Unit 2 : Quiz #2 (Summative)

Which of the following is true in the market for a certain product if producers consistently are willing to sell more at the going price than consumers are willing to buy?

There is a price floor on the product.

Which of the following will occur if the government imposes a price ceiling below the equilibrium price of a good?

There will be a shortage in the market.

If a price ceiling is set at P1, which of the following areas represent the resulting consumer surplus, producer surplus, and deadweight loss?

Consumer Surplus: f + g + i Producer Surplus: k Loss: h + j

After the government imposed a $0.20 per gallon tax on gasoline, the price of a gallon of gasoline increased from $1.00 to $1.15. Which of the following statements is true?

Consumers bear most, but not all, of the tax burden.

If a 5 percent wage increase in a particular labor market results in a 10 percent decrease in employment, the demand for labor is

relatively elastic

Consumer surplus is defined as

the difference between the value that consumers place on a good and the price they pay

Assume that the demand for a certain good is perfectly inelastic and the supply curve of the good is upward sloping. Which of the following occurs in the market for the good if the price of an input used to produce the good increases?

A decrease in the supply and an increase in the equilibrium price

Which of the following best illustrates the concept of consumer surplus?

A thirsty athlete pays $0.85 for a cold drink when she would have gladly paid $1.50 for the drink.

The graph above shows the supply and demand curves for gasoline. Which of the following will occur if the government establishes a price ceiling of $1.20 per gallon?

Neither a surplus nor a shortage

If a one-of-a-kind Etruscan vase is offered for sale at an auction, which, if any, of the following correctly shows the supply curve for the vase?

Supply Price | Quantity

The graph above illustrates the labor market for teenage workers. The current minimum wage for all workers is W1. If Congress introduces a sub-minimum wage, W2 that applies only to teenagers, what is the most likely effect on teenage employment?

Teenage employment will increase because firms will want to hire more teenagers at W2 than at W1.

Which of the following is true of a price floor?

The intention of the government in creating the price floor is to assist the producers of the good.

If the minimum wage for teenagers increased to a rate higher than their market equilibrium wage, what would be the effect on their wage and employment?

Wage: Increase Employment: Decrease

If a store raises its prices by 20 percent and its total revenue increases by 10 percent, the demand it faces in this price range must be

inelastic

To alleviate a financial crisis, a university increases student fees. This action will increase university revenues if the price elasticity of demand for university education is

inelastic