Microeconomics Exam 2

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. Refer to Figure 8-5. The price that sellers effectively receive after the tax is imposed is... a. P2 b. P4 c. P1 d. P3

a. P2

Holding the nonprice determinants of supply constant, and change in price would... a. result in a movement along a stationary supply curve b. result in either a decrease in supply or an increase in supply c. have no effect on the quantity supplied d. result in a shift of demand

a. result in a movement along a stationary supply curve

Which of the following events would cause a movement upward and left along the demand curve for olives? a. the price of olives rises b. the price of pickles decreases, and pickles are a substitute for olives c. the number of people who purchase olives decreases d. consumer income decreases, and olives are a normal good

a. the price of olives rises

Suppose a market has the demand function Qd=20-0.5P. At which of the following prices will total revenue be maximized? a. $20 b. $20 c. $30 d. $40

a. $20

Figure 8-6 The vertical distance between points A and B represents a tax in the market. Refer to Figure 8-6. The total surplus with the tax in place is... a. $4,500 b. $6,000 c. $1,500 d. $3,600

a. $4,500

Figure 4-24 The diagram below pertains to the demand for turkey in the United States Refer to Figure 4-24. All else equal, a large number of people becoming vegetarians would cause a move from... a. DA to DB b. x to y c. DB to DA d. y to x

a. DA to DB

Table 7-12 The numbers reveal the opportunity costs of providing 10 piano lessons of equal quality. Seller: Cost Marcia: $200 Jan: $250 Cindy: $350 Greg: $400 Peter: $700 Bobby: $800 Refer to Table 7-12. You wish to purchase 10 piano lessons, so you take bids from each of the sellers. The bids are required to be rounded to the nearest dollar. You will not accept a bid below a seller's cost because you are concerned that the seller will not provide all 10 lessons. Your parents have given you $450 to spend on piano lessons. You believe that the sellers with higher opportunity costs offer higher quality lessons. You want the highest quality lessons that you can afford, but you can spend any remaining money on dinner with friends. From whom will you take lessons, and how much money will you spend? a. Greg: $401 b. Cindy: $401 c. Peter: $450 d. Cindy: $450

a. Greg: $401

Minimum-wage laws dictate... a. a minimum wage that firms may pay workers b. the exact wage that firms may pay workers c. both a minimum and a maximum wage that firms may pay workers d. a maximum wage that firms may pay workers

a. a minimum wage that firms may pay workers

Figure 6-4 Refer to Figure 6-4. A government-imposed price of $6 in this market is an example of a... a. binding price ceiling that creates a shortage b. binding price floor that creates a surplus c. non-binding price floor that creates a surplus d. non-binding price ceiling that creates a shortage

a. binding price ceiling that creates a shortage

The quantity sold in a market will increase if the government... a. decreases a binding price floor in that market b. increases a binding price ceiling in that market c. decreases a tax on the good sold in that market d. more than one of the above is correct

a. decreases a binding price floor in that market

Figure 7-3 Refer to Figure 7-3. When the price rises from P1 to P2, consumer surplus... a. decreases by an amount equal to B+C b. increase by an amount equal to A c. Increase by an amount equal to B+C d. decrease by an amount equal to C

a. decreases by an amount equal to B+C

A tax on the buyers of sofas... a. decreases the size of the sofa market b. increase the size of the sofa market c. has no effect on the size of the sofa market d. may increase, decrease, or have no effect on the size of the sofa market

a. decreases the size of the sofa market

"Other things equal, when the price of a good rises, the quantity supplied of the good also rises, and when the price falls, the quantity supplied falls as well." This relationship between price and quantity supplied... a. is referred to as the law of supply b. applies only to a few goods in the economy c. is represented by a downward-sloping supply curve d. all of the above are correct

a. is referred to as the law of supply

When drawing a demand curve... a. price is measured along he vertical axis, and quantity demanded is measured along the horizontal axis b. quantity demanded is measured along the vertical axis, and price is measured along the horizontal axis c. price is measured along the vertical axis, and demand is measured along the horizontal axis d. demand is measured along the vertical axis, and price is measured along the horizontal axis

a. price is measured along he vertical axis, and quantity demanded is measured along the horizontal axis

A tax on a good... a. raises the prices that buyers effectively pay and lowers the price that sellers effectively receive b. lowers the price that buyers effectively pay and lowers the price that sellers effectively receive c. raises the price that buyers effectively pay and raises the price that sellers effectively receive d. lowers the price that buyers effectively pay and raises the price that sellers effectively receive

a. raises the prices that buyers effectively pay and lowers the price that sellers effectively receive

