Econ test 2
Suppose the small country of Aronow imports 40,000 kg of bananas. The global price of bananas is $0.50 per kg. The government of Aronow collects tariff revenues of $4,000 from banana imports. Which of the following is true? A The consumers in Aronow pay a price of $0.60 per kg of bananas. B The domestic production of bananas in Aronow would increase with the removal of the tariff. C The deadweight loss in the market for bananas in Aronow would increase with the removal of the tariff. D The removal of the tariff would cause domestic consumer surplus in the market for bananas in Aronow to increase but by less than the decrease in domestic producer surplus. E Aronow's total tariff revenue collected in the banana market would be maximized if the per-unit tariff were equal to the difference between its autarky price and the world price.
A The consumers in Aronow pay a price of $0.60 per kg of bananas
An increase in the price of good X causes buyers to want to buy more of good Y. Which of the following explains the resulting change in the market? A) The demand curve for good X will shift to the right because the goods are substitutes in consumption. B) The demand curve for good Y will shift to the right because the goods are substitutes in consumption. C) The demand curve for good X will shift to the left because the goods are complements in consumption. D) The demand curve for good Y will shift to the left because the goods are complements in consumption. E) There will be a downward movement along the demand curve for good X because the goods are complements in consumption.
B The demand curve for good Y will shift to the right because the goods are substitutes in consumption.
A 10 percent increase in the price of a good results in a 4 percent increase in total revenue. From this information, it can be concluded that the demand over this range of prices A is upward sloping B is inelastic C has a price elasticity of demand equal to 2.5 D has increased by 14% E has increased by
B is inelastic
The market for tomatoes is in equilibrium at the price of $10, and quantity of 50 tomatoes. If consumer surplus is $400 and total economic surplus is $650, what is the producer surplus in the tomato market and why? A The producer surplus is $0, because producer surplus is offset by the costs of producing tomatoes. B The producer surplus is $250, because the total surplus less what consumers receive must go to producers. C The producer surplus is −$400, because consumer and producer surplus must offset one another. D The producer surplus is $500, because the producer surplus is the equilibrium price times the equilibrium quantity =$10×50=$500. E The producer surplus is $650, because producer surplus and total economic surplus are always equal.
B The producer surplus is $250, because the total surplus less what consumers receive must go to producers.
The table below shows the values of different elasticities of demand for good J at the market equilibrium price. Which of the following would result in the greatest rightward shift of the demand curve for good J? A) A 50% decrease in the price of good J. B) A 20% increase in the price of good X. C) A 10% increase in the price of good Y. D) A 10% increase in the price of good Z. E) A 10% decrease in income.
C A 10% increase in the price of good Y.
The table above shows the supply and demand schedules in the orange market. Assume that the demand and supply curves are linear. At the market equilibrium price, what are the consumer surplus and the producer surplus? A Consumer surplus is $200; producer surplus is $200 B Consumer surplus is $100; producer surplus is $100 C Consumer surplus is $50; producer surplus is $50 D Consumer surplus is $45; producer surplus is $15 E Consumer surplus is $10; producer surplus is
C Consumer surplus is $50; producer surplus is $50
The tables below show the domestic demand and domestic supply for two small countries participating in a large global market with a world price of coffee equal to $3. Which of the following would be true given the price in the world market is $3? A Neither country would export coffee. B Neither country would import coffee. C Country A would import 20 units of coffee, and Country B would export 10. D Country A would export 20 units of coffee, and Country B would import 10. E Given the demand and supply schedules, $3 cannot be an equilibrium global price.
C Country A would import 20 units of coffee, and Country B would export 10.
The table below shows the values of different elasticities of demand for good J at the market equilibrium price. Which of the following is true about good J? A) Good J is a normal good. B) Good J's demand is elastic. C) Good J is an inferior good. D) Good J is a complement in consumption to good Y. E) Good J is a substitute in consumption to good Z.
C Good J is an inferior good.
If a 10 percent increase in the price of good X results in a 20 percent decrease in the quantity of good Y demanded, which of the following is true? A Good X and good Y are complementary goods, and the cross-price elasticity is −0.5 . B Good X and good Y are substitute goods, and the income elasticity is +2 . C Good X and good Y are complementary goods, and the cross-price elasticity is −2 . D Good X and good Y are normal goods, and the income elasticity is +2 . E Good X and good Y are substitute goods, and the cross-price elasticity is −2 .
C Good X and good Y are complementary goods, and the cross-price elasticity is −2 .
