Macroeconomics Homeworks for Midterm

Refer to Figure 6-23. How much tax revenue does this tax produce for the government? A. $18. B. $30. C. $6. D. $36.

A. $18.

Refer to Figure 6-23. The effective price received by sellers after the tax is imposed is A. $3. B. $4. C. $5. D. $6.

A. $3.

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 $3 above the equilibrium price in this market. Refer to Table 6-4. Following the imposition of a price floor $3 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting shortage is A. 0 units. B. 4 units. C. 5 units. D. 10 units.

A. 0 units.

Suppose the price elasticity of supply for minivans is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then the quantity supplied of minivans will increase by about A. 1.5% in the short run and 6% in the long run. B. 6% in the short run and 1.5% in the long run. C. 16.7% in the short run and 4.2% in the long run. D. 4.2% in the short run and 16.7% in the long run.

A. 1.5% in the short run and 6% in the long run.

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 $3 above the equilibrium price in this market. Refer to Table 6-4. How many units of the good are sold after the imposition of the price floor? A. 3 B. 9 C. 15 D. 18

A. 3

Suppose the government imposes a $2 on this market. Refer to Figure 6-29. The buyers and sellers will bear an equal share of the tax burden if the demand is A. D1, and the supply is S1. B. D2, and the supply is S1. C. D1, and the supply is S2. D. D2, and the supply is S2.

A. D1, and the supply is S1.

Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for chocolate chip cookies of an improved high-speed mixer that allows bakers to produce cookies in less time? A. Point A to Point B B. Point C to Point B C. Point C to Point D D. Point A to Point D

A. Point A to Point B

Refer to Figure 6-4. A government-imposed price ceiling of $6 in this market results in A. a shortage of 8 units. B. a shortage of 4 units. C. 14 units sold. D. 10 units sold.

A. a shortage of 8 units.

Suppose the government imposes a $2 on this market. Refer to Figure 6-29. Suppose D1 represents the demand curve for paperback novels, D2 represents the demand curve for gasoline, and S1 represents the supply curve for paperback novels and gasoline. After the imposition of the $2 on paperback novels and on gasoline, the A. buyers of gasoline bear a higher burden of the $2 tax than buyers of paperback novels. B. sellers of gasoline bear a higher burden of the $2 tax than sellers of paperback novels. C. buyers of gasoline bear an equal burden of the $2 tax as buyers of paperback novels. D. Both a) and b) are correct.

A. buyers of gasoline bear a higher burden of the $2 tax than buyers of paperback novels.

Refer to Table 4-8. Suppose Firm X and Firm Y are the only two sellers in the market. If the market price decreases from $12 to $9, quantity supplied will A. decrease by 6 units. B. decrease by 12 units. C. increase by 6 units. D. increase by 12 units.

A. decrease by 6 units.

Refer to Figure 4-16. The shift from S' to S in the market for chocolate cake could be caused by a(n) A. decrease in the number of commercial bakers. B. improvement in oven technology. C. decrease in the price of butter. D. decrease in the price of chocolate cake.

A. decrease in the number of commercial bakers.

When the price of chai tea lattés is $5, Maxine buys 20 per month. When the price is $4, she buys 30 per month. Maxine's demand for chai tea lattés is A. elastic, and her demand curve would be relatively flat. B. elastic, and her demand curve would be relatively steep. C. inelastic, and her demand curve would be relatively flat. D. inelastic, and her demand curve would be relatively steep.

A. elastic, and her demand curve would be relatively flat.

Refer to Figure 5-17. If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would A. increase. B. decrease. C. remain unchanged. D. The effect on total revenue cannot be determined from the given information.

A. increase.

In 1990, Congress passed a new luxury tax on items such as yachts, private airplanes, furs, jewelry, and expensive cars. The goal of the tax was to A. raise revenue from the wealthy. B. prevent wealthy people from buying luxuries. C. force producers of luxury goods to reduce employment. D. limit exports of luxury goods to other countries.

A. raise revenue from the wealthy.

Refer to Table 4-13. Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose the following: • x = 2.• The current price of a sandwich is $3.00. • The market quantity supplied of sandwiches is 5. • The slope of the supply curve is 1. Then there is currently a A. shortage of 5 sandwiches, and the equilibrium price of a sandwich is between $3.00 and $5.00. B. shortage of 5 sandwiches, and the equilibrium price of a sandwich is $5.00. C. surplus of 5 sandwiches, and the equilibrium price of a sandwich is between $3.00 and $5.00. D. surplus of 5 sandwiches, and the equilibrium price of a sandwich is $5.00.

