econ exam 2
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.
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.
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.
Suppose that supply and demand at a market are represented by curves S and D at the figure above (notice that the vertical axis grid has increments of $2) and then a tax of $6 dollars per unit is imposed on buyers. How much the sellers are getting per unit?
$10
Suppose that supply and demand at a market are represented by curves S and D at the figure above (notice that the vertical axis grid has increments of $2) and then a tax of $6 dollars per unit is imposed on buyers. What is the new equilibrium market price?
$10
The figure above shows the market for tires. The government has imposed a tax on tires, and the buyers pay ________ of the tax.
$10
In the figure above, at the market price of $15, the consumer surplus equals
$10,000.
Suppose that supply and demand at a market are represented by curves S and D at the figure above (notice that the vertical axis grid has increments of $2) and then a tax of $6 dollars per unit is imposed on buyers. How much the buyers are paying per unit (including the tax)?
$16
Suppose that supply and demand at a market are represented by curves S and D at the figure above (notice that the vertical axis grid has increments of $2) and then a tax of $6 dollars per unit is imposed on buyers. What is the tax burden on the sellers?
$2
The figure above shows the market for tires. The government has imposed a tax on tires, and the sellers tax burden is
$20
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.
The above figure shows the market for buckets of golf balls at the driving range. A new leisure time tax is placed on suppliers in this market, shifting the supply curve from S0 to S1. The amount of this tax is ________ per bucket of golf balls.
$3
In the figure above, what is the total revenue at point A? (20*150)
$3,000
In the figure above, suppose that $20 is the market equilibrium price. What is the amount of the consumer surplus?
$375
Suppose that supply and demand at a market are represented by curves S and D at the figure above (notice that the vertical axis grid has increments of $2) and then a tax of $6 dollars per unit is imposed on buyers. What is the tax burden on buyers?
$4
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
The figure above shows that for the 8,000th ticket, the marginal benefit is ________ and the consumer surplus is ________.
$60; $20
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. 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
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 above figure shows the market for gourmet ice cream. In effort to reduce obesity, government places a $2 tax per gallon on suppliers in this market, shifting the supply curve from S0 to S1. The quantity of ice cream consumed before the tax is ________ gallons and the quantity consumed after the tax is ________ gallons.
250,000; 200,000
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
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
The above figure shows the supply curves in four different markets. If each of the markets has an identical downward sloping demand curve and the same tax is levied on suppliers, which market would produce the smallest amount of deadweight loss?
A
To an economist, "value" is the same as
marginal benefit.
Which of the following statements is correct?
An increase in price decreases consumer surplus.
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.
When a product is taxed,
Both answers part of the initial consumer surplus goes to the government as revenue and part of the initial consumer surplus becomes a deadweight loss are correct.
A tax
Both answers places a wedge between the price paid by the buyers and the price received by the sellers and reduces consumer surplus and producer surplus 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.
The above figure shows the demand curves in four different markets. If each of the markets has an identical upward sloping supply curve and the same tax is levied on suppliers, which market would produce the smallest amount of deadweight loss?
C
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
A supply curve shows quantities supplied at various prices. It also shows the
marginal cost of production.
The above figure shows the demand curves in four different markets. If each of the markets has an identical upward sloping supply curve and the same tax is levied on suppliers, which market would produce the largest amount of deadweight loss?
D
The above figure shows the supply curves in four different markets. If each of the markets has an identical downward sloping demand curve and the same tax is levied on suppliers, which market would produce the largest amount of deadweight loss?
D
Suppose that supply and demand at a market are represented by curves S and D at the figure above (notice that the vertical axis grid has increments of $2) and then a tax of $6 dollars per unit is imposed on buyers. Which curve shifts as a result?
Demand curve is shifting down by $6.
A firm lowers the price it charges. The firm's total revenue decreases. What can we conclude about the price elasticity of demand?
Demand is inelastic.
Suppose the demand for specialty car license plates is perfectly inelastic and the supply curve for specialty license plates is upward sloping. A tax is imposed on specialty license plates. Which of the following is true?
Drivers pay all of the tax.
In the figure above, what happens to total revenue as we move from point A to point B?
It decreases.
Which of the following is necessary for allocative efficiency to be achieved?
Marginal benefit must equal marginal cost.
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.
The supply of oil is more elastic than the demand for oil. If oil is taxed $10 per barrel, how will the tax be divided between the buyer and seller?
The buyer will pay more of the tax than the seller pays.
After long hair for men became popular, barbers found that their incomes fell. In an attempt to boost their incomes, many barbers raised the price of a haircut and yet their total revenue fell even more. What can explain this result?
The demand for haircuts by barbers is elastic because of many substitutes.
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.
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.
Marginal benefit is the
additional benefit we receive from consuming one more unit of a good or service.
