Samual Review Econ 205

What causes movement up the supply curve

An increase in the price of laptops

How a sales tax is divided between buyers and sellers is determined by A) the government's choice of whom to tax. B) who the law says must pay the tax. C) the elasticities of supply and demand. D) the revenue needs of government.

C) the elasticities of supply and demand.

Joe is willing to pay $4 for his first slice of pizza and $3 for his second slice of pizza. If the price is $2, on his two slices of pizza Joe receives a total consumer surplus of A) $4 .B) $3. C) $2. D) $1.

.B) $3. CS = (4-2) + (3-2)

If the quantity demanded of hamburgers increases by 20 percent when the price decreases by 5 percent, then the price elasticity of demandin absolute valueis A) 0.25 .B) 4.0. C) 20.0. D) 5.0.

.B) 4.0.

5 factors that shift a demand curve

1. Income 2. Number of Buyers 3. Price of Complements 4. Price of Substitutes 5. Tastes and Preferences

List the Factors that Shift a supply curve

1. Price of Inputs 2. Productivity/Technology 3. Nature 4. # of sellers

According to one study, the price elasticity of demand for cigarettes is -0.25. To decrease the consumption of cigarettes by 8 percent, a tax on cigarettes must raise the price of cigarettes by A) 32 percent. B) 25 percent. C) 2 percent. D) 3.1 percent.

A) 32 percent.

Which of the following would cause the equilibrium price of white bread to decrease and the equilibrium quantity of white bread to increase? A) a decrease in the price of flour B) an increase in the price of flour C) an increase in the price of rye bread, a substitute for white bread D) an increase in the price of butter, a complement for white bread

A) a decrease in the price of flour

Which of the following leads to a movement along the demand curve for spinach but does not shift the demand curve for spinach?A) a rise in the price of spinach B) a newly discovered health benefit from eating spinach C) an increase in the price of broccoli, a substitute for spinach D) an increase in income for all spinach lovers

A) a rise in the price of spinach

Which of the following decreases the demand for an inferior good? A) an increase in income B) a decrease in the price of a complement C) a decrease in income D) an increase in the price of a substitute

A) an increase in income

Which of the following shifts the demand curve for hot dogs leftward? A) an increase in the price of a hot dog bun B) a decrease in the price of a hot dog bun C) an increase in the price of a hot dog D) an increase in the price of a hamburger

A) an increase in the price of a hot dog bun

If the cross-price elasticity of demand between Guinness Beer and Bass Beer is -0.31, then Guinness and Bass are _____________. A) complements. B) price inelastic goods. C) substitutes. D) necessities. E) Normal Goods.

A) complements.

The amount of a tax paid by the sellers will be larger the more ________ the demand and the more ________ the supply. A) elastic; inelastic B) inelastic; elastic C) inelastic; inelastic D) elastic; elastic

A) elastic; inelastic

Which goods have more elastic demands? A) goods with many substitutes B) goods which are necessities C) goods with few substitutes D) goods whose purchase represents a small percentage of income

A) goods with many substitutes

The "law of demand" states that, other things remaining the same, the quantity demanded of any good is A) inversely related to its price. B) directly related to its price. C) positively related to its price. D) directly related to the supply of the good

A) inversely related to its price.

As long asthe supply curve for a good is upward sloping and the demand curve is downward sloping, a sales tax imposed on consumers shifts the demand curve A) leftward and definitely raises the equilibrium price paid by consumers. B) rightward and definitely raises the equilibrium price paid by consumers. C) rightward and possibly increases the equilibrium quantity .D) rightward and definitely decreases the equilibrium quantity.

A) leftward and definitely raises the equilibrium price paid by consumers.

Netflix is the largest online DVD rental service offering flat rate online streaming to customers in the United States. Currently, there are approximately 8 million subscribers. Suppose Netflix increases their average flat rate by 10 percent and observe their total revenues increase. Based on this information, the A) price elasticity of demand for Netflix subscription is inelastic. B) price elasticity of demand for Netflix subscription is elastic. C) price elasticity of demand for Netflix subscription is unit elastic. D) income elasticity of demand for Netflix subscription is elastic.

A) price elasticity of demand for Netflix subscription is inelastic.

The income elasticity of demand is a measure of the responsiveness of the A) quantity of a good demanded to changes in income. B) consumer's income to a change in the price of the goods he or she consumes. C) quantity of a good demanded to changes in its price. D) quantity of a good demanded to changes in another good's price.

A) quantity of a good demanded to changes in income.

If the quantity of textbooks supplied is 10,000 per year and the quantity of textbooks demanded is 12,000 per year, there is a ________ in the market and the price will ________. A) shortage; rise B) shortage; fall C) surplus; rise D) surplus; fall

A) shortage; rise

In March, the quantity of orange juice sold in the town of Jackson was 3000 cartons and the price $3. In May, the quantity of orange juice sold in the town of Jackson was 3500 cartons and the price was $3.20. This change in the price and quantity sold could have been the result of A) the release of a medical study suggesting that consuming orange juice helps prevent cancer. B) a reduction in the number of orange juice coupons provided by local markets. C) the after effects of a cold winter in Florida that killed half of the orange crop. D) the after effects of a warm winter in Florida that increased the orange crop yield by 50 percent.

