econ test2

When the price of a Starbucks latte is $5, the quantity demanded is 100 lattes per day. When the price is $7, the quantity demanded is 80 lattes per day. Using the midpoint method, the price elasticity of demand for Starbucks lattes is

.67

for substitutes cross price elasticity is

>0

Which of the following is NOT correct? A. Taxes levied on sellers and taxes levied on buyers are not equivalent. B. A tax places a wedge between the price the buyer pays and the price that the seller receives. C. The wedge between the buyer's price and the seller's price is the same, regardless of whether the tax is levied on the buyer or seller. D. In the new after-tax equilibrium, buyers and sellers share the burden of the tax.

A taxes are equivalent

. Suppose demand is perfectly inelastic and the supply of the good in question decreases. As a result, A. the equilibrium quantity decreases and the equilibrium price is unchanged. B. the equilibrium price increases and the equilibrium quantity is unchanged. C. the equilibrium quantity and the equilibrium are both unchanged. D. the equilibrium quantity decreases and the equilibrium price decreases.

B

Erin produces jewelry boxes. If the demand for jewelry boxes is elastic and Erin wants to increase her total revenue, she should A. increase the price of the jewelry boxes B. decrease the price of the jewelry boxes C. not change the price of the jewelry boxes D. none of the above answers is correct

B if elastic then lower price to make more money

If the government levies a $5 tax per tablet computer on buyers of tablet computers, then the price paid by buyers of tablet computers would likely

Increased by 5

an excise tax of 11$ placed on bikes will shift the demand curve in what way

It wont excise= supply left 11

Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts? A. It increases. B. It decreases. C. It remains unchanged. D. It may increase or decrease depending on the shape of the supply curve

a

Which of the following goods would have the steepest demand curve? A. Ben & Jerry's cookie dough ice cream B. McDonald's Big Mac hamburger C. Chevron gasoline D. Apple iPhone smartphone

c

the relationship of elasticity to slope

closely related but not equal

cross price elasticity is <0 for

compliments

the amount a consumer is willing to pay minus what he actually pay

consumer surplus

Sheldon loves strawberry Nestle Quik and he would be willing to pay more for the drink mix than he now currently pays. Suppose that Sheldon has a change in his tastes such that he values strawberry Nestle Quik more than before. If the market price is the same as before, then

consumer surplus rise

Which of the following goods would have a relatively large deadweight loss if a tax was levied on that good? A. a gallon of milk B. a gallon of gasoline C. a cup of coffee D. a ticket to a football game

d

Which of the following is correct? A. The demand for Ralph Lauren clothing is more elastic than the demand for basic clothing. B. The demand for gasoline is less elastic than the demand for tickets to Walk Disney World. C. The demand for Pepsi Cola is more elastic than the demand for milk. D. All of the above statements are correct.

d

when tax decreases dwl____ and total revenue

decrease increase

Suppose a tax is levied on books. If the sellers end up bearing most of the tax burden, we know that the

demand is elastic

sellers bare most of tax burden when

demand is elastic

buyers bare most of burden of tax when

demand is inelastic

substitutes available time frame narrowly or broadly defined luxury or necessity

determinants of elasticity of demand

aalocation of resources that maximizes total surplus

efficient

demand >1

elastic

supply>1

elastic

how much qs responds to change in p

elasticity of supply

example of perfectly elastic

farmers

examples of inelastic items

gasoline, necessities

for many good price elasticity is ________in the long run because

greater

the more easily sellers can change the quantity they produce

greater price elasticity of supply

measures response of qd related to change in income

income elasticity of demand

when tax increases dwl_____ and total revenue

increases and decreases

demand< 1

inelastic

supply<1

inelastic

income elasticity is negative for

inferior goods

demand is elastic dwl is

larger

sales tax shifts the d curve

left by the amount of the tax

if demand is elastic_____ price to make more money

lower

buyer that would leave market if price were higher

marginal buyer

seller who would leave market if price were lower

marginal seller

economists use price elasticity of demand to

measure how much buyers respond to a change in price of a good

you can increase surplus by

moving toward equilibrium quantity

Suppose a good has a positive income elasticity of demand, such as 0.99. This implies the good is

normal

income elasticity is positive for

normal goods

price floor below the equi. price is

not binding

price ceiling above the equi. price is______ and has

not binding and has no effect on market outcomes

demand =infinity

perfectly elastic

supply= infinity

perfectly elastic

demand=0

perfectly inelastic

supply=0

perfectly inelastic

legal maximum set for pice of a good

price ceiling

numerical measurement of the responsiveness of quantity demanded based on change in price

price elasticity of demand

leagal minimum for price of a good

price floor

When the price of a good falls, A. consumer surplus decreases for original buyers because some new buyers will now purchase the product B. producer surplus rises because existing firms gain an extra benefit and new firms will now enter the market C. consumer surplus rises because existing buyers gain an extra benefit and some buyers will now leave the market and not purchase the product D. producer surplus decreases for some firms will now leave the market and those sellers that remain will see their producer surplus decrease

price goes down consumer surplus rises and producer surplus decreases

more revenue on each unit you sell but you sell fewer units due to law of demand results from

price increase

ammount seller is paid minus his actual cost

producer surplus

if demand is inelastic _______price to make more money

raise

with a shortage sellers must

ration goods among buyers

what is the shape of the demand curve for a good with few substitutes

relatively vertical

demand is said to be elastic if buyers

respond substantially to change in price

the fall in revenue from lower q is greater than the increased revenue from higher p so....

revenue falls

the fall in revenue from lower q is smaller than the increase in revenue from higher p so....

revenue rises

price ceiling is binding constraint on the price causes a

shortage

in the long run supply and demand are more price elastic

shortage is larger

when demand is inelastic dwl

smaller

DWL is higher

supply is elastic

DWL is low when

supply is inelastic

excise tax shifts what graph

supply to the left by ammount of tax

how the burden of tax is shared among market participants

tax incidence

the affects of p and q and the tax incidence are the same whether

tax is imposed on buyers or sellers

demand =1

unit elastic demand

the floor is a binding constraint on the

wage causes an surplus