Table 5-9 Refer to Table 5-9. Which of the 3 supply curves represents the most elastic supply? a. supply curve A b. supply curve B c. supply curve C d. there is no difference in the elasticity of the three supply curves

a. supply curve A

Table 4-11 Refer to Table 4-11. If the price were $8, a... a. surplus of 25 units would exist, and price would tend to fall b. surplus of 45 units would exist, and price would tend to fall c. shortage of 25 units would exist, and price would tend to rise d. shortage of 20 units would exist, and price would tend to rise

a. surplus of 25 units would exist, and price would tend to fall

Figure 8-16 Refer to Figure 8-16. Panel (a) and Panel (b) each illustrate a $2 tax placed on a market. In comparison to Panel (a), Panel (b) illustrates which of the following statements? a. when supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic b. when demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic c. when supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic d. when demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic

a. when supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic

Table 7-4 The number in the table reveal the maximum willingness to pay for a ticket to a Chicago Cubs vs, St. Louis Cardinal's baseball game at Wrigley Field. Buyer: Willingness to Pay Jennifer: $10 Bryce: $15 Dan: $20 David: $25 Ken: $50 Lisa: $60 Refer to Table 7-4. If tickets sell for $40 each, then what is the total consumer surplus in the market? a. $110 b. $30 c. $70 d. $90

b. $30

Suppose Brent, Callie, and Danielle each purchase a particular type of electric pencil sharpener at a price of $20. Brent's willingness to pay was $22, Callie's willingness to pay was $25, and Danielle's willingness to pay was $30. Which of the following statements is correct? a. the fact that all 3 individuals paid $20 for the same type of pencil sharpener indicates that each one placed the same value on that pencil sharpener b. Brent's consumer surplus id the smallest of the 3 individual consumer surpluses c. Had the price of the pencil sharpener been $24 rather than $20, only Danielle would have been a buyer d. For the 3 individuals together, consumer surplus amounts to $60.

b. Brent's consumer surplus id the smallest of the 3 individual consumer surpluses

Which of the following statements is correct? a. The demand for medicine is more elastic than the demand for sailboats. b. The demand for iPads is more elastic than the demand for tablets in general. c. The demand for cell phones is more elastic over a short period of time than over a long period of time. d. All of the above are correct.

b. The demand for iPads is more elastic than the demand for tablets in general.

Figure 8-11 Refer to Figure 8-11. The deadweight loss of the tax is represented by the... a. length of the line segment connecting points A and C b. area of the triangle bounded by the points A, B, and C c. length of the line segment connecting points A and B

b. area of the triangle bounded by the points A, B, and C

When a tax is placed on the buyers of lemonade, the... a. buyers bear the entire burden of the tax b. burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal c. burden of the tax will always be equally divided between the buyers and the sellers d. sellers bear the entire burden

b. burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal

The higher a country's a tax rates, the more likely that country will be... a. on the positively sloped part of the Laffer curve b. on the negatively sloped part of the Laffer curve c. experiencing small deadweight loss d. at the top of the Laffer curve

b. on the negatively sloped part of the Laffer curve

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the... a. flatter the demand curve will be b. steeper the demand curve will be c. further to the right the demand curve will sit d. closer to the vertical axis the demand curve will sit

b. steeper the demand curve will be

A $0.10 tax levied on the sellers of chocolate bars will cause the... a. a supply curve for chocolate bars to shift down by $0.10 b. supply curve for chocolate bars to shift up by $0.10 c. demand curve for chocolate bars to shift down by $0.10 d. demand curve for chocolate bars to shift up by $0.10

b. supply curve for chocolate bars to shift up by $0.10

The demand curve for coffee shifts... a. only when income changes b. when a determinant of the demand for coffee other than the price of coffee changes c. when the price of coffee changes d. both b and c are correct

b. when a determinant of the demand for coffee other than the price of coffee changes

Which of the following statements is correct? a. a tax levied on sellers always will be passed completely on to buyers b. who actually pays a tax depend so f the price elasticities of supply and demand c. a tax levied on buyers will never be partially paid by sellers d. government can decide who actually pays a tax

b. who actually pays a tax depend so f the price elasticities of supply and demand

At Nick's Bakery, the cost to make a cheese danish is $1.50 per danish. As a result of selling 10 danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his danishes for... a. $0.50 each b. $5.00 each c. $3.50 each d. $2.00 each

c. $3.50 each

Figure 5-13 Refer to Figure 5-13. Between point A and B, price elasticity of demand using the midpoint method is equal to... a. 1.18 b. 0.71 c. 0.85 d. 1.40

c. 0.85

Table 7-6 For each of 3 potential buyers of apples, the table displays the willingness to pay for the first 3 apples of the day. Assume Xavier, Yadier, and Zavi are the only 3 buyers of apples and only 3 apples can be supplied per day. First Apple Xavier: $1.75 Yadier: $1.50 Zavi: $1.30 Second Apple Xavier: $1.55 Yadier: $1.25 Zavi: $1.10 Third Apple Xavier: $1.15 Yadier: $0.75 Zavi: $0.70 Refer to Table 7-6. If the market price of an apple is $.40, then the market quantity of apples demanded per day is... a. 1 b. 2 c. 3 d. 4

c. 3

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. Refer to Figure 8-8. The deadweight loss of the tax is the area... a. B+D b. B+C+D+F c. C+F d. A+C+F+J