A) the release of a medical study suggesting that consuming orange juice helps prevent cancer.

Analyzing the path between two equilibrium states is called ____________. A)Dynamic Analysis B)Comparative Statics C)Equilibrium Analysis D)Equilibrium Statics

A)Dynamic Analysis

Consider the market for Coffee Frappuccino's. An economist claims that the results of a $.05 per unit excise tax will be identical whether the tax is placed on sellers or consumers. Is this true or false? A)True B)False

A)True

Goods and services that can be produced by using commonly available resources that could be allocated to a wide variety of alternative tasks have a supply that is A)elastic. B) inelastic. C) unit elastic. D) perfectly inelastic.

A)elastic.

Microeconomics is the study of ________. A)the choices that individuals and businesses make B) all aspects of scarcity C) the global economy D) the national economy

A)the choices that individuals and businesses make

Assume the following relationship is true. Elastic demand > elastic supply. And a 100$ per unit excise tax is placed on sellers. A) Consumers pay the majority of the tax. B) Sellers pay the majority of the tax. C) The tax is split evenly between sellers and buyers. D) More information is needed to determine the tax split.

B) Sellers pay the majority of the tax.

Consider the market for heart transplants. The demand for a heart transplant is perfectly inelastic and the supply curve is upward sloping. If a $1,000 tax per transplant tax is imposed on buyers (the recipients), how will the tax be divided between the buyer and seller? A) The sellers will pay the entire tax. B) The buyers will pay the entire tax. C) The tax will be evenly divided between the sellers and buyers. D) More information is needed to determine how the tax is split.

B) The buyers will pay the entire tax.

Coffee and sugar are complements. If the supply curve of coffee shifts leftward because of poor weather, then there will be A) an increase in the price of sugar. B) a decrease in the price of sugar. C) a leftward shift of the demand curve for coffee. D) a leftward shift of the supply curve for sugar.

B) a decrease in the price of sugar.

The price elasticity of demand for gasoline is 0.40. If the price of gasoline rises by 20 percent, there will be A) a decrease of more than 20 percent in the quantity of gasoline demanded. B) an increase in the total revenue received from the sale of gasoline. C) a loss of total revenue for gasoline producers, because at a higher price the quantity of gasoline demanded decreases. D) no change in the quantity of gasoline sold because people need gasoline.

B) an increase in the total revenue received from the sale of gasoline.

If the price of a pizza increases and the demand curve for pizza does not shift, then the consumer surplus from pizza will ________. A) increase B) decrease C) equal the producer surplus if the market produces the efficient quantity of pizza D) remain the same

B) decrease

The price elasticity of demand (in absolute value) for furniture is estimated at 1.3. This value means a one percent increase in the A) price of furniture will increase the quantity of furniture demanded by 1.3 percent. B) price of furniture will decrease the quantity of furniture demanded by 1.3 percent. C) quantity of furniture demanded will decrease the price of furniture by 1.3 percent. D)quantity of furniture demanded will increase the price of furniture by 1.3 percent.

B) price of furniture will decrease the quantity of furniture demanded by 1.3 percent.

Long-distance travel by bus is an inferior good. As people's incomes increase and other things remain the same, you predict that the A) price of long-distance travel by bus will fall and the demand for long-distance travel by bus will increase. B) price of long-distance travel by bus will fall. C) demand for long-distance travel by bus will decrease and the price will rise. D) demand for long-distance travel by bus will increase as the price of long-distance travel by bus falls.

B) price of long-distance travel by bus will fall.

For consumers, goods A and B are complementary goods. The cost of a resource (i.e. an input price) used in the production of A decreases. As a result, A) the equilibrium price of B will fall and the equilibrium price of A will rise. B) the equilibrium price of B will rise and the equilibrium price of A will fall. C) the equilibrium prices of both A and B will rise. D) the equilibrium prices of both A and B will fall.

B) the equilibrium price of B will rise and the equilibrium price of A will fall.

When a market is in equilibrium, A) everyone has all they want of the commodity in question. B) there is no shortage and no surplus at the equilibrium price. C) the number of buyers is exactly equal to the number of sellers. D) the supply curve has the same slope as the demand curve.

B) there is no shortage and no surplus at the equilibrium price.

During the past twenty years, the prices of prescription drugs, relative to the prices of other goods, have risen, yet Americans buy more prescription drugs than ever. This might be because A) with higher incomes and more older Americans, we have moved rightward along our demand curve for drugs. B) with higher incomes and more older Americans, the demand curve for prescription drugs has shifted rightward. C) more new firms entered the pharmaceutical industry each year, which caused a rightward shift in the supply curve of prescription drugs. D) Both answers A and C are correct.

B) with higher incomes and more older Americans, the demand curve for prescription drugs has shifted rightward.