A. shortage of 5 sandwiches, and the equilibrium price of a sandwich is between $3.00 and $5.00.

If buyers and sellers in a certain market are price takers, then individually: A. they have no influence on market price. B. they have some influence on market price but that influence is limited. C. buyers will be able to find prices lower than those determined in the market. D. sellers will find it difficult to sell all they want to sell at the market price.

A. they have no influence on the market price.

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 $3 above the equilibrium price in this market. Refer to Table 6-4. Following the imposition of a price floor $3 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is A. $2. B. $3. C. $4. D. $5.

B. $3

If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about A. 0.63, and supply is elastic. B. 0.63, and supply is inelastic. C. 1.60, and supply is elastic. D. 1.60, and supply is inelastic.

B. 0.63, and supply is inelastic.

Refer to Table 4-8. If these are the only three sellers in the market, then an increase in the market price from $6 to $12 will increase quantity supplied by A. 12 units. B. 24 units. C. 36 units. D. 48 units.

B. 24 units.

Refer to Figure 5-10. Total revenue when the price is P2 is represented by the area(s) A. B + D. B. A + B. C. C + D. D. D.

B. A + B.

Refer to Figure 6-23. Which of the following is correct? A. The entire burden of the tax falls on sellers, and none of the burden of the tax falls on buyers. B. One-third of the burden of the tax falls on buyers, and two-thirds of the burden of the tax falls on sellers. C. One-half of the burden of the tax falls on buyers, and one-half of the burden of the tax falls on sellers. D. Two-thirds of the burden of the tax falls on buyers, and one-third of the burden of the tax falls on sellers.

B. One-third of the burden of the tax falls on buyers, and two-thirds of the burden of the tax falls on sellers.

Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for golf balls of an increase in green fees? A. Point A to Point B B. Point C to Point B C. Point C to Point D D. Point A to Point D

B. Point C to Point B

For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? A. There are no close substitutes for this good. B. The good is a luxury. C. The market for the good is broadly defined. D. The relevant time horizon is short.

B. The good is a luxury.

Refer to Figure 6-4. A government-imposed price floor of $12 in this market results in A. a surplus of 2 units. B. a surplus of 4 units. C. 12 units sold. D. 10 units sold.

B. a surplus of 4 units.

Refer to Figure 6-16. In this market, a minimum wage of $7.25 is A. binding and creates a labor shortage. B. binding and creates unemployment. C. nonbinding and creates a labor shortage. D. nonbinding and creates neither a labor shortage nor unemployment.

B. binding and creates unemployment.

Scenario 5-3: The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. Refer to Scenario 5-3. The change in equilibrium quantity will be A. greater in the aged cheddar cheese market than in the bread market. B. greater in the bread market than in the aged cheddar cheese market. C. the same in the aged cheddar cheese and bread markets. D. Any of the above could be correct.

B. greater in the bread market than in aged cheddar cheese market.

Suppose the government imposes a $2 on this market. Refer to Figure 6-29. Suppose D1 represents the demand curve for gasoline in both the short run and long run, S1 represents the supply curve for gasoline in the short run, and S2 represents the supply curve for gasoline in the long run. After the imposition of the $2, A. buyers bear a higher burden of the tax in the short run than in the long run. B. sellers bear a higher burden of the tax in the short run than in the long run. C. buyers and sellers bear an equal burden of the tax in both the short run and long run. D. buyers and sellers bear an equal burden of the tax in the short run, but buyers bear a higher burden of the tax in the long run.

B. sellers bear a higher burden of the tax in the short run than in the long run.

Refer to Table 4-13. Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose the following: • x = 2. • The current price of a sandwich is $3.00. • The market quantity supplied of sandwiches is 4. • The slope of the supply curve is 2. Then there is currently a A. shortage of 6 sandwiches, and the equilibrium price of a sandwich is less than $3.00. B. shortage of 6 sandwiches, and the equilibrium price of a sandwich is $5.00. C. surplus of 6 sandwiches, and the equilibrium price of a sandwich is less than $3.00. D. surplus of 6 sandwiches, and the equilibrium price of a sandwich is $5.00.

B. shortage of 6 sandwiches, and the equilibrium price of a sandwich is $5.00.

Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point A and point B? A. 0.4 B. 0.6 C. 1.67 D. 2.16

C. 1.67

Refer to Table 5-4. Using the midpoint method, what is the price elasticity of demand when price rises from $12 to $16? A. 0.43 B. 0.67 C. 2.33 D. 4

C. 2.33

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is A. 0.35. B. 0.43. C. 2.33. D. 2.89.

