Econ Exam 2

what is true regarding economic efficiency:

everyone may not gain from a more efficient outcome. it is possible for everyone to gain from a more efficient outcome. equity is a separate issue from efficiency.

the statutory burden of a tax is the

government designated burden of a tax payment

what is positive analysis

it describes what is happening, explains why it is happening, or predicts what will happen

which of the following reflects positive analysis?

mario's staff identifies four options for reducing costs

mary loves avocados and must consume avocados every week, regardless of the price? which of the following must be true?

mary has an inelastic demand for avocados

if a consumer has more time to search for a low cost alternative for an item, the demand curve for that item will be:

relatively more elastic.

a subsidy for a seller of a product shifts the

supply curve to the right

the price of a dozen eggs falls from $2.50 to $1.50. in response to this price change, the quantity demanded for eggs increases by 10%. what is the absolute value of the price elasticity of demand for eggs?

.20

the price of milk at the local grocery store rises by 25%, and the quantity of milk demanded falls by 10%. the absolute value of the price elasticity of demand for milk is _________, and demand is __________.

0.4; inelastic

if income rises by 10% and the quantity demanded of an item rises by 20%, the income elasticity of demand for this item is:

2

uber cuts the price of a ride in new york city by 15%. thereafter, the quantity of rides demanded rises by 45%. what is the absolute value of the price elasticity of demand for uber rides?

3

a tax on sellers would not cause a decrease in quantity sold if:

demand is perfectly inelastic

income elasticity of demand measures how responsive the:

demand of a good is to changes in income

when price equals marginal cost for the last unit sold, a seller will:

earn producer surplus on all except the last unit sold

you are told that good M has an income elasticity of demand of 0.5. which of the following items might good M be?

a premium computer (normal good)

a binding price floor is:

always above the equilibrium price

when looking at a demand and supply graph, if a tax is implemented on a buyer, the distance between the old and new demand curves will be equivalent to the

amount of the tax

people gain consumer surplus when they purchase an item:

at a price below the value of the benefit they receive from the item

a quantity regulation is a :

minimum or maximum quantity that can be sold

the criterion of economic efficiency is that the ______ economic surplus that is generated, the _______ the outcome.

more;better

analysis based on value judgments is called ________ analysis

normative

when the absolute value of the price elasticity of demand is infinite, demand is:

perfectly elastic

price minus marginal cost equals the

producer surplus of a unit sold

if a certain item has many substitutes, its demand curve will be:

relatively flat

if a firm produces a product that has easily available variable inputs, its supply curve will be:

relatively flat

which principle helps buyers and sellers make decisions about whether to trade?

the cost benefit principle.

which of the following is NOT a way that the government can intervene in markets?

the government cannot stop the forces of demand and supply working in markets

you are given some data for four different products. the absolute value of the price elasticity of demand for toothpaste is 4, shampoo is 0.2, soap is 0.5, and laundry detergent is 2. which product has the most elastic demand?

toothpaste

two products have a cross-price elasticity of demand of 1.5. based on this value of cross-price elasticity, which of the following products are they most likely to be?

two competing brands of soft drinks