ECON FINAL - test 2

When the local used bookstore prices economics books at $15 each, it generally sells 70 books per month. If it lowers the price to $7, sales increase to 90 books per month. Given this information, we know that the price elasticity of demand for economics books is about A) -0.34 when calculated using the midpoint formula. B) -2.91 when calculated using the midpoint formula.

A) -0.34mwhen calculated using the midpoint formula

The only four consumers in a market have the following willingness to pay for a good: Refer to Table provided. If the market price for the good is $20, who will purchase the good? A) Quilana, Wilbur, and Ming-la only B) Ming-la only C) Carlos and Quilana only D) Quilana and Wilbur only

A) Quilana, Wilbur, and Ming-la only

Consumer surplus is the A) amount a consumer is willing to pay minus the amount the consumer actually pays B) value of a good to a consumer C) amount a consumer pays minus the amount the consumer is willing to pay D) amount of a good consumers get without paying anything

A) amount a consumer is willing to pay minus the amount the consumer actually pays

Private markets fail to account for the negative externalities associated with air pollution because A) decisionmakers in the market fail to include the costs of their behavior to third parties. B) externalities don't occur in private markets. C) the government cannot easily estimate the optimal quantity of pollution. D) sellers include costs associated with externalities in the price of their product.

A) decision makers in the market fail to include the costs of their behavior to third parties

Last year, Joan bought 50 pounds of hamburger when her household's income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is: A) negative, so Joan considers hamburger to be an inferior good. B) positive, so Joan considers hamburger to be an inferior good. C) positive, so Joan considers hamburger to be a normal good and a necessity. D) negative, so Joan considers hamburger to be a normal good but not a necessity.

A) negative, so Joan considered hamburger to be an inferior good

Refer to Figure provided. Buyers pay how much of the tax per unit? A) $3.50 B) $1.00 C) $1.50 D) $2.50

B) $1.00

Refer to Figure provided. Sellers pay how much of the tax per unit? A) $2.50. B) $1.50. C) $1.00. D) $3.50.

B) $1.50

Refer to Figure provided. The equilibrium price in the market before the tax is imposed is A) $7. B) $5. C) $3.50. D) $6.

B) $5

The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor at $2 above the equilibrium price in this market. Refer to Table provided. How many units of the good A) 10 B) 5 C) 15 D) 9

B) 5

An externality arises when a person engages in an activity that influences the well-being of A) sellers in the market for that activity. B) bystanders in the market for that activity. C) buyers in the market for that activity.

B) bystanders in the market for that activity

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center in order to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that A) both the mayor and the city manager think that demand is elastic. B) the mayor thinks demand is inelastic, and the city manager thinks demand is elastic. C) the mayor thinks demand is elastic, and the city manager thinks demand is inelastic. D) both the mayor and the city manager think that demand is inelastic.

B) the mayor thinks demand is inelastic, and the city manager thinks demand is elastic

When the government enacts policies to redistribute income A) the objective is to enhance efficiency and a side effect is that the allocation of resources becomes less equal. B) the objective is to enhance equality and a side effect is that the allocation of resources becomes less efficient. C) the objective is to enhance efficiency and a side effect is that the allocation of resources becomes more equal. D) the objective is to enhance equality and a side effect is that the allocation of resources becomes more efficient.

B) the objective is to enhance equality and a side effect is that the allocation of resources becomes less efficient

Kelly is willing to pay $68 for a pair of shoes for a wedding. She finds a pair at her favorite outlet shoe store for $58. Kelly's consumer surplus is A) $68. B) $58. C) $10. D) $28.

C) $10

What will the price charged in the market be when a quota is placed at 300 units? Use the chart below to assist you in answering this question. A) $35 B) $20 C) $25 D) $30 E) $15

C) $25

The graph depicts the market for plastic. Refer to Figure provided. Suppose that the production of plastic creates a social cost which is depicted in the graph above. What is the socially optimal quantity of plastic? A) 450 units B) 650 units C) 500 units D) 200 units

C) 500 units

Refer to Figure provided. Which demand curve is perfectly elastic? A) A B) B C) D D) C

C) D

A difference in wages that reflects differences in the noonday features of two jobs is called A) a minimum wage B) an efficiency wage C) a compensating differential D) a wage adjustment

C) a compensating differential

The loss in total surplus resulting from a tax is called A) inefficiency B) economic loss C) deadweight loss D) a deficit

C) deadweight loss

Which one of the following Ten Principles of Economics best illustrates the "Market Failure and Government Intervention" section of the Test 2 course content? A) Prices rise when the government prints too much money. B) Rational people think at the margin. C) Governments can sometimes improve market outcomes. D) A country's standard of living depends on its ability to produce goods.

C) governments can sometimes improve market outcomes

Refer to Figures provided. A binding price floor is shown in A) neither panel (a) nor panel (b). B) both panel (a) and panel (b). C) panel (b) only. D) panel (a) only.

C) panel (b) only

Refer to Figure provided. As the figure is drawn, who sends the tax payment to the government? A) The buyers send the tax payment. B) The question of who sends the tax payment cannot be determined from the graph. C) The sellers send the tax payment. D) A portion of the tax payment is sent by the buyers, and the remaining portion is sent by the sellers.

