Test 2 - Chapters 4-6

Figure 5-14 Points from smallest to largest: (2,16), (5,40), (9,100), (14, 220), (20, 430) Refer to Figure 5-14. Over which range is the supply curve in this figure the least elastic? $16 to $40 $40 to $100 $100 to $220 $220 to $430

$220 to $430

Suppose that when the price of good X falls from $10 to $8, the quantity demanded of good Y rises from 20 units to 25 units. Using the midpoint method, the cross-price elasticity of demand is -1.0, and X and Y are complements. -1.0, and X and Y are substitutes. 1.0, and X and Y are complements. 1.0, and X and Y are substitutes.

-1.0, and X and Y are complements.

At price of $1.20, a local pencil manufacturer is willing to supply 150 boxes per day. At a price of $1.40, the manufacturer is willing to supply 170 boxes per day. Using the midpoint method, the price elasticity of supply is about 2.0. 1.23. 1.00. 0.81.

0.81.

Figure 5-1 Point A: (12,7) Point B: (20, 5) Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to 0.33. 0.67. 1.5 2.67.

1.5

Figure 4-3 Consumer 1 goes from (0,10) to (10,0) on line D Consumer 2 goes from (0,15) to (25,0) on line D Refer to Figure 4-3. If these are the only two consumers in the market, then the market quantity demanded at a price of $6 is 12 units. 14 units. 19 units. 21 units.

19 units.

At a price of $1.20, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.40, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about 0.15 0.375 2.5 2.60

2.60

Table 5-8 Income Quantity of Good X Quantity of Good Y Purchased Purchased $30,000 2 20 $40,000 6 10 Refer to Table 5-8. Using the midpoint method, what is the income elasticity of demand for good X? -3.5 -0.29 0.29 3.5

3.5

Figure 4-2 Phil goes from (0,10) to (10,0) on line D1 Miss Kay goes from (0,14) to (14,0) on line D2 Refer to Figure 4-2. Suppose Phil and Miss Kay are the only consumers in the market. If the price is $10, then the market quantity demanded is 0 units. 2 units. 4 units. 6 units.

4 units.

Table 5-12 Price Quantity Demanded $0 50 $2 40 $4 30 $6 20 $8 10 Refer to Table 5-12.Between which two quantities listed is demand unit elastic?

Between quantities 30 and 20 Unit elastic: Elasticity = 1 Price Elasticity of Demand = % Change in Qty / % Change in Price ( (20-30) / ( (20+30) / 2 ) ) / ( (6-4) / ( (6+4) / 2 ) ) = -1 *negative sign doesn't matter

If the demand for a good increases at the same time as the supply of the same good decreases, what will happen to the equilibrium price and quantity of the good?

Equilibrium price will increase Equilibrium quantity is uncertain

Figure 5-3 Refer to Figure 5-3. Which demand curve is unit elastic? A B D None of the above.

None of the above.

Figure 4-14 ​ E2 intersects S2 and D at (20,6) E1 intersects S1 and D at (25,5) Refer to Figure 4-14. Which of the following would explain a movement from E1 to E2? There is an improvement in the technology used to produce this good. The cost of an input to the production of this good increases. This good becomes very popular. The price of a substitute good decreases.

The cost of an input to the production of this good increases.

Table 4-16 The following table shows the supply and demand schedules in a Price ($) Quantity Demanded Quantity Supplied (units) (units) 0 50 0 2 40 15 4 30 30 6 20 45 8 10 60 10 0 75 Refer to Table 4-16. What is the equilibrium quantity in this market?

The equilibrium quantity is 30 units (at $4) Quantity Demanded = Quantity Supplied

Figure 6-32 Demand curve: linear from (0,120) to (60,0) Supply curve: linear from (0,0) to (60,120) Equilibrium at (30,60) Refer to Figure 6-32.If the government set a price floor at $70, would there be a shortage or surplus, and how large would be the shortage/surplus?

There would be a surplus of 10 units A price floor at $70 would be binding Binding price floors always cause a surplus 35 units are supplied and only 25 units are demanded 35 - 25 = 10 units

Figure 6-32 Demand curve: linear from (0,120) to (60,0) Supply curve: linear from (0,0) to (60,120) Equilibrium at (30,60) Refer to Figure 6-32. If the government set a price ceiling at $80, would there be a shortage or surplus, and how large would be the shortage/surplus?

