Microeconomics: Class Test 02

(Figure: The Market for Amazon Echo) Use Figure: The Market for Amazon Echo. The figure shows the pre-tax and post-tax positions—S1 and S2, respectively—of the supply curve for the Amazon Echo. The transfer of consumer surplus to the government is equal to area:

B

(Figure: The Market for Summer Sandals) Use Figure: The Market for Summer Sandals. The government recently levied a $10 tax on the producers of summer sandals. What area or areas in the graph identify tax revenue? 1. a + b + c 2. c + e 3. b + d 4. d + e + f

3. b + d

(Figure: Winners and Losers from Rent Control) Use Figure: Winners and Losers from Rent Control. Consider the market for apartments. After the imposition of a price ceiling (rent control), the deadweight loss is given by area: C. A. D. B.

C.

(Figure: The Market for Alaskan Lobster) Use Figure: The Market for Alaskan Lobster. The government imposes a quota limiting sales of lobster to 1,000 pounds. According to the figure, the quota rent per pound is: The quota rent cannot be determined from the information provided. a. $2.50. b. $5.00. c. $7.50.

a. $2.50.

(Figure: The Demand Curve for Lattes) Use Figure: The Demand Curve for Lattes. If the price is $5, total revenue is: a. $25. b. $20. c. $10. d. $5.

a. $25.

(Table: Producer Surplus and Opera Tickets) Use Table: Producer Surplus and Opera Tickets. The table shows Columbia University students' opportunity cost of selling a ticket to Verdi's Aida at the Metropolitan Opera House. Assume that each student has one ticket to sell. If the price of a ticket to see Aida is $75, then David's producer surplus is: a. $50. b. $15. c. $240. d. $25.

a. $50.

Suppose that Michelle buys a cappuccino from Paul's Cafe and Bakery for $4.75. Michelle was willing to pay up to $6.75 for the cappuccino, and Paul's Cafe and Bakery was willing to accept $3.75 for the cappuccino. Based on this information, answer the following questions. a. Michelle's consumer surplus: $ b. Paul's Cafe and Bakery's producer surplus: $

a. 3.50 ? b. 1.50 ?

If the cross elasticity of demand between cheese and yogurt is positive, then: a. cheese and yogurt are complements. b. cheese and yogurt are substitutes. c. the demand for cheese and the demand for yogurt are both price inelastic. d. the demand for cheese and the demand for yogurt are both price elastic.

a. cheese and yogurt are complements.

(Figure: The Demand for Digital Movies) Use Figure: The Demand for Digital Movies. If the price of online movies increases from $6 to $8, total revenue _____, which means that demand is _____. a. decreases; elastic b. increases; elastic c. remains constant; elastic d. decreases; inelastic

a. decreases; elastic

(Figure: The Market for Microeconomics Textbooks) Use Figure: The Market for Microeconomics Textbooks. Suppose the government believes that microeconomics textbooks are too expensive and wants to make them more affordable, ensuring that they are available to students. Given a price ceiling of $80, the market outcome would be a _____ of _____ textbooks. a. shortage; 30 b. surplus; 30 c. shortage; 10 d. surplus; 10

a. shortage; 30

If you pay a price exactly equal to your willingness to pay, then your consumer surplus is: a. greater than the opportunity cost of the good. b. $0. c. less than the producer surplus. d. impossible to determine.

b. $0.

(Table: Movie Downloads) Two consumers, Ariel and Abbie, like to download movies to their iPhones. The table Movie Downloads shows their willingness to pay for each downloaded movie. If an individual movie can be downloaded for $1, what is the total consumer surplus received by these consumers? a. $10 b. $11 c. $18 d. $19.25

b. $11

(Figure: The Market for Chai Lattes) Use Figure: The Market for Chai Lattes. What is the price elasticity of supply between the prices of $2 and $2.50 per cup, using the midpoint method? a. 0.33 b. 3.00 c. 1.51 d. 1.00

b. 3.00

(Figure: The Linear Demand Curve for Golf Balls) Use Figure: The Linear Demand Curve for Golf Balls. If the price is initially $10, then falls to $9, this will result in a(n) _____ in quantity demanded and a(n) _____ in total revenue. a. decrease; increase b. increase; decrease c. increase; increase d. decrease; decrease

b. increase; decrease

When a market is in equilibrium, and there is no outside intervention to change the equilibrium price: a. total surplus is minimized. b. no mutually beneficial trades are missed. c. some mutually beneficial trades may be missed. d. the marginal benefit to consumers is greater than the marginal cost to producers.

b. no mutually beneficial trades are missed.

Price elasticities of demand and supply do NOT play a major role in determining: a. the deadweight loss arising from the imposition of an excise tax. b. the administrative costs of imposing an excise tax. c. the burden of an excise tax on consumers and producers. d. the ability of policy makers to change the consumption of a good via the imposition of an excise tax.

b. the administrative costs of imposing an excise tax.

Which factor does NOT determine the price elasticity of demand? a. the number of available substitutes b. the slope of the supply curve c. the time available to adjust to price changes d. the proportion of the budget spent on the item

b. the slope of the supply curve

Each month, Evelyn spends exactly $50 on frappuccinos, regardless of the price. Evelyn's price elasticity of demand for frappuccinos is: a. less than 1 but greater than 0. b. greater than 1. c. 1. d. 0.

c. 1.

Diana and Graham live in an area of Brooklyn with rent control. Both are looking for an apartment to rent. Diana has a job paying $20 per hour, and Graham has a job paying $15 per hour. Both value an apartment equally. What is the most likely outcome? a. Diana will find the apartment first. b. Both will spend the same amount of time searching for an apartment. c. Graham will spend more time than Diana searching for an apartment. d. Diana will spend more time than Graham searching for an apartment.

c. Graham will spend more time than Diana searching for an apartment.

A price floor often results in: a. less communication between buyers and sellers about the appropriate price. b. a shortage of the product. c. a more efficient allocation of the good among sellers. d. black markets, or underground transactions in the good.

c. a more efficient allocation of the good among sellers. ?

The state of Texas recently saw a gasoline price increase of 5%, which brought about a fall in the quantity of gasoline purchased of 1%. The price elasticity of demand is equal to _____, and demand is described as _____. a. 5; inelastic b. 0.2; elastic c. 5; elastic d. 0.2; inelastic

d. 0.2; inelastic

The price elasticity of demand for snowboarding lessons at Jay Peak resort in Vermont is greater than 1. This means that the demand for snowboarding lessons is _____. a. perfectly elastic b. unit-elastic c. inelastic d. elastic

d. elastic

(Figure: The Alaskan Crab Market) Use Figure: The Alaskan Crab Market. If the government wants to limit crab sales to 500 pounds, it can impose a price: a. floor of $20. b. ceiling of $5. c. floor of $10. d. floor of $15.

d. floor of $15.

Brian and Luisa must pay an income tax. Both Brian and Luisa pay $10,000 in taxes each year, but Brian earns $200,000, and Luisa earns $100,000. From this information, you can infer that this tax is: a. proportional. b. equitable. c. progressive. d. regressive.

d. regressive.

An excise tax that the government collects from the producers of a good: a. shifts the demand curve upward. b. shifts the demand curve downward. c. decreases tax revenue for the government. d. shifts the supply curve upward.

d. shifts the supply curve upward.