Micro Exam #2

Refer to Figure 6-23. The price paid by buyers after the tax is imposed is

$6.

Refer to Figure 6-16. In this market, a minimum wage of $7.25 is

binding and creates unemployment.

Refer to Table 4-13. Regarding Harry and Darby, whose demand for sandwiches conforms to the law of demand?

both Harry's and Darby's

Refer to Table 4-13. Suppose Harry, Darby, and Jake are the only demanders of sandwiches and that the market demand violates the law of demand. Then, in the table, the value of x must be

greater than or equal to 7.

Refer to Figure 6-16. In this market, a minimum wage of $2.75 creates a labor

neither a labor shortage nor surplus.

Refer to Figure 6-16. In this market, a minimum wage of $2.75 is

nonbinding and creates neither a labor shortage nor unemployment.

In 1990, Congress passed a new luxury tax on items such as yachts, private airplanes, furs, jewelry, and expensive cars. The goal of the tax was to

raise revenue from the wealthy.

Refer to Table 4-13. Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose the following:• x = 2.• The current price of a sandwich is $3.00.• The market quantity supplied of sandwiches is 4.• The slope of the supply curve is 2.Then there is currently a

shortage of 6 sandwiches, and the equilibrium price of a sandwich is $5.00.

If buyers and sellers in a certain market are price takers, then individually

they have no influence on market price.

Refer to Figure 6-23. How much tax revenue does this tax produce for the government?

$18.

Refer to Table 6-4. Following the imposition of a price floor $3 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is

$3

Refer to Figure 6-23. The effective price received by sellers after the tax is imposed is

$3.

Refer to Figure 6-4. A government-imposed price of $16 in this market could be an example of a (i)binding price ceiling.(ii)non-binding price ceiling.(iii)binding price floor.(iv)non-binding price floor.

(ii) and (iii) only

Which of the following statements is correct?

*ALL are correct* The demand for flat-screen computer monitors is more elastic than the demand for monitors in general. The demand for grandfather clocks is more elastic than the demand for clocks in general. The demand for cardboard is more elastic over a long period of time than over a short period of time.

Refer to Figure 5-10. If rectangle D is larger than rectangle A, then

*ALL of these are correct* demand is elastic between prices P1 and P2. a decrease in price from P2 to P1 will cause an increase in total revenue. the magnitude of the percent change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded.

If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about

0.63, and supply is inelastic.

Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then the quantity supplied of minivans will increase by about

1.5% in the short run and 6% in the long run.

Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point A and point B?

1.67

Refer to Table 5-4. Using the midpoint method, what is the price elasticity of demand when price rises from $12 to $16?

2.33

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

2.33

Refer to Table 4-8. If these are the only three sellers in the market, then an increase in the market price from $6 to $12 will increase quantity supplied by

24 units.

Refer to Table 6-4. How many units of the good are sold after the imposition of the price floor?

3

Refer to Figure 5-10. Total revenue when the price is P2 is represented by the area(s)

A + B.

Refer to Figure 6-29. The buyers and sellers will bear an equal share of the tax burden if the demand is

D1, and the supply is S1

Refer to Figure 6-29. The buyers will bear a higher share of the tax burden than sellers if the demand is

D2, and the supply is S2

Refer to Table 4-13. Suppose x = 1. Then it must be true that

Harry's demand curve is identical to Jake's demand curve.

Assume Leo buys coffee beans in a competitive market. It follows that

None of the above is correct.

Refer to Figure 6-23. Which of the following is correct?

One-third of the burden of the tax falls on buyers, and two-thirds of the burden of the tax falls on sellers.

Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for chocolate chip cookies of an improved high-speed mixer that allows bakers to produce cookies in less time?

Point A to Point B

Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for swimming lessons of an increase in the incomes of parents with school-aged children?

Point A to Point D

Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for golf balls of an increase in green fees?

Point C to Point B

Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for convertible automobiles of an increase in the price of steel?

Point C to Point D

Refer to Figure 5-19. Which of the following statements is correct?

Supply curve C is more inelastic than supply curve D.

Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most inelastic price elasticity of supply?

Supply curve Z

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?

The good is a luxury.

A key determinant of the price elasticity of supply is the time period under consideration. Which of the following statements best explains this fact?

