, and demand is inelastic between points X and Z. b. increase by $4,800, and demand is elastic between points X and Z. c. increase by $7,200, and demand is elastic between points X and Z. d. decrease by $7,200, and demand is inelastic between points X and Z.
b. increase by $4,800, and demand is elastic between points X and Z.
If the demand for donuts is elastic, then a decrease in the price of donuts will a. not change total revenue of donut sellers. b. increase total revenue of donut sellers. c. There is not enough information to answer this question. d. decrease total revenue of donut sellers.
b. increase total revenue of donut sellers.
You are selling extra tickets to the Midwest Regional Sweet 16 game in the men's NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. Which of the following graphs represents the market demand curve? a. b. c. d.
b. price starts at 500, 400, 350 last drop off is 300; Quantity 0-4
Moving production from a high-cost producer to a low-cost producer will a. raise producer surplus but lower consumer surplus. b. raise total surplus. c. lower producer surplus. d. lower total surplus.
b. raise total surplus.
The following table shows the production and costs for the Wooden Chair Factory. The Wooden Chair Factory experiences diminishing marginal product of labor with the addition of which worker? a. The third worker b. The sixth worker c. The fourth worker d. The fifth worker
b. the sixth worker
How is the burden of the tax shared between buyers and sellers? Buyers bear a. two-thirds of the burden, and sellers bear one-third of the burden. b. three-fourths of the burden, and sellers bear one-fourth of the burden. c. one-fourth of the burden, and sellers bear three-fourths of the burden. d. one-half of the burden, and sellers bear one-half of the burden.
b. three-fourths of the burden, and sellers bear one-fourth of the burden.
Jerome says that he will spend exactly $25 each month on new apps for his mobile device, regardless of the price of apps. Jerome's demand for apps is a. perfectly elastic. b. unit elastic. c. perfectly inelastic. d. somewhat inelastic, but not perfectly inelastic.
b. unit elastic
Curve A is always declining because a. marginal product first increases, then decreases. b. we are dividing fixed costs by higher and higher levels of output. c. marginal product first decreases, then increases. d. of diminishing marginal product.
b. we are dividing fixed costs by higher and higher levels of output
If the supply curve is S and the demand curve shifts from D to D', what is the increase in producer surplus to existing producers? a. $625 b. $3,125 c. $2,500 d. $5,625
c. $2,500
Both the demand curve and the supply curve are straight lines. At equilibrium, producer surplus is a. $48. b. $64. c. $24. d. $32.
c. $24.
At the equilibrium price, consumer surplus is a. $700. b. $1,600. c. $800. d. $1,400.
c. $800.
At which number of workers does diminishing marginal product begin? a. 3 b. 1 c. 2 d. 4
c. 2
Using the midpoint method, if the price falls from $200 to $150, the absolute value of the price elasticity of demand is a. 5.3. b. 0.8. c. 2.8. d. 0.36.
c. 2.8.
If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a a. 40 percent decrease in the quantity demanded. b. 5 percent decrease in the quantity demanded. c. 20 percent decrease in the quantity demanded. d. 0.2 percent decrease in the quantity demanded.
c. 20 percent decrease in the quantity demanded.
How many units of the good are purchased after the imposition of the price floor? a. 15 b. 9 c. 5 d. 10
c. 5
Which of the following is consistent with the elasticities given in Table 5-1? a. A is a good after an increase in income and B is that same good after a decrease in income. b. A is a good immediately after a price increase and B is that same good three years after the price increase. c. A is a luxury and B is a necessity. d. A has fewer substitutes than B.
c. A is a luxury and B is a necessity.
In the short run average total cost is u-shaped because of a. the slope of marginal product b. of diminishing returns c. All of the above d. at least one resource is fixed
c. All of the above
If marginal product is increasing than a. marginal cost must be decreasing. b. average total cost must be falling c. All of the above. d. diminishing returns have yet to set in.
c. All of the above.
If total costs is $2500 and average variable cost is $4, when output is equal to 500 units then, (multiple correct) a. Average total cost must be $5 b. average total cost must be $500 c. Average variable cost must be $5 d. Average variable cost must be equal to average total cost.
c. Average total cost must be $5
All else equal, what happens to consumer surplus if the price of a good increases? a. Consumer surplus increases b. Consumer surplus is unchanged c. Consumer surplus decreases d. Consumer surplus may increase, decrease, or remain unchanged
c. Consumer surplus decreases
On a graph, consumer surplus is represented by the area a. between the demand and supply curves. b. below the demand curve and to the right of equilibrium price. c. below the demand curve and above price. d. below the price and above the supply curve.
c. below the demand curve and above price.
A decrease in supply will cause the largest increase in price when a. demand is inelastic and supply is elastic. b. both supply and demand are elastic. c. both supply and demand are inelastic. d. demand is elastic and supply is inelastic.
c. both supply and demand are inelastic.
If the cross-price elasticity of two goods is negative, then the two goods are a. inferior goods. b. normal goods. c. complements. d. necessities.
c. complements.
If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the a. market is not a competitive market. b. consumer has consumer surplus of $2 if he or she buys the good. c. consumer does not purchase the good. d. price of the good will fall due to market forces.
c. consumer does not purchase the good.
When a certain price control is imposed on this market, the resulting quantity of the good that is actually bought and sold is such that buyers are willing and able to pay a maximum of P 1 dollars per unit for that quantity and sellers are willing and able to accept a minimum of P 2 dollars per unit for that quantity. If P 1 − P 2 = $3, then the price control is a. only a price ceiling of $3.00. b. only a price floor of $6.00. c. either a price ceiling of $3.00 or a price floor of $6.00. d. only a price ceiling of $6.00.
c. either a price ceiling of $3.00 or a price floor of $6.00.Which of the following statements is not correct?
Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is a. positive, and the good is an inferior good. b. negative, and the good is a normal good. c. positive, and the good is a normal good. d. negative, and the good is an inferior good.
c. positive, and the good is a normal good.
Cost is a measure of the a. seller's producer surplus. b. seller's willingness to buy. c. seller's willingness to sell. d. producer shortage.
c. seller's willingness to sell.
A supply curve can be used to measure producer surplus because it reflects a. quantity supplied. b. the actions of sellers. c. sellers' costs. d. the amount that will be purchased by consumers in the market.
c. sellers' costs.
Rent control a. is the most efficient way to allocate scarce housing resources. b. is regarded by most economists as an efficient way of helping the poor. c. serves as an example of a price ceiling. d. serves as an example of how a social problem can be alleviated or even solved by government policies.
c. serves as an example of a price ceiling.
In this market, a minimum wage of $7.00 creates a labor a. shortage of 4,000 worker hours. b. surplus of 2,000 worker hours. c. surplus of 4,000 worker hours. d. shortage of 2,000 worker hours.
c. surplus of 4,000 worker hours.
Income elasticity of demand measures how a. consumer purchasing power is affected by a change in the price of a good. b. the price of a good is affected when there is a change in consumer income. c. the quantity demanded changes as consumer income changes. d. many units of a good a consumer can buy given a certain income level.
c. the quantity demanded changes as consumer income changes.
Efficiency in a market is achieved when a. a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs. b. no buyer is willing to pay more than the equilibrium price for any unit of the good. c. the sum of producer surplus and consumer surplus is maximized. d. all firms are producing the good at the same low cost per unit.
c. the sum of producer surplus and consumer surplus is maximized.
A simultaneous increase in both the demand for tablets and the supply of tablets would imply that a. the value of tablets to consumers has decreased, and the cost of producing tablets has increased. b. both the value of tablets to consumers and the cost of producing tablets has increased. c. the value of tablets to consumers has increased, and the cost of producing tablets has decreased. d. both the value of tablets to consumers and the cost of producing tablets has decreased.
c. the value of tablets to consumers has increased, and the cost of producing tablets has decreased.
The Earned Income Tax Credit, a government program that supplements the incomes of low-wage workers, is an example of a a. minimum-wage law. b. price ceiling. c. wage subsidy. d. rent subsidy.
c. wage subsidy.
Which of the following statements is not correct? a. A government-imposed price of $4 would be a binding price ceiling if market demand is either Demand A or Demand B. b. A government-imposed price of $10 would be a binding price floor if market demand is Demand A and a nonbinding price ceiling if market demand is Demand B. c. A government-imposed price of $8 would be a binding price floor if market demand is Demand A and a binding price ceiling if market demand is Demand B. d. A government-imposed price of $10 would be a binding price ceiling if market demand is either Demand A or Demand B.
d. A government-imposed price of $10 would be a binding price ceiling if market demand is either Demand A or Demand B.
Which of the following is not correct? a. A minimum wage would not be binding if the equilibrium wage was above the minimum wage. b. The impact of a minimum wage depends on the skill and experience of the worker. c. The economy contains many labor markets for different types of workers. d. A minimum wage would be binding for workers with high skills and much experience.
d. A minimum wage would be binding for workers with high skills and much experience.
Which of the following is likely to have the most price elastic demand? a. Blue jeans b. Pants c. Clothing d. Tommy Hilfiger jeans
d. Tommy Hilfiger jeans
A price ceiling is a. often imposed on markets in which "cutthroat competition" would prevail without a price ceiling. b. often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling. c. imposed to make sure everyone can earn a fair wage. d. a legal maximum on the price at which a good can be sold.
d. a legal maximum on the price at which a good can be sold.
In graph (b), there will be a. a shortage. b. equilibrium in the market. c. lines of people waiting to buy the good. d. a surplus.
d. a surplus.
If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would a. increase by more than $1,000. b. increase by exactly $1,000. c. decrease by an indeterminate amount. d. increase by less than $1,000.
d. increase by less than $1,000.
Firms may experience diseconomies of scale when a. there are too few employees, and managers do not have enough to do b. average fixed costs begin to rise again c. they are too small to take advantage of specialization d. large management structures are bureaucratic and inefficient
d. large management structures are bureaucratic and inefficient.
Economies of scale occur when a. average fixed costs are falling b. long run average total costs rise as output increases c. average fixed costs are constant d. long run average total costs fall as output increases
d. long run average total costs fall as output increases
Goods with many close substitutes tend to have a. less elastic demands. b. price elasticities of demand that are unit elastic. c. income elasticities of demand that are negative. d. more elastic demands.
d. more elastic demands.
The term tax incidence refers to a. whether the demand curve or the supply curve shifts when the tax is imposed. b. whether buyers or sellers of a good are required to send tax payments to the government. c. widespread view that taxes (and death) are the only certainties in life. d. the distribution of the tax burden between buyers and sellers.
d. the distribution of the tax burden between buyers and sellers.
The efficient scale of production occurs at which quantity? a. A b. B c. C d. D
efficient scale of production minimizes average total cost C
If marginal cost is below average total cost but above average variable cost then (multiple correct) a. average total cost must be at it's minimum. b. average variable cost must be at it's minimum. c. marginal cost must be increasing. d. all of the above.
marginal cost must be increasing
If marginal cost is rising, a. average fixed cost must be rising. b. marginal product must be falling. c. marginal product must be rising. d. average variable cost must be falling.
marginal product must be falling