C) the sellers send the tax payment

Which of the following is an example of a positive externality? A) Local high school teachers have pizza delivered every Friday for their lunch. B) A college student buys a new car when she graduates. C) The mayor of a small town plants flowers in the city park. D) An avid fisherman buys new fishing gear for his next fishing trip.

C) they mayor of a small town plants flowers in the city park

Refer to Table provided. The equilibrium market price for 10 piano lessons is $400. What is the total producer surplus in the market? A) $700 B) $300 C) $0 D) $400

D) $400

Last year, Carolyn bought 6 pairs of earrings when her income was $40,000. This year, her income is $52,000, and she purchased 7 pairs of earrings. Holding other factors constant, it follows that Carolyn's income elasticity of demand is about A) 0.59, and Carolyn regards earrings as an inferior good. B) 1.7, and Carolyn regards earrings as a normal good. C) 1.7, and Carolyn regards earrings as an inferior good. D) 0.59, and Carolyn regards earrings as a normal good.

D) 0.59, and Carolyn regard earring as a normal good

Who among the following is a free rider? A) Donald rides to work with Betsey, but he pays Betsey for gasoline and other travel-related expenses. B) Fred drives 20,000 miles a year on public streets, but he pays no more in property taxes than Barney, who only drives 1,000 miles. C) Mickey buys groceries from the store where he works. D) Wilma watches many public television programs, but she has never sent in a contribution to the station.

D) Wilma watches many public television programs, but she has never sent in a contribution to the station

For which of the following goods is the income elasticity of demand likely the highest? A) food B) housing C) water D) diamonds

D) diamonds

A cross-price elasticity of supply of 1.4 for goods X and Y means A) goods X and Y are substitutes in consumption B) goods X and Y are both normal, luxury goods C) goods X and Y are complements in consumption D) goods X and Y are complements in production E) goods X and Y are both inferior goods F) goods X and Y are substitutes in production

D) goods X and Y are complements in production

Goods with many close substitutes tend to have A) less elastic demands B) income elasticities of demand that are negative C) price elasticities of demand that are unit elastic D) more elastic demand

D) more elastic demands

In the case of perfectly inelastic demand, A) the percentage change in quantity demanded equals the percentage change in price B) the change in quantity demanded equals the change in price C) infinitely-large changed in quantity demanded result from very small changes in the price D) quantity demanded stays the same whenever price changes

D) quantity demanded stays the same wherever the price changes

The US government uses the Federal Trade Commission to help correct for which type of market failure? A) quotas B) price flors C) public goods D) price ceilings E) negative externalities F) tariffs G) positive externalities H) lack of information I) lack of competition

I) lack of competition

Discrimination occurs when the marketplace offers different opportunities to similar individuals who differ only by A) years of experience B) years of education C) age D) all three of these are forms of discrimination

to be determined

Goods that are rivaling consumption and excludable would be considered A) public goods B) club goods C) privante goods D) common resources

to be determined

If the cross-price elasticity of demand for two goods is -4.5, then A) the two goods are complements in consumption. B) one of the goods is a luxury while the other good is a necessity. C) the two goods are complements in production D) one of the goods is normal while the other good is inferior. E) the two goods are substitutes in consumption. F) the two goods are substitutes in production

to be determined

Refer to Figure provided. For a price ceiling to be binding in this market, it would have to be set at A) any price above $6. B) a price between $3 and $6. C) any price below $6. D) a price between $6 and $9.

to be determined

Refer to Figure provided. The amount of the tax per unit is A) $3.50. B) $1.50. C) $2.50. D) $1.00.

to be determined

Refer to Figure provided. The price paid by buyers after the tax is imposed is A) $6.00 B) $2.50 C)$5.00 D) $3.50

to be determined

The US government decides to impose a $1,000 tax in the market for imported designer fur coats. Before the tax, the equilibrium price is $2,000 and the equilibrium quantity is 70,000 coats. After the tax, the equilibrium price is $2,200 and the equilibrium quantity is 65,000 coats. Based on this information, which of the following statements is true? A) The demand curve is more inelastic than the supply curve. B) The supply curve is more inelastic than the demand curve. C) The demand curve is perfectly elastic. D) The supply curve is perfectly elastic. E) The demand curve is perfectly inelastic. F) The supply curve is perfectly inelastic.

to be determined

Under which of the following scenarios would a park be considered a public good? A) Visitors can enter the park free of charge, but frequently all of the picnic tables are in use. B) Visitors to the park must pay an admittance fee, but there are always plenty of empty picnic tables. C) Visitors can enter the park free of charge and there are always plenty of empty picnic tables. D) Visitors to the park must pay an admittance fee and frequently all of the picnic tables are in use.

to be determined

if the price elasticity of demand for a good is -4.0, then a 1- percent increase in price results in a A) 4 percent decrease in the quantity demanded B) 2.5 percent decrease in the quantity demanded C) 0.4 percent decrease in the quantity demanded D) 40 percent decrease in the quantity demanded

to be determined