ECO exam 3
For a particular good, a 12 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?
The good is a necessity.
If the price elasticity of demand for a good is 1.4, then a 14 percent increase in the quantity demanded must be the result of
a 10 percent decrease in the price.
If the price elasticity of supply for a window manufacturer is 1.5,
a 10% increase in the price of windows results in a 15% increase in the quantity of windows supplied.
When demand is inelastic, a decrease in price will cause
a decrease in total revenue.
Rent-control laws dictate
a maximum rent that landlords may charge tenants.
If a binding price floor is imposed on the market for eBooks, then
a surplus of eBooks will develop.
If a binding price floor is imposed on the video game market, then
a surplus of video games will develop.
The price elasticity of demand for a good measures the willingness of
consumers to buy less of the good as price rises.
Denise values a stainless steel dishwasher for her new house at $500. The actual price of the dishwasher is $650. Denise
does not buy the dishwasher, and on her purchase she experiences a consumer surplus of $0.
If the price elasticity of supply is 1.2, and price increased by 10%, quantity supplied would
increase by 12%. 10x1.2=12
The supply of oil is likely to be
inelastic in the short run and elastic in the long run.
As we move downward and to the right along a linear, downward-sloping demand curve,
slope remains constant but elasticity changes
After a binding price floor becomes effective, a
smaller quantity of the good is bought and sold.
Suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages. The tax would shift
supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially-sweetened beverages.
One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the
tax reduces the welfare of both buyers and sellers.
If the price elasticity of demand for a good is 4, then a 12 percent decrease in price results in a
48 percent increase in the quantity demanded. 4x12=48
Bob purchases a book, and his consumer surplus is $3. If Bob is willing to pay $8 for the book, then the price of the book must be
$5. 8-3=5
Tom tunes pianos in his spare time for extra income. Buyers of his service are willing to pay $155 per tuning. One particular week, Tom is willing to tune the first piano for $120, the second piano for $125, the third piano for $140, and the fourth piano for $160. Assume Tom is rational in deciding how many pianos to tune. His producer surplus is
$75. 155- 120= 35. 155-125= 30. 155-140=15 155-160=-5. so then 35+30+15-5= 75
If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in quantity supplied, then the price increase is about
4.2% divide .5 by 1.2
When demand is inelastic, a decrease in price increases total revenue
False
If the government passes a law requiring sellers of mopeds to send $200 to the government for every moped they sell, then A.) The supply curve for mopeds shifts downward by $200 B.) sellers of mopeds receive $200 less per moped than they were receiving before the tax. C.) buyers of mopeds are unaffected by the tax. D. ) None of the above is correct.
None of the above is correct.
A key determinant of the price elasticity of supply is the
Time horizon
A binding minimum wage creates a surplus of labor
True
A price floor is binding when it is set
above the equilibrium price, causing a surplus
A price floor is binding when it is set
above the equilibrium price, causing a surplus.
Producer surplus is the
amount a seller is paid minus the cost of production.
Producer surplus measures the
benefits to sellers of participating in a market.
When a tax is levied on a good,
both buyers and sellers are made worse off.
To say that a price floor is binding is to say that the price floor
causes quantity supplied to exceed quantity demanded.
The price elasticity of demand measures the
magnitude of the response in quantity demanded to a change in price.
Goods with many close substitutes tend to have
more elastic demands.
Inefficiency exists in a market when a good is
not being consumed by buyers who value it most highly.
Suppose that when the price of wheat is $2 per bushel, farmers can sell (buyers demand) 10 million bushels. When the price of wheat is $3 per bushel, farmers can sell (buyers demand) 8 million bushels. Which of the following statements is true? The demand for wheat is
price inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers.
A seller is willing to sell a product only if the seller receives a price that is at least as great as the
seller's cost of production
If a tax is imposed on a market with inelastic supply and elastic demand, then
sellers will bear most of the burden of the tax.
If the current allocation of resources in the market for hammers is inefficient, then it must be the case that
the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources.
If a price ceiling is not binding, then
there will be no effect on the market price or quantity sold.
