Practice for Midterm

In a market with an upward sloping supply curve and a downward sloping demand curve, a price floor ________.

-creates deadweight loss -transfers some consumer surplus to the producer

Property taxes are:

-generally considered to be progressive. -imposed based on ownership of assets such as real estate and autos.

In the case of a positive relationship between two variables, all else remaining constant:

-graphically, the data line representing the relationship between the variables has a positive slope. -the values of the two variables will move in the same direction.

Society gains advantages through trade because of its ability to

-refine tasks associated with production. -specialize resources to the uses where opportunity cost is minimized.

The ability of a model to predict outcomes (accurately) is an indicator that

-the model is valuable. -the assumptions of the model are generally accurate.

Suppose, in the graph below, there is a price ceiling of $6. Then there is a shortage of

0 units.

Refer to the figure below. Total surplus is:

$210

Identify the normative statement(s) among the following statement(s).

-College tuition is not high enough. -College tuition is too high.

It is said that the rational consumer will act according to their self-interest, and that self-interest can include a concern for one's family and friends, but not often society as a whole. Which of the following illustrates this type of decision?

-The boat rental was worth the additional fish catch, regardless how little fish we left behind. -Renting of recreational vehicles for use in national parks is responsive to the price charged, but not to concerns of noise pollution.

Compare a market operating at a quantity lower than equilibrium with the same market operating at the equilibrium quantity. Which of the following statements are true?

-The producer surplus is greater at the equilibrium quantity. -The economic surplus is greater at the equilibrium quantity. -It is unclear if the consumer surplus is greater or less at the equilibrium quantity.

If the consumer surplus is $1000 and the producer surplus is $300, social surplus is

1300

Refer to the figure below. If the government set a price floor of $80, the excess supply will be:

16

Which of the following represents consumer surplus?

A

The supply curve will shift to the right if which of the following occurs?

An improvement in technology.

A filtration improvement has been proposed for the old water plant that serves the entire city. Water rates have been only 2 cents per gallon, but with the improvement, the rate would be 5 cents per gallon.

Are the additional benefits of cleaner water worth paying 3 more cents per gallon?

In the following figure, which area represents producer surplus?

Area C

There are two common ways to discourage tobacco use; taxes on tobacco and information campaigns on the hazards of tobacco use. Which way causes a decrease in demand for smoking?

Information campaign on hazards of tobacco.

If a decrease in the price of MP3 players decreases the demand for CD players, this means that

MP3 players and CD players are substitutes.

Which of the following example(s) describe a proportional tax?

Medicare payroll tax of 2.9% of income for everyone, regardless of how much they earn

What will we never do in a world of scarcity?

Meet all of society's wants.

Suppose there is a major technological advance in the production of a good that causes production costs to fall. If demand for the product is relatively inelastic, what will happen in the market?

Price will relatively decrease greater than the increase in quantity.

If demand deceases and supply remains constant, what happens to the market equilibrium?​

Quantity rises and price falls.

Which of the following three statements are normative?

Retired professionals should work less and get out more.

It is said that the rational consumer will act according to their self-interest, and that self-interest can include a concern for one's family and friends, but not often society as a whole. Which of the following illustrates this type of decision?

The boat rental was worth the additional fish catch, regardless how little fish we left behind.

Identify the microeconomic topic(s) among the following.

The price that a farmer asks for her watermelons.

Which of the following best defines consumer surplus?

The social surplus minus producer surplus

Which of the following statements describe a competitive market?

There are a large number of buyers and sellers.

If the government set a price ceiling of $40, there would be:

a shortage (or excess supply) of about 8 units

Refer to the figure below. If the government set a price ceiling of $6,

consumers would demand 14 units.

Suppose the price of apples increase by 20%, resulting in consumers to purchase 15% more pears. Given this information, it appears that

cross-price elasticity of pears is 0.75.

Given that total revenue = price x quantity, what will happen to total revenue if price increases when demand is elastic?

decrease

Teenage workers are assumed to have ________ labor supply, therefore a 5% increase in wage would result in ________ percentage change in quantity of labor supplied.

elastic, greater

The slope of a budget constraint line is influenced by

how much one item costs compared to the cost of the other item.

Economic capital is productive, so it does not include________?

money

Consumer surplus is best described as the extra benefit consumers receive when they ________.

pay less than they would have been willing to pay

When the demand for a good or service does NOT vary when there is a change in price, the good is ________?

perfectly inelastic

Elastic supply occurs if the change in quantity supplied is ________ to a change in price.

relatively responsive

Price ceilings typically result in ________.

shortages

Which of the following factors does NOT influence the price elasticity of demand of a product?

slope of the supply curve

A non-linear ("bending") production possibilities model assumes that

some land or labor is more productive in one use than another.

When there is an excess supply of goods

suppliers lower prices, which encourages consumers to demand more.

When supply is inelastic and demand is elastic, the tax incidence falls on ________.

the producer

If a data line on a graph slopes upward as it goes to the right, it is depicting that

the relationship between the variables on the axes is direct.

A severe freeze has damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of

the supply curve.

In the case of an inverse relationship between two variables, all else remaining constant

the value of the two variables will move in opposite directions from each other.

In the case of an negative relationship between two variables, all else remaining constant

the value of the two variables will move in opposite directions from each other.

A competitive market is one in which

there is a large number of buyers and sellers.

Given that spending for a certain household will always include a base amount of $1000/month, and that additional spending is equal to half of any income earned, we can predict household spending with a model y=b+mx, where

y represents spending.

The house that Jeanne inherited from her mother can rent for $2000/month, but Jeanne decides to allow her brother to stay there for only half of that. This decision carried with it a

zero monetary cost but a $1000 per month opportunity cost.

Complete the following sentence. Given that total revenue = price x quantity, a reduction in price will lead to an increase in total revenue when demand is

elastic.