There would be no effect (no shortage nor surplus) A price ceiling set at $80 would be nonbinding. Nonbinding price ceilings have no effect on equilibrium price/quantity

Table 4-7 Price Dairy Barn's Dolly's Dairy's Four Queen's Moo Roo's Gallons Gallons Gallons Gallons Supplied Supplied Supplied Supplied $0 0 0 0 0 $2 3 4 2 1 $4 6 8 4 2 $6 9 12 6 3 $8 12 16 8 4 $10 15 20 10 5 Refer to Table 4-7. If these are the only four sellers in the market for ice cream, then when the price increases from $4 to $6, the market quantity supplied decreases by 10 gallons. decreases by 20 gallons. increases by 10 gallons. increases by 20 gallons.

increases by 10 gallons.

Table 4-5The table below shows the quantities demanded of cases of Mt. Dew per month by four families at various prices. Price of Case The Adams The Jones The Smiths The Williams of Mt. Dew Family Family Family Family $7 9 15 12 14 $8 8 12 10 10 $9 7 9 8 6 $10 6 6 6 2 Refer to Table 4-5. Suppose the four families listed in the table are the only demanders of Mt. Dew in the market. If the price of a case of Mt. Dew decreases by $1, the market quantity demanded decreases by 10. market quantity demanded increases by 10. Adams family increases its quantity demanded by more than the Smith family. Jones family increases its quantity demanded by more than the Williams family.

market quantity demanded increases by 10.

Figure 6-16 Equilibrium at (5,5) Refer to Figure 6-16. In this market, a minimum wage of $2.75 is binding and creates a labor shortage. binding and creates unemployment. nonbinding and creates a labor shortage. nonbinding and creates neither a labor shortage nor unemployment.

nonbinding and creates neither a labor shortage nor unemployment.

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

prices adjust to eliminate shortages.

Food and clothing tend to have small income elasticities because consumers, regardless of their incomes, choose to buy relatively constant quantities of these goods. small income elasticities because consumers buy proportionately more of both goods at higher income levels than they buy at low income levels. large income elasticities because they are necessities. large income elasticities because they are relatively inexpensive.

small income elasticities because consumers, regardless of their incomes, choose to buy relatively constant quantities of these goods.

If the cross-price elasticity of two goods is positive, then the two goods are substitutes. complements. normal goods. inferior goods.

substitutes.

For a good that is a luxury, demand tends to be inelastic. tends to be elastic. has unit elasticity. cannot be represented by a demand curve in the usual way.

tends to be elastic.

An example of a price floor is the regulation of gasoline prices in the U.S. in the 1970s. rent control. the minimum wage. any restriction on price that leads to a shortage.

the minimum wage.

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then consumers of wheat would buy more wheat. wheat farmers would suffer a reduction in their total revenue. wheat farmers would experience an increase in their total revenue. the demand for wheat would decrease.

wheat farmers would experience an increase in their total revenue.

Figure 4-15 From left to right: A, B, C Refer to Figure 4-15. Which of the following would cause the supply curve to shift from Supply B to Supply A in the market for butter? a decrease in the price of butter an increase in the price of margarine an increase in the price of milk an improvement in technology that allows firms to use less labor in the production of butter

an increase in the price of milk

Figure 6-4 Equilibrium at (10,10) Refer to Figure 6-4. A government-imposed price of $6 in this market is an example of a binding price ceiling that creates a shortage. non-binding price ceiling that creates a shortage. binding price floor that creates a surplus. non-binding price floor that creates a surplus.

binding price ceiling that creates a shortage.

Figure 6-1 Panel (a): price ceiling above equilibrium Panel (b): price ceiling below equilibrium Refer to Figure 6-1. The price ceiling shown in panel (b) is not binding. creates a surplus. creates a shortage. Both a) and b) are correct.

creates a shortage.

Which of the following is not an expression for the sum of all the individual demand curves for a product? total demand market demand equilibrium demand aggregate demand

equilibrium demand

The market for ice cream is a monopolistic market. highly competitive market. highly organized market. Both b and c are correct.

highly competitive market.

Demand is inelastic if the price elasticity of demand is less than 1. equal to 1. greater than 1. equal to 0.

less than 1.