Micro test 2

In this market, equilibrium price and quantity, respectively, are a. $10 and 30 units. b. $10 and 50 units. c. $10 and 70 units. d. $4 and 50 units.

$10 and 50 units

If both members and non-members are allowed to purchase tickets to this year's celebrity golf tournament, then what will be the equilibrium price? a. $10 b. $15 c. $20 d. $25

$25

At what price would there be an excess supply of 200 units of the good? a. $15 b. $20 c. $30 d. $35

$30

Which of the following price floors would be binding in this market? a. $70 b. $60 c. $50 d. $40

$70

The price paid by buyers in a market will increase if the government (i) increases a binding price floor in that market. (ii) increases a binding price ceiling in that market. (iii) decreases a tax on the good sold in that market. a. (ii) only b. (iii) only c. (i) and (ii) only d. (i), (ii), and (iii)

(i) and (ii) only

Suppose good X has a positive income elasticity of demand. This implies that good X could be (i) a normal good. (ii) a necessity. (iii) an inferior good. (iv) a luxury. a. (i) only b. (i) and (ii) only c. (i), (ii), and (iv) only d. (iii) only

(i), (ii), and (iv) only

If a 6% decrease in price for a good results in a 2% increase in quantity demanded, the price elasticity of demand is a. 0.02. b. 0.33. c. 3. d. 4.

0.33

Studies of the effects of the minimum wage typically find that a 10 percent increase in the minimum wage depresses teenage employment by about a. 1 to 3 percent. b. 5 to 7 percent. c. 10 percent. d. None of the above is correct because studies show no decrease in teenage employment.

1 to 3 percent.

If these are the only two consumers in the market, then the market quantity demanded at a price of $6 is a. 12 units. b. 14 units. c. 19 units. d. 21 units.

19 units

If the price elasticity of demand for a good is 1, then a 3 percent decrease in price results in a a. 0.1 percent increase in the quantity demanded. b. 1 percent increase in the quantity demanded. c. 3 percent increase in the quantity demanded. d. 4 percent increase in the quantity demanded.

3 percent increase in the quantity demanded

If these are the only two consumers in the market, then the market quantity demanded at a price of $10 is a. 0 units. b. 5 units. c. 8.33 units. d. 25 units.

8.33 units

Which of the following statements about the consumers' responses to rising gasoline prices is correct? a. About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars. b. About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars. c. About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars. d. Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run.

About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars.

Sellers' total revenue would increase if the price a. increased from $12 to $15. b. decreased from $39 to $36. c. decreased from $27 to $24. d. All of the above are correct.

All of the above are correct.

Which combination would produce an increase in equilibrium price and an indeterminate change in equilibrium quantity? a. A b. B c. C d. D

B

Which of the following statements is correct concerning the burden of a tax imposed on take-out food? a. Buyers bear the entire burden of the tax. b. Sellers bear the entire burden of the tax. c. Buyers and sellers share the burden of the tax. d. We have to know whether it is the buyers or the sellers that are required to pay the tax to the government in order to make this determination.

Buyers and sellers share the burden of the tax

All else equal, a sale on chicken would cause a move from a. DA to DB. b. DB to DA. c. x to y. d. y to x.

DA to DB.

Which of the following is not correct? a. Economists have two roles: scientist and policy adviser. b. As scientists, economists develop and test theories to explain the world around them. c. Economic policies rarely have effects that their architects did not intend or anticipate. d. As policy advisers, economists use their theories to help change the world for the better

Economic policies rarely have effects that their architects did not intend or anticipate

Suppose x = 1. Then it must be true that a. Harry and Jake have the same income, which is lower than Darby's income. b. if sandwiches and potato chips are complements for Harry, then those two goods are also complements for Jake. c. Harry's demand curve is identical to Jake's demand curve. d. All of the above are correct.

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

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. Leave the price at 25 cents and be patient. b. Raise the price to increase total revenue. c. Lower the price to increase total revenue. d. There isn't enough information given to answer this question

Lower the price to increase total revenue

In a competitive market, the price of a product a. is determined by buyers, and the quantity of the product produced is determined by sellers. b. is determined by sellers, and the quantity of the product produced is determined by buyers. c. and the quantity of the product produced are both determined by sellers. d. None of the above is correct.

None of the above is correct.

Using the midpoint method, which of the three supply curves has the most inelastic price elasticity of supply? a. Supply curve X b. Supply curve Y c. Supply curve Z d. There is no difference in the elasticities of the three supply curves.

Supply curve Z

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? a. There are many substitutes for this good. b. The good is a necessity. c. The market for the good is narrowly defined. d. The relevant time horizon is long.