The number of firms in a market tends to be more variable over long periods of time than over short periods of time.

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good?

The quantity of the good demanded decreases by 0.2 percent.

Refer to Table 4-13. Regarding Harry and Darby, for whom are sandwiches a normal good?

This cannot be determined from the given information.

Refer to Figure 4-8. Suppose the figure shows the market demand for coffee. Suppose the price of tea, a substitute good, increases. Which of the following changes would occur?

a shift from D2 to D1

Refer to Figure 4-8. Suppose the figure shows the market demand for laptop computers. Suppose the price of wireless printers, a complementary good, decreases. Which of the following changes would occur?

a shift from D2 to D1

Refer to Figure 6-4. A government-imposed price ceiling of $6 in this market results in

a shortage of 8 units.

Refer to Figure 6-4. A government-imposed price floor of $12 in this market results in

a surplus of 4 units.

Refer to Figure 6-29. Suppose D1 represents the demand curve for paperback novels, D2 represents the demand curve for gasoline, and S1 represents the supply curve for paperback novels and gasoline. After the imposition of the $2 on paperback novels and on gasoline, the

buyers of gasoline bear a higher burden of the $2 tax than buyers of paperback novels

Refer to Table 4-8. Suppose Firm X and Firm Y are the only two sellers in the market. If the market price decreases from $12 to $9, quantity supplied will

decrease by 6 units.

Scenario 5-3The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. Refer to Scenario 5-3. The equilibrium price will

decrease in both the aged cheddar cheese and bread markets.

Refer to Figure 4-16. The shift from S' to S in the market for chocolate cake could be caused by a(n)

decrease in the number of commercial bakers.

When the price of chai tea lattés is $5, Maxine buys 20 per month. When the price is $4, she buys 30 per month. Maxine's demand for chai tea lattés is

elastic, and her demand curve would be relatively flat.

Scenario 5-3The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. Refer to Scenario 5-3. The change in equilibrium quantity will be

greater in the bread market than in the aged cheddar cheese market.

Refer to Figure 5-17. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would

increase

Refer to Figure 6-29. Suppose D1 represents the demand curve for gasoline in both the short run and long run, S1 represents the supply curve for gasoline in the short run, and S2 represents the supply curve for gasoline in the long run. After the imposition of the $2,

sellers bear a higher burden of the tax in the short run than in the long run

Refer to Table 4-13. Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose the following:• x = 2.• The current price of a sandwich is $3.00.• The market quantity supplied of sandwiches is 5.• The slope of the supply curve is 1.Then there is currently a Correct!

shortage of 5 sandwiches, and the equilibrium price of a sandwich is between $3.00 and $5.00.

Refer to Figure 6-16. In this market, a minimum wage of $7.25 creates a labor

surplus of 4,500 workers.

Refer to Table 4-13. Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose the following:• x = 2.• The current price of a sandwich is $5.00.• The market quantity supplied of sandwiches is 10.• The law of supply applies to the supply of sandwiches.Then there is a

surplus of 5 sandwiches, and the price would be expected to fall from its current level of $5.00.

The value of the price elasticity of demand for a good will be relatively large when

the good is a luxury rather than a necessity.

Refer to Table 4-13. Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose x = 2. Then

the slope of Jake's demand curve is -2, and the slope of the market demand curve is -2/5.

Suppose that gasoline prices increase dramatically this month. Lola commutes 100 miles to work each weekday. Over the next few months, Lola drives less on the weekends to try to save money. Within the year, she sells her home and purchases one only 10 miles from her place of employment. These examples illustrate the importance of

the time horizon in determining the price elasticity of demand.

Refer to Figure 6-23. For every unit of the good that is sold, sellers are required to send

three dollars to the government, and buyers are required to send nothing to the government.

Refer to Table 6-4. Following the imposition of a price floor $3 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting shortage is

0 units.

Refer to Figure 4-16. If the supply curves that are drawn represent supply curves for single-family residential houses, then the movement from S to S' could be caused by a(n)

decrease in the price of lumber.

Scenario 5-3The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. Refer to Scenario 5-3. Total consumer spending on aged cheddar cheese will

decrease, and total consumer spending on bread will decrease.