C. 2.33

Refer to Table 4-13. Suppose x = 1. Then it must be true that A. Harry and Jake have the same income, which is lower than Darby's income. B. if sandwiches and potato chips are complements for Harry, then those two goods are also complements for Jake. C. Harry's demand curve is identical to Jake's demand curve. D. All of the above are correct.

C. Harry's demand curve is identical to Jake's demand curve.

Refer to Table 4-13. Suppose x = 1. Then it must be true that Harry and Jake have the same income, which is lower than Darby's income. A. if sandwiches and potato chips are complements for Harry, then B. those two goods are also complements for Jake. C. Harry's demand curve is identical to Jake's demand curve. D. All of the above are correct.

C. Harry's demand curve is identical to Jake's demand curve.

Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for convertible automobiles of an increase in the price of steel? A. Point A to Point B B. Point C to Point B C. Point C to Point D D. Point A to Point D

C. Point C to Point D

Refer to Figure 5-19. Which of the following statements is correct? A. Supply curve A is perfectly elastic. B. Supply curve B is perfectly inelastic. C. Supply curve C is more inelastic than supply curve D. D. Supply curve D is unit elastic.

C. Supply curve C is more inelastic than supply curve D.

Refer to Table 5-10. Using the midpoint method, which of the three supply curves has the most inelastic price elasticity of supply? A. Supply curve X B. Supply curve Y C. Supply curve Z D. There is no difference in the elasticities of the three supply curves.

C. Supply curve Z

A key determinant of the price elasticity of supply is the time period under consideration. Which of the following statements best explains this fact? A. Supply curves are steeper over long periods of time than over short periods of time. B. Buyers of goods tend to be more responsive to price changes over long periods of time than over short periods of time. C. The number of firms in a market tends to be more variable over long periods of time than over short periods of time. D. Firms prefer to change their prices in the short run rather than in the long run.

C. The number of firms in a market tends to be more variable over long periods of time than over short periods of time.

Refer to Table 4-13. Regarding Harry and Darby, whose demand for sandwiches conforms to the law of demand? A. only Harry's B. only Darby's C. both Harry's and Darby's D. neither Harry's nor Darby's

C. both Harry's and Darby's

Refer to Figure 4-16. If the supply curves that are drawn represent supply curves for single-family residential houses, then the movement from S to S' could be caused by a(n) A. increase in the price of apartments which are a substitute for single-family houses for many people looking for a place to live. B. newly-formed expectation by house-builders that prices of houses will increase significantly in the next six months. C. decrease in the price of lumber. D. All of the above are correct.

C. decrease in the price of the lumber.

Refer to Table 4-13. Suppose Harry, Darby, and Jake are the only demanders of sandwiches and that the market demand violates the law of demand. Then, in the table, the value of x must be A. less than or equal to 5. B. greater than or equal to 5. C. greater than or equal to 7. D. greater than or equal to 10.

C. greater than or equal to 7.

The value of the price elasticity of demand for a good will be relatively large when A. there are no good substitutes available for the good. B. the time period in question is relatively short. C. the good is a luxury rather than a necessity. D. All of the above are correct.

C. the good is a luxury rather than a necessity

Refer to Figure 6-23. For every unit of the good that is sold, sellers are required to send A. one dollar to the government, and buyers are required to send two dollars to the government. B. two dollars to the government, and buyers are required to send one dollar to the government. C. three dollars to the government, and buyers are required to send nothing to the government. D. nothing to the government, and buyers are required to send two dollars to the government.

C. three dollars to the government, and buyers are required to send nothing to the government.

Refer to Figure 6-23. The price paid by buyers after the tax is imposed is A. $3. B. $4. C. $5. D. $6.

D. $6.

Refer to Figure 6-4. A government-imposed price of $16 in this market could be an example of a (i)binding price ceiling. (ii)non-binding price ceiling. (iii)binding price floor. (iv)non-binding price floor. A. (i) only B. (ii) only C. (i) and (iv) only D. (ii) and (iii) only

D. (ii) and (iii) only

Which of the following statements is correct? A. The demand for flat-screen computer monitors is more elastic than the demand for monitors in general. B. The demand for grandfather clocks is more elastic than the demand for clocks in general. C. The demand for cardboard is more elastic over a long period of time than over a short period of time. D. All of the above are correct.