Which of the following policies would result in an increase in the quantity supplied of a good in a market? A Eliminating a per-unit subsidy from sellers B Levying a per-unit tax on sellers C Imposing a binding price floor D Imposing a nonbinding price floor E Imposing a binding price ceiling
C Imposing a binding price floor
In the market described by the diagram above, the total economic surplus will be maximized at which of the following price and quantity combinations? A P3 and Q1 B P3 and Q3 C P2 and Q2 D P1 and Q1 E P1 and
C P2 and Q2
A change in which of the following causes a movement along a given demand curve for a normal good? A) Consumer income B) The demand for the good C) The price of the good D) The price of a substitute good in consumption E) The number of buyers
C The price of the good
Assume that the market for a good is characterized by a downward-sloping demand curve and an upward-sloping supply curve. Suppose that there is an improvement in technology for producing the good. Which of the following would occur? A The impact on consumer surplus would be indeterminate, because of the offsetting impact of the changes in equilibrium price and quantity. B The change in equilibrium price would cause producer surplus to increase. C The total economic surplus in the market would increase. D The demand curve would shift right in response to an increase in the equilibrium price. E The supply curve would shift up resulting in an increase in the equilibrium price and the producer surplus.
C The total economic surplus in the market would increase.
Suppose the price elasticity of supply for gasoline in the short run is estimated to be 0.4. Due to an unexpected surge in the demand for gasoline, the price of gasoline increases by 20 percent. As a result, the quantity supplied of gasoline will A increase by 50 percent B increase by 20 percent C increase by 8 percent D decrease by 0.2 percent E be impossible to determine from the given information
C increase by 8 percent
Which of the following will shift the supply curve for apples to the right? A An increase in consumers' income B An increase in the price of apples C An increase in the wages of apple pickers D A decrease in the rental price for apple harvesting equipment E A decrease in the demand for oranges, a substitute in consumption
D A decrease in the rental price for apple harvesting equipment
The market supply curve for a product is derived from the individual firm supply curves by A) multiplying the equilibrium quantity sold by the number of consumers in the market B) multiplying the equilibrium quantity sold by the number of producers in the market C) multiplying the quantities each producer sells by the market price D) summing the quantities each producer sells at each possible price E) summing the quantities each producer sells and multiplying by the market price
D summing the quantities each producer sells at each possible price
If the price elasticity of supply for pickles is 2 and the price of pickles increases by 10 percent, then the quantity supplied of pickles will increase by A 0.2% B 5% C 8% D 12% E 20%
E 20%
Consider the market for arugula, a normal good. Which of the following changes would result in an increase in both the equilibrium price and the equilibrium quantity of arugula? A A decrease in consumer income B An increase in the price of salad dressing, a complement in consumption C A decrease in the price of radicchio, a substitute in consumption D An increase in the price of water irrigation for arugula farms E An increase in population
E An increase in population
Which of the following explains why the supply curve is upward sloping? A) At a higher price, consumers are willing to buy more of the good. B) At a lower price, consumers are able to buy more of the good. C) Producers receive subsidies as they increase production. D) At a higher quantity, producers are more able to control the market price. E) At a higher price, producers are willing to sell more to increase their profits.
E At a higher price, producers are willing to sell more to increase their profits.
Which of the following correctly describes the income effect associated with the law of demand? A) If consumer income increases, there will be an upward movement along the demand curve for a normal good. B) If consumer income increases, the demand curve will shift to the right for an inferior good. C) If the price of a good increases, the demand for the good decreases because the demand for its substitute in consumption increases. D) If the price of a good decreases, the demand for the good increases because the lower price increases the demand for its complement in consumption. E) If the price of a normal good decreases, the purchasing power of a consumer's income increases and therefore consumers will be willing and able to purchase more of the good.
E If the price of a normal good decreases, the purchasing power of a consumer's income increases and therefore consumers will be willing and able to purchase more of the good.
Which of the following will occur as a result of a decrease in the prices of the inputs used to produce a good? A) The quantity supplied would increase at each possible price for the good. B) The price of the good would increase for any given quantity supplied. C) The quantity supplied would increase as the price of the good increased. D) The quantity supplied would increase as the price of the good decreased. E) The price of the good would increase as the quantity supplied decreased.
A The quantity supplied would increase at each possible price for the good.