c. C+F

Figure 8-7 The vertical distance between points A and B represents a tax in the market. Refer to Figure 8-7. Which of the following statements is correct? a. total surplus before the tax is imposed is $180 b. after the tax is imposed, consumer surplus is 25% of its pre-tax value c. after the tax is imposed, the producer surplus is 36% of its pre-tax value d. all of the above are correct

c. after the tax is imposed, the producer surplus is 36% of its pre-tax value

The price received by sellers in a market will decrease if the government... a. increases a binding price floor in that market b. increases a binding price ceiling in that market c. decreases a tax on the good sold in that market d. none of the above are correct

c. decreases a tax on the good sold in that market

Figure 8-11 Refer to Figure 8-11. Neither a shift of the demand curve nor a shift of the supply curve is shown in the figure. However, we know that, when the tax is imposed... a. none of the above are correct; the tax causes neither the demand curve nor the supply curve to shift b. the demand curve will shift c. either the demand curve or the supply curve will shift d. the supply curve will shift

c. either the demand curve or the supply curve will shift

The supply of a good will be more elastic, the... a. more the good is considered a luxury b. broader is the definition of the market for the good c. longer the time period being considered d. larger the number of close substitutes for the good

c. longer the time period being considered

Figure 7-7 Refer to Figure 7-7. What happens to the consumer surplus of the price rises from $100 to $150? a. the new consumer surplus is triple the original consumer surplus b. the new consumer surplus is half of the original consumer surplus c. the new consumer surplus is 25% of the original consumer surplus d. the new consumer surplus is double the original consumer surplus

c. the new consumer surplus is 25% of the original consumer surplus

There is no shortage of scarce resources in a market economy because... a. resources are abundant in market economies b. the government makes shortages illegal c. the prices adjust to eliminate shortages d. quantity supplied is always greater than the quantity demanded in market economies

c. the prices adjust to eliminate shortages

Figure 8-9 The vertical distance between points A and C represents a tax in the market. Refer to Figure 8-9. The per-unit burden of the tax on buyers is... a. $200 b. $500 c. $300 d. $20

d. $20

Figure 7-9 Refer to Figure 7-9. If the price of a good is $41, then producer surplus is... a. $19.50 b. $25.00 c. $22.50 d. $20.50

d. $20.50

On a certain supply curve, one point is (quantity supplied = 200, price = $4.00) and another point is (quantity supplied = 250, price = $4.50). Using the midpoint method, the price elasticity of supply is about... a. 1.00 b. 0.53 c. 0.22 d. 1.89

d. 1.89

Figure 7-21 Refer to Figure 7-21. Which area represents the total surplus in the market when the price is P1? a. C+D b. A+B+C+D c. A+B d. B+C

d. B+C

Figure 5-3 Refer to Figure 5-3. Which demand curve is perfectly elastic? a. A b. B c. C d. D

d. D

Which of the following situations would supply be the most elastic? a. a real estate developer in Boston is looking to build condos on the waterfront b. an auto parts manufacturer is operating at capacity c. a hotel has all of its rooms booked for each night of the next 3 months d. a furniture manufacturer is operating its factory 8 hours per day

d. a furniture manufacturer is operating its factory 8 hours per day

A price floor is binding when it is set... a. below the equilibrium price, causing a shortage b. below the equilibrium price, causing a surplus c. above the equilibrium price. causing a shortage d. above the equilibrium price, causing a surplus

d. above the equilibrium price, causing a surplus

Economists normally... a. do not believe that people's tastes determine demand, so they ignore the subject of tastes b. incorporate tastes into economic models only to the extent that tastes determine whether pairs of goods are substitutes or complements c. believe that they must be able to explain people's tastes in order to explain what happens when tastes change d. do not try to explain people's tastes, but they try to explain what happens when tastes change

d. do not try to explain people's tastes, but they try to explain what happens when tastes change

Which of the following statements helps to explain why government drug interdiction increases drug-related crime? a. In the short run, both equilibrium quantities and prices will fall in the markets for illegal drugs b. successful drug interdiction policies reduce the demand for illegal drugs c. the direct impact is on buyers, not sellers d. drug addicts will have an even greater need for quick cash to support their habits

d. drug addicts will have an even greater need for quick cash to support their habits

Elena loves orange juice. She reads in the newspaper that 20% of the Florida orange crop was destroyed by a late spring frost. Economists predict that the price of oranges will rise by 50% by the end of the year. As a result, Elena's demand for orange juice... a. shifts left today b. decreases as she looks for a substitute good c. will increase but not until the end of the year d. increases today

d. increase today

The total surplus in a market will increase when the government... a. imposes a binding price floor or a binding price ceiling on that market b. imposes a tax on that market c. both a and b are correct d. neither a nor b is correct

d. neither a nor b is correct

In a competitive market free of government regulation... a. price adjusts until quantity demanded is less than quantity supplied b. price adjusts until quantity demanded is greater than quantity supplied c. supply adjusts to meet demand at every price d. price adjusts until quantity demanded equals quantity supplied

d. price adjusts until quantity demanded equals quantity supplied