shiskin microeconomics

The figure shows the labor market for fast food workers. A minimum wage of ________ per hour will create unemployment of ________ workers.

$15; 150,000

Suppose the local university charges $85 per credit hour. If tuition increases from $85 to $93 per credit hour, using the midpoint method, what is the percentage change in price?

8.99 percent

In a housing market with a rent ceiling below the equilibrium rent, apartment seekers spend more time searching for an apartment than they would in a housing market without a rent ceiling. Why does this difference exist?

In the market with the rent ceiling, the quantity of housing demanded is greater than quantity supplied at the ceiling price.

New York City, which has had a rent ceiling law for more than sixty years, has many abandoned apartment buildings throughout the city. Which of the following explains this?

Landlords have no incentive to finance maintenance and remodeling of apartment buildings.

Which of the following is necessary for allocative efficiency to be achieved?

Marginal benefit must equal marginal cost.

Which of the following is an example of the unfairness of rent ceilings?

Newcomers have a more difficult time finding apartments.

Of the following, which good has the most elastic demand?

Post Raisin Brand purchased at a Safeway grocery store

Which of the following are the rules for finding the point of allocative efficiency?

Produce on the PPF and then produce where marginal benefit equals marginal cost.

What must be true for a consumer to buy a good or service?

The price must be equal to or less than the marginal benefit.

Assuming that the rent ceiling is strictly enforced so that there is no black market, which of the following statements about a housing market with a rent ceiling set below the equilibrium rent is correct?

The rent ceiling creates a deadweight loss.

The figure above shows Kaley's marginal benefit from swimming with manatees and Scott's marginal cost of providing manatee swimming tours. For Kaley and Scott, allocative efficiency is achieved at what point?

c

The marginal cost of a good or service

can be derived from the production possibilities frontier.

Jake just bought a new hockey stick. When he was leaving the shop, he thought that he such a great deal and would have paid $50 more dollars for the stick. Jake received

consumer surplus.

Consumer surplus exists when

consumers value the good more highly than what they must pay to buy it.

A rent ceiling set below the equilibrium rent

creates a situation in which the quantity demanded of housing is greater than quantity supplied.

In a competitive labor market, a minimum wage law set above the equilibrium wage rate

creates a surplus of labor.

Rent ceilings are difficult to abolish because

current renters offer political support for ceilings.

Marginal benefit

decreases as more of a good is consumed.

Use the following diagram to figure out how a $1 increase in price along the ELASTIC section of the demand curve affects the total revenue. Fill in the blank spaces: as price increases from $7 to $8, total revenue __________ from ___ to ____ .

decreases from $104 to $80

If the price elasticity of demand for a good is 2, then a 10 percent increase in the price of that good ________ the quantity demanded by ________ percent.

decreases; 20

The point that each glass of lemonade consumed on a hot day brings lower and lower levels of satisfaction is known as the principle of

decreasing marginal benefit.

Moving downward along a linear (straight-line) downward-sloping demand curve, the

demand becomes less elastic.

Suppose the Chicago Bears football team raises ticket prices by 13 percent and as a result the quantity of tickets demanded decreases by 21 percent. This response means that the demand for Bears tickets is

elastic

If a good has many close substitutes, then its demand is most likely

elastic.

The price elasticity of demand for Red Delicious apples, a certain type of apple, is likely

elastic.

When the percentage change in the quantity demanded exceeds the percentage change in price, then demand is

elastic.

Which is larger: The price elasticity of demand for food or the price elasticity of demand for oranges?

elasticity of demand for oranges is larger than the price elasticity of demand for food because oranges have more substitutes than food

When the marginal cost of producing a bike is greater than the marginal benefit of the bike, for resource use to be allocatively efficient,

fewer bikes should be produced.

In Tanzania a larger proportion of income is spent on food compared to Canada.As a result, we'd expect the price elasticity of demand for food to be

greater in Tanzania.

The marginal benefit of the first hotdog consumed is ________ the marginal benefit of the fifth hotdog consumed.

greater than

If a product is narrowly defined, it is likely to

have many substitutes and therefore its demand is elastic.

