econ test unit 2
Which of the following would result in the greatest rightward shift of the demand curve for good J?
A 10% increase in the price of good Y.
Which of the following will shift the supply curve for apples to the right?
A decrease in the rental price for apple harvesting equipment
Carmen consumes both entertainment and medical care. For Carmen, entertainment is a normal good, and the income elasticity of her demand for medical care is zero. If Carmen's income increases, which of the following will be the immediate impact on her consumption?
Entertainment: increases, Medical care: no change
Which of the following is true about good J?
Good J is an inferior good.
Which of the following would cause the supply of good XX to become more elastic?
The ability to easily reallocate inputs to production of good X
If the price elasticity of supply for pickles is 2 and the price of pickles increases by 10 percent, then the quantity supplied of pickles will increase by
20%
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.
Which of the following explains why the supply curve is upward sloping?
At a higher price, producers are willing to sell more to increase their profits.
The table above shows the supply and demand schedules in the orange market. Assume that the demand and supply curves are linear. At the market equilibrium price, what are the consumer surplus and the producer surplus?
Consumer surplus is $50; producer surplus is $50
Which of the following policies would result in an increase in the quantity supplied of a good in a market?
Imposing a binding price floor
In the market described by the diagram above, the total economic surplus will be maximized at which of the following price and quantity combinations?
P2 and Q2
Assume that the market for a good is characterized by a downward-sloping demand curve and an upward-sloping supply curve and the market is in equilibrium at a price of $20 and a quantity of 100 units. After the government imposes a $5 per-unit excise tax on the good, the price that buyers pay for the good increases by $3. Which of the following are possible values for the government tax revenue and deadweight loss in the market?
Tax revenue is $300, deadweight loss $100
Which of the following statements is true about the demand curve above?
The elasticity of demand decreases when moving from point X to point Y
The economic concept of total consumer surplus refers to which of the following?
The sum of the differences between the prices that consumers are willing to pay for a good or service and the price they will actually pay
Which of the following is true about the supply curve between the given points?
The supply curve is inelastic, because the percentage change in the price is greater than the percentage change in the quantity supplied.
Which of the following describes how a market will respond when the scarcity of a good increases?
the price of the good will increase
Assume that more corn is used to produce ethanol. Simultaneously, more effective control of pests and weeds occurs in farming. Which of the following will definitely occur in the corn market? Responses
the quantity of corn will increase
If the demand for product X is perfectly elastic and the supply of product X decreases, which of the following will occur in the market for X ?
total revenue will decrease
At the current prices of goods X and Y, the quantity demanded of good X is 10 units, and the quantity demanded of good Y is 5 units. The cross-price elasticity of demand between goods X and Y is 0.6. A 10 percent increase in the price of good Y will result in which of the following?
A 6 percent increase in the quantity demanded of good X.
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?
A vertical line
Consider the market for arugula, a normal good. Which of the following changes would result in an increase in both the equilibrium price and the equilibrium quantity of arugula?
An increase in population
Assume that the market for beef is perfectly competitive and in equilibrium. Which of the following would most likely result in an increase in both the equilibrium price and the equilibrium quantity of beef?
An increase in the supply of potatoes, a complementary good
The tables below show the domestic demand and domestic supply for two small countries participating in a large global market with a world price of coffee equal to $3. Which of the following would be true given the price in the world market is $3?
Country A would import 20 units of coffee, and Country B would export 10.
Country Z has a downward sloping domestic demand curve and an upward sloping domestic supply curve for widgets. In the absence of trade, the domestic price of widgets is P0P0. Now the country engages in trade, and the price for widgets, PwPw, is below the domestic price, P0P0. Which of the following will occur?
Domestic producer surplus will decrease in country Z
If a 10 percent increase in the price of good X results in a 20 percent decrease in the quantity of good Y demanded, which of the following is true?
Good X and good Y are complementary goods, and the cross-price elasticity is −2−.
Which of the following correctly describes the income effect associated with the law of demand?
If the price of a normal good decreases, the purchasing power of a consumer's income increases and therefore consumers will be willing and able to purchase more of the good.
A firm estimates that the absolute value of the price elasticity of demand for its signature sandwich is 2. If the firm increases its sandwich price by 10 percent, what will happen to the quantity demanded?
It will decrease by 20 percent
In the rental housing market, what would be the effect of a rent control that was set at the market equilibrium rental price?
It would have no impact on the number of housing units available.
If the government imposes a tariff on imports of cheese, the price and quantity of imported cheese will most likely change in which of the following ways?
Price: Increase, Quantity: Decrease
In which of the following cases would government intervention in a market result in an increase in the quantity sold?