The good is a necessity

Suppose the United States had a short-term shortage of farmers. Which mechanisms would adjust to remove the shortage? a. The government would provide tax incentives to encourage people to become farmers. b. The government would subsidize the production of food. c. The prices of food and the wages of farmers would adjust. d. There are no mechanisms to remove the shortage

The prices of food and the wages of farmers would adjust

What would we expect to observe in the caviar market? a. Equilibrium prices and quantities will increase. b. Equilibrium prices will increase by more if the demand for caviar is elastic than if demand is inelastic. c. Total revenues to caviar firms will increase if the demand for caviar is inelastic. d. All of the above are correct.

Total revenues to caviar firms will increase if the demand for caviar is inelastic.

Which of the following is correct? a. Workers determine the supply of labor, and firms determine the demand for labor. b. Workers determine the demand for labor, and firms determine the supply of labor. c. The labor market is a single market for all different types of workers. d. The price of the product produced by labor adjusts to balance the supply of labor and the demand for labor.

Workers determine the supply of labor, and firms determine the demand for labor.

For a price floor to be binding in this market, it would have to be set at a. any price below $3. b. a price between $2 and $3. c. a price between $3 and $4. d. any price above $3.

a price between $2 and $3

If the government imposes a price ceiling of $4 on this market, then there will be a. no shortage. b. a shortage of 5 units. c. a shortage of 10 units. d. a shortage of 20 units.

a shortage of 10 units

If a surplus exists in a market, then we know that the actual price is a. above the equilibrium price, and quantity supplied is greater than quantity demanded. b. above the equilibrium price, and quantity demanded is greater than quantity supplied. c. below the equilibrium price, and quantity demanded is greater than quantity supplied. d. below the equilibrium price, and quantity supplied is greater than quantity demanded.

above the equilibrium price, and quantity supplied is greater than quantity demanded.

OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to a. an inelastic demand for oil and a reduction in the amount of oil supplied. b. a reduction in the amount of oil supplied and a world-wide oil embargo. c. a world-wide oil embargo and an elastic demand for oil. d. a reduction in the amount of oil supplied and an elastic demand for oil.

an inelastic demand for oil and a reduction in the amount of oil supplied.

Suppose a tax of $2 per unit is imposed on this market. What will be the new equilibrium quantity in this market? a. less than 50 units b. 50 units c. between 50 units and 100 units d. greater than 100 units

between 50 units and 100 units

Regarding Harry and Darby, whose demand for sandwiches conforms to the law of demand? a. only Harry's b. only Darby's c. both Harry's and Darby's d. neither Harry's nor Darby's

both Harry's and Darby's

For which pairs of goods is the cross-price elasticity most likely to be positive? a. canoes and kayaks b. pizza and college textbooks c. Halloween candy and rain coats d. cats and cat food

canoes and kayaks

The line that relates the price of a good and the quantity supplied of that good is called the supply a. schedule, and it usually slopes upward. b. schedule, and it usually slopes downward. c. curve, and it usually slopes upward. d. curve, and it usually slopes downward.

curve, and it usually slopes upward.

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply is a. elastic, and the price elasticity of supply is 1.74. b. elastic, and the price elasticity of supply is 0.57. c. inelastic, and the price elasticity of supply is 1.74. d. inelastic, and the price elasticity of supply is 0.57.

elastic, and the price elasticity of supply is 1.74.

Which of the following is correct? A tax burden a. falls more heavily on the side of the market that is more elastic. b. falls more heavily on the side of the market that is less elastic. c. falls more heavily on the side of the market that is closest to unit elastic. d. is distributed independently of the relative elasticities of supply and demand.

falls more heavily on the side of the market that is less elastic

Demand is elastic if the price elasticity of demand is a. less than 1. b. equal to 1. c. equal to 0. d. greater than 1.

greater than 1

If the price decreases in the region of the demand curve between points A and B, we can expect total revenue to a. increase. b. stay the same. c. decrease. d. first decrease, then increase until total revenue is maximized.

increase

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 a. increase. b. decrease. c. remain unchanged. d. The effect on total revenue cannot be determined from the given information.

increase

If the government levies a $5 tax per ticket on buyers of NFL game tickets, then the price paid by buyers of NFL game tickets would a. increase by less than $5. b. increase by exactly $5. c. increase by more than $5. d. decrease by an indeterminate amount.

increase by less than $5

The movement from Da to Db in the market for potato chips could be caused by a(n) a. decrease in the price of potato chips. b. decrease in income, assuming that potato chips are a normal good. c. announcement by the FDA that potato chips cause cancer. d. increase in the price of a pretzels.

increase in the price of a pretzels.