The price elasticity of demand measures which of the following?

how responsive the quantity demanded is to changes in price

Which of the following results from a price ceiling? i.increased search activity ii.surplus iii.black market

i and iii

A rent ceiling creates a deadweight loss

if it is set below the equilibrium rent.

The tollway authority must decide the efficient allocation of resources to build toll roads. To determine the efficient allocation of resources, the tollway authority must compare

marginal cost to marginal benefit.

The longer the time that has elapsed since the price of a good changed, the

more elastic the demand for that good.

If the demand for insulin is inelastic, an increase in insulin prices leads to

more total revenue for insulin makers.

Suppose the current equilibrium wage rate for housekeepers is $8.60 per hour. An increase in the minimum wage to $7.50 per hour leads to

no change in the market for housekeepers.

People who benefit from a rent ceiling include

tenants who have a rent-controlled apartment.

In the figure above, if the minimum wage is $8 per hour, then

resources used in job-search activity increase compared to the situation before the minimum wage.

Total revenue increases if the price of the good

rises and demand is inelastic.

The above figure shows the market for 2 bedroom town homes in San Diego. If a rent ceiling is set at $1,000 per month then there is a

shortage equal to 150,000 town homes.

If the price is greater than the marginal cost of producing a good, the seller has

some producer surplus from the sale.

You are more sensitive to a change in price if you

spend a lot of your income on the good.

One reason why the demand for gasoline is inelastic is because

substitutes for gas are hard to find.

If marginal benefit is equal to marginal cost, then the

sum of producer surplus and consumer surplus is as large as possible.

The people who immediately benefit from a minimum wage are

the workers who retain their jobs after enactment of the minimum wage.

When underproduction occurs,

there is a deadweight loss that is borne by the entire society.

If a price ceiling is set above the equilibrium price, then

there will be neither a shortage nor a surplus of the good.

Suppose the nation is producing at a point on its PPF. If the marginal cost of producing one more computer is greater than the marginal benefit, the nation is producing

too many computers to be allocatively efficient.

The price of the good multiplied by the quantity sold is its

total revenue.

If the price elasticity of demand for opera tickets in Orlando is 1.00, then the demand for opera tickets in Orlando is

unit elastic.

If the local government set the highest legally permitted rent at $400 per month, what would the deadweight loss resulting from this restriction be?

$1,125

The figure above illustrates the current market for fast-food restaurant jobs in Springfield. If the city government imposes a minimum wage of $12 an hour, how much resources will be lost because of an increase in search activity?

$1,200 a week

The above figure shows the market for 2 bedroom town homes in San Diego. If a rent ceiling is set at $1,000 per month, what is the maximum rent someone is willing to pay in the black market?

$1,300 per month

In the figure above, at the market price of $15, the consumer surplus equals

$10,000.

Bill and Krista sell potted plants from a roadside stand. The figure above shows Bill and Krista's marginal cost curve and the market price. If Bill and Krista sell 60 plants per week at $8 per plant, their producer surplus from all their plants is

$240.

According to the diagram, what is the total surplus generated by the market if nothing prevents it from reaching the point of allocative efficiency?

$270

On the diagram, what would be the DWL (deadweight loss) if for some reason the level of output is set to 40 units.

$30

In the figure above, suppose that $20 is the market equilibrium price. What is the amount of the consumer surplus?

$375

The figure above shows Kaley's marginal benefit from swimming with manatees and Scott's marginal cost of providing manatee swimming tours. At 1 manatee swim per week, Kaley's marginal benefit is ________ and Scott's marginal cost is ________.

$40; $10

If the local government set the highest legally permitted rent at $400 per month, how much resources will be lost because of search activity caused by the shortage?

$6,750

This figure illustrates the current market for fast-food restaurant jobs in Springfield. If the city government imposes a minimum wage of $12 an hour, what is the deadweight loss resulting from this restriction on wages?

$600 a week

The figure above shows that for the 8,000th ticket, the marginal benefit is ________ and the consumer surplus is ________.

$60; $20

On the diagram above, what would be the DWL (deadweight loss) if for some reason the level of output is set at 70 units?

$7.5

The figure above shows that the total benefit equals ________ which is the total of ________.