)One reason the luxury tax on yachts imposed by the U.S. Congress in 1991 failed to produce much tax revenue was that the demand for yachts was quite inelastic. A)True B)False

B)False

Suppose product X is an input in the production of product Y. Product Y in turn is a substitute for product Z. An increase in the price of X can be expected to: A.decrease the demand for Z. B.increase the demand for Z. C.have no effect on the demand for Z. D.decrease the supply of Z.

B.increase the demand for Z.

The demand and the supply for a good are each neither perfectly elastic nor perfectly inelastic. If a sales tax on sellers of the good is imposed, the tax is paid by A) only buyers. B) only sellers. C) both buyers and sellers. D) neither buyers nor sellers.

C) both buyers and sellers.

If the cross elasticity of demand for good x with respect to the price of good y is negative, then goods x and y are A) normal goods. B) inferior goods .C) complements. D) substitutes.

C) complements.

Which of the following influences does NOT shift the supply curve?A) a rise in the wages paid workers who produce the good B) the development of new technology C) people deciding that they want to buy more of the product D) a decrease in the number of suppliers

C) people deciding that they want to buy more of the product

Suppose that you are looking at the market for Starbucks Frappuccino's. Graphically, producer surplus is the area under the (hint: draw a supply curve and label a price.) A) demand curve and above the supply curve, up to the relevant quantity. B) price and above the demand curve, up to the relevant quantity. C) price and above the supply curve, up to the relevant quantity. D) price and above the quantity axis, up to the relevant quantity. E) demand curve and above the price, up to the relevant quantity.

C) price and above the supply curve, up to the relevant quantity.

A price floor A) always results in a surplus. B) always results in a shortage. C) results in a surplus if the floor price is higher than the equilibrium price. D) results in a shortage if the floor price is higher than the equilibrium price.

C) results in a surplus if the floor price is higher than the equilibrium price.

Opportunity cost is best defined as A) how much money is paid for something. B) how much money is paid for something, taking inflation into account. C) the highest-valued alternative that is given up to get something. D) all the alternatives that are given up to get something.

C) the highest-valued alternative that is given up to get something

The price elasticity of demand for new cars is 1.2. If automobile manufacturers lower price, then __________. A) total revenue will fall. B) total revenue will remain unchanged. C) total revenue will increase. D) total revenue will fall initially but eventually rise.

C) total revenue will increase.

A complement is a good A) of lower quality than another good. B) used instead of another good. C) used in conjunction with another good. D) of higher quality than another good.

C) used in conjunction with another good.

The price elasticity of demand (in absolute value) can range between A) zero and one. B) negative infinity and infinity. C) zero and infinityD) negative one and one.

C) zero and infinity

Suppose that the cross elasticity of demand for Dell computers with respect to Hewlett Packard computers is 2.1. If Hewlett-Packard lowers its price by 10 percent, other things being equal, what will be the percentage change in the quantity of Dell computers demanded? A) 21 percent B) -10 percent C) 10 percent D) -21 percent

D) -21 percent

The figure and equation above represent the demand for turkey sandwiches. The price elasticity of demand at point c (in absolute value) is _________ and therefore the good is _____________. A) 1, inelastic B) 1, elastic C) .04, inelastic D) 1, unit elastic

D) 1, unit elastic

Economists at Amazon determine that the price elasticity of demand forAmazon prime is 2.0. If Amazon raises the price of its Prime membership by 6.0 percent, the quantity demanded will decrease by ________ percent. A) 2.0 B) 3.0 C) 6.0 D) 12.0

D) 12.0

Which of the following statements is correct? A) A change in the quantity demanded means a shift in the demand curve. B) A change in demand means a movement along the demand curve. C) A change in demand and change in quantity demanded means the same thing. D) A change in demand means a shift in the demand curve while change in the quantity demanded means a movement along the demand curve.

D) A change in demand means a shift in the demand curve while change in the quantity demanded means a movement along the demand curve.

Each week Bill buys exactly 7 bottles of cola regardless of its price. Bill's own price elasticity of demand for cola in absolute value is ______________. A)Greater than 1 B)Less than 1 C)1 D)Zero E)Infinity

D) Zero

The elasticity of demand for Gateway computers is probably A) inelastic and smaller than the elasticity of demand for computers overall. B) elastic and smaller than the elasticity of demand for computers overall. C) inelastic but larger than the elasticity of demand for computers overall. D) elastic and larger than the elasticity of demand for computers overall.

D) elastic and larger than the elasticity of demand for computers overall.

The price elasticity of demand measures A) how often the price of a good changes. B) the slope of a budget curve. C) how sensitive the quantity demanded is to changes in demand. D) the responsiveness of the quantity demanded to changes in price.

D) the responsiveness of the quantity demanded to changes in price.

Read the articleentitled "Alcohol Policy and Sexually Transmitted Diseases". You can find the article on Moodle or Canvas. The article was a direct application of the following elasticity concept: A)Price Elasticity of Demand B)Price Elasticity of Supply C)Income Elasticity D)Cross Price Elasticity

D)Cross Price Elasticity

DescribeProposition E?

Proposition E puts a two cent per ounce tax on sugary beverages sold throughout the city of San Francisco.