Sales taxes are usually collected from sellers, who view the tax as
an additional cost of selling the good.
If the market for bicycles is efficient, then
it is not possible to produce more bicycles without sacrificing another, more highly valued good.
Consumer surplus is the area
below the demand curve and above the market price.
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.
If the government eliminates a tax on a good with a perfectly elastic supply, who benefits most?
buyers
The demand for gasoline is inelastic and the supply of gasoline is elastic. Therefore,
buyers bear most of the incidence of a tax on gasoline.
For a given supply elasticity, the more inelastic the demand for a good, the larger the share of the tax paid by the
buyers.
For a given elasticity of demand, the less elastic the supply, the
larger the share of a tax paid by the sellers.
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.
The loss to society resulting from a tax includes the
deadweight loss.
Neither the demand for gasoline nor the supply of gasoline is perfectly elastic or inelastic. If the federal government eliminated the 18.4 cents per gallon gasoline tax, the price paid by buyers would
decrease by less than 18.4 cents.
Marginal benefit
decreases as more of a good is consumed.
A sales tax imposed on sellers of a good
decreases the supply and shifts the supply curve leftward.
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.
A $2.00 increase in the size of a tax on a good will only cause the price for buyers to increase by $2.00 if
demand is perfectly inelastic.
When the percentage change in the quantity demanded exceeds the percentage change in price, then demand is
elastic
If a good has many close substitutes, then its demand is most likely
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.
The price elasticity of demand for Red Delicious apples, a certain type of apple, is likely
elastic.
To determine who bears the greater share of a tax, we compare the
elasticity of supply to the elasticity of demand.
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
If a tax is placed on tires, then i.the equilibrium quantity of tires will decrease. ii.a deadweight loss will be created. iii.the producer surplus will decrease.
i, ii, and iii All are correct
In the figure above, when the price falls from $8 to $7, total revenue
increases from $120 to $210 so demand is elastic.
The graph shows the market for textbooks. If the government introduces a tax of $20 a textbook, then the price paid by buyers
increases to $80 a textbook.
The supply curve is upward sloping because of
increasing marginal cost.
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.
A Minnesota snowmobile dealer lowers its prices in February by 16 percent and the quantity demanded increases by 2 percent. Thus the demand for snowmobiles from this dealer is ________ and the dealer's total revenue will ________.
inelastic; decrease
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.
When a tax is imposed on a good, at the after-tax equilibrium the marginal benefit of the last unit produced ________ the marginal cost.
is greater than
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.
Marginal benefit is the benefit that a person receives from consuming
one more unit of a good or service.
If the demand curve for a good is horizontal, a tax is levied on this product is
paid entirely by sellers.
The buyers pay all of a tax when the demand is
perfectly inelastic.
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.
Total revenue increases if the price of the good
rises and demand is inelastic.
Neither the demand nor the supply of gasoline is perfectly elastic or inelastic. When the government increases the federal tax on gasoline, the effect on buyers is that the price they pay
rises.
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.
The above figure shows the market for gourmet ice cream. In effort to reduce obesity, government places a $2 tax per gallon on suppliers in this market, shifting the supply curve from S0 to S1. The tax incidence is
split equally between consumers and producers, each paying $1 per gallon.
One reason why the demand for gasoline is inelastic is because
substitutes for gas are hard to find.
The above figure shows the market for buckets of golf balls at the driving range. A new leisure time tax is placed on suppliers in this market, shifting the supply curve from S0 to S1. The tax incidence is
such that buyers pay $2 per bucket and sellers pay $1 per bucket.
If marginal benefit is equal to marginal cost, then the
sum of producer surplus and consumer surplus is as large as possible.
If buyers pay more of a tax than do the sellers,
supply is more elastic than demand.
The demand for insulin is quite inelastic. The demand for Pepsi is quite elastic. Suppose the elasticity of supply for insulin is the same as the elasticity of supply for Pepsi. If a $0.20 tax was imposed on each of these goods (holding everything else constant), which consumers would pay more of the tax?
the insulin consumers
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.
At harvest time the supply of wheat is perfectly inelastic. If the government taxes wheat at $1 a bushel, then
the seller pays the entire tax.
The demand for apple pies is perfectly elastic. If the government taxes apple pies at $1 a pie, then
the seller pays the entire tax.
When underproduction occurs,
there is a deadweight loss that is borne by the entire society.
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.
How a moderate leftward shift in the supply curve is going to affect total revenue generated at a market if in the initial market equilibrium demand is elastic?
total revenue goes down
Suppose that good weather positively affects supply of bananas in Costa Rica. 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 inelastic?
total revenue goes down
Suppose that bad weather negatively affects supply of oranges in Florida. 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 inelastic?
total revenue goes up
The price of the good multiplied by the quantity sold is its
total revenue.