$900,000; consumer surplus plus the amount paid

In the figure above, using the midpoint method, what is the price elasticity of demand between points A and B?

0.43

When the price of a cup of coffee falls from $3.00 to $2.50, the quantity demanded increases from 1,000 per month to 1,150 per month. This means that price elasticity of demand is:

0.77

When the price of a cup of coffee falls from $3.00 to $2.50, the quantity demanded increases from 1,000 per month to 1,150 per month. Using the midpoint method, the price elasticity of demand is

0.77.

When the price of Cosmopolitan magazine decreases from $5 to $3, the quantity demanded increases from 600,000 to 1,000,000 copies each month. Using the midpoint method, the price elasticity of demand equals

1.

A firm can sell 10 units if the price is $100 and can sell 8 units if the price is $125. Using the midpoint method, what is the price elasticity of demand?

1.00

The graph shows the market for apartments in Rivercity. As a result of the rent ceiling of $400, ________ are rented and people are willing to incur search costs of ________.

2,000; more than $100

In the figure above, using the midpoint method, the price elasticity of demand when the price falls from $8 to $7 is equal to

2.50.

The figure shows a demand curve. Using the midpoint formula, the elasticity of demand moving from point A to point B equals

30

Suppose the price of a box of cereal rises from $4 to $6. Using the midpoint method, what is the percentage change in price?

40 percent

The above figure shows a labor market with a minimum wage of $8 an hour. How many people are employed when the minimum wage is in place?

40,000

Which of the following statements is correct?

An increase in price decreases consumer surplus.

Suppose that good weather positively affects supply of bananas in CostaRica. How a moderate shift in the supply curve caused by this event is going to affect total revenue generated at this market if in the initial market equilibrium demand is elastic? Use the following diagram by showing a shift in the supply curve along the elastic section of the demand curve and a resulting change in total revenue on the righthand diagram:

As supply increases, the price drops and the total revenue increases

The above figure shows the market for 2 bedroom town homes in San Diego. If a rent ceiling is set at $1,000 per month, what is true?

Black market rents might be as high as $1,300 per month.

Ben's cost of making an additional rocking chair is $75.

Both answers If he sells it for a $100, his producer surplus is $25 and His marginal cost is equal to $75 are correct.

A point on the demand curve shows the

Both answers price and the corresponding quantity demanded and marginal benefit from that unit are correct.

If the total revenue moves in the opposite direction of the price, then what can we say about elasticity of demand?

Demand is elastic

If the total revenue moves in the same direction as the price, then what can we say about elasticity of demand?

Demand is inelastic

If the total revenue does not change much as the price of the good changes, then what can we say about elasticity of demand?

Demand is unit elastic

The figure above shows the t-shirt market. Market failure will occur in the t-shirt market if the quantity produced equals

both 20,000 because a deadweight loss occurs due to underproduction and 35,000 because a deadweight loss occurs due to overproduction. are correct.

Which of the following occurs when a market is efficient?

The sum of consumer surplus and producer surplus is maximized.

If demand is price inelastic and the price is lowered, which of the following occurs?

The total revenue of the firms selling the product decreases.

If the marginal benefit of a hot dog is greater than its marginal cost, then what should be done to the output of hotdogs to achieve efficiency?

To achieve allocative efficiency, the output of hot dogs should be increased.

A housing shortage results when

a rent ceiling below the equilibrium rent is imposed.

The demand and supply schedules for pizza are in the table above. A price ceiling of $2 per slice results in

a shortage of 20 slices of pizza.

If the local government sets the highest legally permitted rent at $400 per month, would there be a shortage or surplus? How large?

a shortage of 45 apartments

Suppose the equilibrium rent in Denver is $1,050. A rent ceiling of $755 per month leads to

a shortage of apartments in Denver.

A supply curve shows quantities supplied at various prices. It also shows the

marginal cost of production.

In the figure above, if the minimum wage rate is $8 per hour, then after taking account of resources lost in job search, the workers' surplus is the area ________ and the firms' surplus is the area ________.

a; f

Marginal benefit is the

additional benefit we receive from consuming one more unit of a good or service.