In the early 1970s, OPEC's goal was to a. decrease the world-wide price of oil so that the quantity demanded increased, thus raising total revenues for OPEC members. b. increase the world-wide price of oil by reducing the quantity of oil supplied. c. increase the world-wide price of oil by increasing the quantity of oil supplied, thus raising total revenues for OPEC members. d. decrease the world-wide price of oil so that quantity demanded increased.

increase the world-wide price of oil by reducing the quantity of oil supplied.

Total revenue will be at its largest value on a linear demand curve at the a. top of the curve, where prices are highest. b. midpoint of the curve. c. low end of the curve, where quantity demanded is highest. d. None of the above is correct.

midpoint of the curve.

The burden of a luxury tax falls a. more on the rich than on the middle class. b. more on the poor than on the rich. c. more on the middle class than on the rich. d. equally on the rich, the middle class, and the poor.

more on the middle class than on the rich.

If two goods are complements, their cross-price elasticity will be a. positive. b. negative. c. zero. d. equal to the difference between the income elasticities of demand for the two goods.

negative.

If the government imposes a price ceiling of $6 on this market, then there will be a. no shortage. b. a shortage of 5 units. c. a shortage of 10 units. d. a shortage of 20 units.

no shortage

The long-run effects of rent controls are a good illustration of the principle that a. society faces a short-run tradeoff between unemployment and inflation. b. the cost of something is what you give up to get it. c. people respond to incentives. d. government can sometimes improve on market outcomes.

people respond to incentives.

A tax imposed on the sellers of a good will raise the a. price paid by buyers and lower the equilibrium quantity. b. price paid by buyers and raise the equilibrium quantity. c. effective price received by sellers and lower the equilibrium quantity. d. effective price received by sellers and raise the equilibrium quantity.

price paid by buyers and lower the equilibrium quantity

Each of the following is a determinant of demand except a. tastes. b. production technology. c. expectations. d. the prices of related goods.

production technology

If, at the current price, there is a surplus of a good, then a. sellers are producing more than buyers wish to buy. b. the market must be in equilibrium. c. the price is below the equilibrium price. d. quantity demanded equals quantity supplied.

sellers are producing more than buyers wish to buy

If a tax is levied on the buyers of a product, then the demand curve will a. not shift. b. shift down. c. shift up. d. become flatter.

shift down.

When a binding price ceiling is imposed on a market to benefit buyers, a. no buyers actually benefit. b. some buyers benefit, but no buyers are harmed. c. some buyers benefit, and some buyers are harmed. d. all buyers benefit.

some buyers benefit, and some buyers are harmed

Last month, sellers of good Y took in $100 in total revenue on sales of 50 units of good Y. This month sellers of good Y raised their price and took in $120 in total revenue on sales of 40 units of good Y. At the same time, the price of good X stayed the same, but sales of good X increased from 20 units to 40 units. We can conclude that goods X and Y are a. substitutes, and have a cross-price elasticity of 0.60. b. complements, and have a cross-price elasticity of -0.60. c. substitutes, and have a cross-price elasticity of 1.67. d. complements, and have a cross-price elasticity of -1.67.

substitutes, and have a cross-price elasticity of 1.67.

The two words economists use most often are a. inflation and trade. b. supply and demand. c. competition and prices. d. markets and equilibrium.

supply and demand.

A improvement in production technology will shift the a. supply curve to the right. b. supply curve to the left. c. demand curve to the right. d. demand curve to the left.

supply curve to the right.

Which of the following is an example of a highly organized market? a. the market for textbooks b. the market for spa services c. the market for soybeans d. the market for ice cream

the market for soybeans

In which market will the tax burden be most equally divided between buyers and sellers? a. the market shown in panel (a). b. the market shown in panel (b). c. the market shown in panel (c). d. All of the above are correct.

the market shown in panel (c)

Which of the following is not a determinant of demand? a. the price of a resource that is used to produce the good b. the price of a complementary good c. the price of the good next month d. the price of a substitute good

the price of a resource that is used to produce the good

Generally, a firm is more willing and able to increase quantity supplied in response to a price change when a. the relevant time period is short rather than long. b. the relevant time period is long rather than short. c. supply is inelastic. d. the firm is experiencing capacity problems.

the relevant time period is long rather than short

A binding price floor will reduce a firm's total revenue a. always. b. when demand is elastic. c. when demand is inelastic. d. never.

when demand is elastic.

Price controls are usually enacted a. as a means of raising revenue for public purposes. b. when policymakers believe that the market price of a good or service is unfair to buyers or sellers. c. when policymakers tax a good. d. All of the above are correct.

when policymakers believe that the market price of a good or service is unfair to buyers or sellers.