Providing producers of a product with a per unit subsidy
The diagram above depicts the demand and supply curves for good Y. The perfectly competitive market is initially in equilibrium, but the government decides to institute a price floor program by setting the price of good Y at PF and agrees to purchase all unsold units of good Y from the producers. The cost of this program to the government is represented by which of the following areas? Responses
Q1IKQ3
Suppose the small country of Aronow imports 40,000 kg of bananas. The global price of bananas is $0.50$0.50 per kg. The government of Aronow collects tariff revenues of $4,000$4,000 from banana imports.
The consumers in Aronow pay a price of $0.60 per kg of bananas.
The graph above shows the domestic market for sandalwood in equilibrium at a price of $800$800 per kilogram in the absence of international trade. Now assume the country begins to engage in international trade, and sandalwood is selling at a price of $600$600 per kilogram in the world market. Which of the following would most likely result?
The country would import sandalwood, and its total economic surplus would increase, with the domestic consumer surplus increasing by more than the domestic producer surplus decreases.
An increase in the price of good X causes buyers to want to buy more of good Y. Which of the following explains the resulting change in the market?
The demand curve for good Y will shift to the right because the goods are substitutes in consumption.
A change in which of the following causes a movement along a given demand curve for a normal good?
The price of the good
The market for tomatoes is in equilibrium at the price of $10$10, and quantity of 5050 tomatoes. If consumer surplus is $400$400 and total economic surplus is $650$650, what is the producer surplus in the tomato market and why?
The producer surplus is $250, because the total surplus less what consumers receive must go to producers.
Which of the following will occur as a result of a decrease in the prices of the inputs used to produce a good?
The quantity supplied would increase at each possible price for the good.
Assume that the market for a good is characterized by a downward-sloping demand curve and an upward-sloping supply curve. Suppose that there is an improvement in technology for producing the good. Which of the following would occur?
The total economic surplus in the market would increase.
Which of the following will initially result from an increase in the market demand for a good?
There will be a temporary shortage at the original equilibrium price.
An increase in the supply of good X resulted in an increase in the price and quantity of good Y. It can be concluded that good Y is
a complement for good x
All of the following cause a rightward shift in the demand schedule for a normal good EXCEPT
a decrease in the price of a good
For a normal good, the income effect of a price change refers to the change in the consumption of the good that occurs because of the change in
consumers purchasing power
The absolute value of the price elasticity of demand for a good increases when
consumers spend greater portion of their budget on the good
To determine whether two goods are complements, one would calculate the
cross price elascity of demand
The demand curves X and Y are shown in the graph above. Which of the following offers the most accurate comparison of the price elasticities of demand curves X and Y at a price of $4?
curve x: relatively inelastic, curve y: perfectly elastic
Suppose that the demand for vegetables is price elastic. If the price of vegetables increases by 5 percent, the quantity of vegetables demanded would
decrease by more than 5%
The quantity of peanuts supplied increased from 40 tons per week to 60 tons per week when the price of peanuts increased from $4 per ton to $5 per ton. The price elasticity of supply for peanuts over this price range is
elastic
Given the demand curve above, if price decreases from $8 to $4 per unit, total consumer surplus will
increase by 18
Suppose the price elasticity of supply for gasoline in the short run is estimated to be 0.4. Due to an unexpected surge in the demand for gasoline, the price of gasoline increases by 20 percent. As a result, the quantity supplied of gasoline will
increase by 8 percent
Which of the following relationships among the price elasticity of demand, change in price, and change in total revenue is consistent?
inelastic/decrease/ decrease
A 10 percent increase in the price of a good results in a 44 percent increase in total revenue. From this information, it can be concluded that the demand over this range of prices
is inelastic
Assume that the current market equilibrium price for milk is $2.80 per gallon and that 5 million gallons are sold per day. If the government sets a price ceiling of $2.00 per gallon, which of the following is true?
less than 5 million gallons of milk would be sold
A 10 percent increase in Sandra's income causes Sandra's consumption of milk to decrease from 1010 cartons to 6 cartons. Sandra's income elasticity of demand for milk is
less than zero and therefore milk is an inferior good
Assume that the supply of corn is relatively price inelastic, while the demand for corn is relatively price elastic. If the government imposes a per-unit excise tax on the production of corn, the incidence of the tax will fall
more on the sellers than on the buyers
If a hurricane reduced the crab population, the price of crabs and quantity sold would change in which of the following ways?
price increases, quantity decreases
An effective minimum wage policy in a competitive market will increase unemployment and increase the total earnings of labor only if the demand for labor is
relatively inelastic
The market supply curve for a product is derived from the individual firm supply curves by
summing the quantities each producer sells at each possible price
In a perfectly competitive market, a change in which of the following could cause a shift in the supply curve?
technolgy
A change in which of the following will cause a change in the supply of personal computers (PC's) in the short run?
technology