The above figure shows a housing market with a rent ceiling equal to $1,000. In this figure, after taking account of the resources lost in search, what area is equal to the consumer surplus?

area A

The above figure shows a housing market with a rent ceiling equal to $1,000. In this figure, what area is equal to the resources lost due to search?

area B

The above figure shows a housing market with a rent ceiling equal to $1,000. In this figure, what area is equal to the deadweight loss?

area C

The above figure shows a housing market with a rent ceiling equal to $1,000. In this figure, what area is equal to the producer surplus?

area D

Consumer surplus is the area

below the demand curve and above the market price.

In a market with a rent ceiling set below the equilibrium rent, the producer and consumer surplus

both decrease, but generally not to zero.

Rent ceilings

increase search activity.

In the labor market, as wages rise, households

increase the quantity of labor supplied.

Use the following diagram to figure out how a $1 increase in price along the inelastic section of the demand curve affects the total revenue. Fill in the blank spaces to explain your work: as price increases from $2 to $3, total revenue __________ from ___ to ____ .

increases from $76 to $104

A minimum wage law

increases the time spent searching by workers who cannot find a job.

The supply curve is upward sloping because of

increasing marginal cost.

If a good has only a few, poor substitutes, then its demand is

inelastic

If the supply of a good decreases and it causes total revenue to increase, this shows that the good has an

inelastic demand.

The demand for a necessity generally is

inelastic.

When the percentage change in the quantity demanded is less than the percentage change in price, then demand is

inelastic.

You own a small store. Your cashier thinks you should raise prices to increase your total revenue and your customer thinks you should lower prices to increase your total revenue. The cashier thinks the price elasticity of demand is ________ and the customer believes the price elasticity of demand is ________.

inelastic; elastic

The principle of decreasing marginal benefit explains why the marginal benefit curve

is downward sloping.

A price ceiling

is the maximum price that can legally be charged.

If the market for bicycles is efficient, then

it is not possible to produce more bicycles without sacrificing another, more highly valued good.

The demand curve is also the

marginal benefit curve.

The maximum amount of other goods and services that people are willing to give up in order to get one more unit of a good is defined as the good's

marginal benefit.

To an economist, "value" is the same as

marginal benefit.

Marginal benefit is the benefit that a person receives from consuming

one more unit of a good or service.

The price of furnace filters increased by 5 percent and the quantity demanded did not change. The price elasticity of demand for furnace filters is

perfectly inelastic.

Consumer surplus exists when a

person buys something with a marginal benefit more than what they paid.

Value and price can be compared by noting that

price is what we must pay and value is what we are willing to pay.

What is the formula for the price elasticity of demand? The percentage change in the

quantity demanded divided by the percentage change in price.

The figure above illustrates the current market for fast-food restaurant jobs in Springfield. If the city government imposes a minimum wage of $12 an hour, what would be the amount of labor demanded and the amount of labor supplied?

quantity supplied will be 500 worker hours a week and quantity demanded will be only 200 worker hours a week.

Mark loves ice cream. At any point in time, he will buy an additional ice cream cone if

the marginal benefit from it exceeds the price.

Marginal cost equals

the opportunity cost of producing one more unit of output.

The price elasticity of demand measures the extent to which the quantity demanded changes when

the price of the good changes.

A price ceiling in the market for gasoline that is below the equilibrium price will lead to

the quantity demanded of gasoline exceeding the quantity supplied.

Studies have shown that as people's income is growing, the proportion of income that they spend on food is getting smaller. People in developing countries have low incomes and therefore spend a large part of it on food. For example, in Tanzania 62 percent of income is spent on food. On the other hand, in United States only 12 percent of income is spent on food. Based on this information, in which country we would expect elasticity of demand for food to be higher: in United States or in Tanzania?

we would expect elasticity of demand for food to be higher in Tanzania, because people in Tanzania spend larger share of their income on food

Resource use is allocative efficient

when we produce goods and services that we value most highly.

Suppose the demand for peaches sold from one roadside stand in Georgia is perfectly elastic. As a result, a 7 percent increase in the price charged by the owner of this stand leads to

zero peaches sold by this stand.