The supply schedule gives two points on a market supply curve. Which of the following is true about the supply curve between the given points? A The supply curve is inelastic, because the percentage change in the price is greater than the percentage change in the quantity supplied. B The supply curve is unit elastic, because the change in price is $10 and the change in quantity supplied is 10 units. C The supply curve is perfectly elastic, because the change in price is $10 and the change in quantity supplied is 10 units. D The supply curve is elastic, because the price elasticity of supply is equal to 10. E The supply curve is unit elastic, because the price elasticity of supply is equal to 1
A The supply curve is inelastic, because the percentage change in the price is greater than the percentage change in the quantity supplied.
The graphs above show Mary's demand for hamburgers and Mark's demand for hamburgers. Suppose Mary and Mark are the only two consumers in the market. Which of the following is a point on the market demand curve for hamburgers? A PriceQuantity$2 12 B PriceQuantity$4 7 C PriceQuantity$6 6 D PriceQuantity$8 4 E PriceQuantity$10 8
B PriceQuantity$4 7
Which of the following statements is true about the demand curve above? A Demand is elastic at each given price because the slope is constant and equal to −2. B The elasticity of demand decreases when moving from point X to point Y. C The elasticity of demand increases when moving from point X to point Y. D Demand is inelastic between quantities 0 and 4. E Demand is elastic between quantities 4 and 8.
B The elasticity of demand decreases when moving from point X to point Y.
Assume that the market for a good is characterized by a downward-sloping demand curve and an upward-sloping supply curve and the market is in equilibrium at a price of $20 and a quantity of 100 units. After the government imposes a $5 per-unit excise tax on the good, the price that buyers pay for the good increases by $3. Which of the following are possible values for the government tax revenue and deadweight loss in the market? A Tax revenue is $200, deadweight loss $0 B Tax revenue is $300, deadweight loss $0 C Tax revenue is $300, deadweight loss $100 D Tax revenue is $500, deadweight loss $200 E Tax revenue is $500, deadweight loss $300
C Tax revenue is $300, deadweight loss $100
Which of the following would cause the supply of good X to become more elastic? A Greater availability of substitutes for good X B Increased prices of inputs required to produce good X C The ability to easily reallocate inputs to production of good X D A short time frame for making production decisions E More elastic demand for good
C The ability to easily reallocate inputs to production of good X
At the current prices of goods X and Y, the quantity demanded of good X is 10 units, and the quantity demanded of good Y is 5 units. The cross-price elasticity of demand between goods X and Y is 0.6. A 10 percent increase in the price of good Y will result in which of the following? A A 0.5 percent decrease in the quantity demanded of good Y. B A 3 percent increase in the quantity demanded of good Y. C A 1 percent increase in the quantity demanded of good X. D A 6 percent increase in the quantity demanded of good X. E A 60 percent increase in the quantity demanded of good X.
D A 6 percent increase in the quantity demanded of good X.
A firm estimates that the absolute value of the price elasticity of demand for its signature sandwich is 2. If the firm increases its sandwich price by 10 percent, what will happen to the quantity demanded? A It will increase by 5 percent B It will increase by 20 percent C It will decrease by 5 percent D It will decrease by 20 percent E It will remain unchanged
D It will decrease by 20 percent
Which of the following will initially result from an increase in the market demand for a good? A There will be a matching increase in supply. B There will be a decrease in quantity supplied. C The equilibrium price will decrease. D There will be a temporary shortage at the original equilibrium price. E Total producer surplus in the market will decrease.
D There will be a temporary shortage at the original equilibrium price
In which of the following cases would government intervention in a market result in an increase in the quantity sold? A Setting a price ceiling above the equilibrium price B Setting a price ceiling below the equilibrium price C Setting a price floor above the equilibrium price D Levying a per-unit tax on producers E Providing producers of a product with a per unit subsidy
E Providing producers of a product with a per unit subsidy
The graph above shows the domestic market for sandalwood in equilibrium at a price of $800 per kilogram in the absence of international trade. Now assume the country begins to engage in international trade, and sandalwood is selling at a price of $600 per kilogram in the world market. Which of the following would most likely result? A The country would increase domestic production to become competitive in the world market. B The country would export sandalwood, and its domestic consumer surplus would increase. C The country would export sandalwood, and its total economic surplus would increase, with the domestic consumer surplus increasing by more than the domestic producer surplus decreases. D The country would import sandalwood, and its total economic surplus would decrease, with both the domestic consumer surplus and the domestic producer surplus decreasing. E The country would import sandalwood, and its total economic surplus would increase, with the domestic consumer surplus increasing by more than the domestic producer surplus decreases.
E The country would import sandalwood, and its total economic surplus would increase, with the domestic consumer surplus increasing by more than the domestic producer surplus decreases.