MICROECON quiz 2

In some markets consumers may buy many different brands of a product. Which of the statements below best represents a situation where demand for a particular brand would be very elastic? a. "The different brands are almost identical. I always buy the cheapest." b. "I pinch pennies in buying other products, but like most people I feel I owe it to myself to get the best brand of this product." c. "I use so little of that product that when I do buy it, I don't pay much attention to the price." d. "The brand I buy is so superior to other available brands that I hardly consider the others."

a. "The different brands are almost identical. I always buy the cheapest."

Charlie is willing to pay $10 for a T-shirt that is priced at $9. If Charlie buys the T-shirt, then his consumer surplus is a. $1. b. $0.90. c.$90. d. $19.

a. $1.

What price does the consumer pay after the government imposes the excise tax on the market? a. $13 b. $9 c. $11 d. $4

a. $13

When the price of candy bars decreased from $0.55 to $0.45, the quantity demanded changed from 19,000 per day to 21,000 per day. In this price range, the price-elasticity coefficient (based on the midpoint formula) for candy bars is a. 0.5. b. 2. c. 0.2. d. 1.

a. 0.5.

We would expect the cross elasticity of demand between Pepsi and Coke to be a. positive, indicating substitute goods. b. positive, indicating general goods. c. positive, indicating secondary goods. d. negative, indicating substitute goods.

a. positive, indicating substitute goods.

The price elasticity of demand is a measure of the a. responsiveness of buyers of a good to changes in its price. b. effect of changes in demand on the price. c. relationship between price and profitability. d. sensitivity of a good's price to changes in demand.

a. responsiveness of buyers of a good to changes in its price.

For which product is the income elasticity of demand most likely to be negative? a. used clothing b. apps for iPads c. bread d. computer software

a. used clothing

In the market for a particular pair of shoes, Jena is willing to pay $75 for a pair while Jane is willing to pay $85 for a pair. The actual price that each has to pay for a pair of shoes is $65. What is the combined amount of consumer surplus of Jena and Jane? $10 a. $10 b. $30 c. $215 d. $130

b. $30

The price elasticity(midpoint method) of demand when price decreases from $9 to $7 is a. -1.5. b. -1.6. c. -1. d. -4.

b. -1.6.

When the price of a product is increased 10 percent, the quantity demanded decreases 15 percent. The price elasticity of demand coefficient for this product is a. 0.67. b. 1.5. c. 67. d. 0.15.

b. 1.5.

Assuming equilibrium price P1 , producer surplus is represented by areas a. a + b. b. c + d. c. a + c. d. a + b + c + d.

b. c + d.

The difference between the maximum price a consumer is willing to pay for a product and the actual price the consumer pays is called a. utility. b. consumer surplus. c. market failure. d. consumer demand

b. consumer surplus.

Cross elasticity of demand is a. negative for substitute goods. b. negative for complementary goods. c. positive for general goods. d. unitary for secondary goods

b. negative for complementary goods.

The minimum acceptable price for a product that producer Sam is willing to receive is $15. The price he could get for the product in the market is $18. How much is Sam's producer surplus? a. $270 b. $33 c. $3 d. $45

c. $3

Suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from 110 to 118. Then the price elasticity of demand is (based on the midpoint formula) a. 2.1. b. 4.0. c. 1.4. d.3.9.

c. 1.4.

At equilibrium, consumer surplus would be represented by the area a. b + c. b. a + b + c. c. a. d. a + b.

c. a.

If the price-elasticity coefficient for a good is -.75, the demand for that good is described as a. normal. b. inferior. c. inelastic. d. elastic.

c. inelastic.

A negative income elasticity of demand coefficient indicates that the product a. is a substitute good. b. follows the law of demand. c. is an inferior good d. is a complementary good.

c. is an inferior good

The demand schedules for such products as eggs, bread, and electricity tend to be a. relatively price elastic. b. of unit price elasticity. c. relatively price inelastic. d. perfectly price elastic.

c. relatively price inelastic

What price does the producer receive for her product after the government imposes the excise tax on the market? a. $4 b. $11 c.$13 d. $9

d. $9

Assuming equilibrium price P1, consumer surplus is represented by areas a. a + c. b. c + d. c. a + b + c + d. d. a + b.

d. a + b.

Demand is said to be inelastic when a. a reduction in price results in an increase in total revenue. b. an increase in price results in a reduction in total revenue. c. the elasticity coefficient exceeds 1. d. a reduction in price results in a decrease in total revenue.

d. a reduction in price results in a decrease in total revenue

Demand is said to be inelastic when a. an increase in price results in a reduction in total revenue. b. the elasticity coefficient exceeds 1. c. a reduction in price results in an increase in total revenue. d. a reduction in price results in a decrease in total revenue.

d. a reduction in price results in a decrease in total revenue.

At equilibrium, the producer surplus would be represented by the area a. a + b. b. b + c. c. b + c + d. d. b.

d. b.

The demand for a luxury good whose purchase would exhaust a big portion of one's income is a. perfectly price elastic. b. relatively price inelastic. c. perfectly price inelastic. d. relatively price elastic.

d. relatively price elastic.

The price elasticity of demand is a measure of the a. effect of changes in demand on the price. b. relationship between price and profitability. c. sensitivity of a good's price to changes in demand. d. responsiveness of buyers of a good to changes in its price.

d. responsiveness of buyers of a good to changes in its price.