D. All of the above are correct.

Refer to Figure 5-10. If rectangle D is larger than rectangle A, then A. demand is elastic between prices P1 and P2. B. a decrease in price from P2 to P1 will cause an increase in total revenue. C. the magnitude of the percent change in price between P1 and P2 is smaller than the magnitude of the corresponding percent change in quantity demanded. D. All of the above are correct.

D. All of the above is correct.

Suppose the government imposes a $2 on this market. Refer to Figure 6-29. The buyers will bear a higher share of the tax burden than sellers if the demand is A. D1, and the supply is S1. B. D2, and the supply is S1. C. D1, and the supply is S2. D. D2, and the supply is S2.

D. D2, and the supply is S2.

Assume Leo buys coffee beans in a competitive market. It follows that: A. Leo has a limited number of sellers from which to buy coffee beans. B. Leo will negotiate with sellers whenever he buys coffee beans. C. Leo can influence the price of coffee beans if he buys a large quantity of them. D. None of the above is correct.

D. None of the above is correct.

Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for swimming lessons of an increase in the incomes of parents with school-aged children? A. Point A to Point B B. Point C to Point B C. Point C to Point D D. Point A to Point D

D. Point A to Point D

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good? A. The quantity of the good demanded decreases from 250 to 150. B. The quantity of the good demanded decreases from 200 to 100. C. The quantity of the good demanded decreases by 0.05 percent. D. The quantity of the good demanded decreases by 0.2 percent.

D. The quantity of the good demanded decreases by 0.2 percent.

Refer to Table 4-13. Regarding Harry and Darby, for whom are sandwiches a normal good? A. only for Harry B. only for Darby C. for both Harry and Darby D. This cannot be determined from the given information.

D. This cannot be determined from the given information.

Refer to Figure 4-8. Suppose the figure shows the market demand for coffee. Suppose the price of tea, a substitute good, increases. Which of the following changes would occur? A. a movement along D2 from point A to point B B. a movement along D2 from point B to point A C. a shift from D1 to D2 D. a shift from D2 to D1

D. a shift from D2 to D1

Refer to Figure 4-8. Suppose the figure shows the market demand for laptop computers. Suppose the price of wireless printers, a complementary good, decreases. Which of the following changes would occur? A. a movement along D2 from point A to point B B. a movement along D2 from point B to point A C. a shift from D1 to D2 D. a shift from D2 to D1

D. a shift from D2 to D1

Scenario 5-3: The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. Refer to Scenario 5-3. The equilibrium price will A. increase in both the aged cheddar cheese and bread markets. B. increase in the aged cheddar cheese market and decrease in the bread market. C. decrease in the aged cheddar cheese market and increase in the bread market. D. decrease in both the aged cheddar cheese and bread markets.

D. decrease in both the aged cheddar cheese and bread markets.

Scenario 5-3: The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. Refer to Scenario 5-3. Total consumer spending on aged cheddar cheese will A. increase, and total consumer spending on bread will increase. B. increase, and total consumer spending on bread will decrease. C. decrease, and total consumer spending on bread will increase. D. decrease, and total consumer spending on bread will decrease.

D. decrease, and total consumer spending on bread will decrease.

Refer to Figure 6-16. In this market, a minimum wage of $2.75 creates a labor A. shortage of 2,250 workers. B. shortage of 4,500 workers. C. surplus of 2,250 workers. D. neither a labor shortage nor surplus.

D. neither a labor shortage nor surplus.

Refer to Figure 6-16. In this market, a minimum wage of $2.75 is A. binding and creates a labor shortage. B. binding and creates unemployment. C. nonbinding and creates a labor shortage. D. nonbinding and creates neither a labor shortage nor unemployment.

D. nonbinding and creates neither a labor shortage nor unemployment.

Refer to Figure 6-16. In this market, a minimum wage of $7.25 creates a labor A. shortage of 2,250 workers. B. shortage of 4,500 workers. C. surplus of 2,250 workers. D. surplus of 4,500 workers.

D. surplus of 4,500 workers.

Refer to Table 4-13. Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose the following: • x = 2. • The current price of a sandwich is $5.00. • The market quantity supplied of sandwiches is 10. • The law of supply applies to the supply of sandwiches. Then there is a A. shortage of 5 sandwiches, and the price would be expected to rise from its current level of $5.00. B. shortage of 5 sandwiches, and the price would be expected to fall from its current level of $5.00. C. surplus of 5 sandwiches, and the price would be expected to rise from its current level of $5.00. D. surplus of 5 sandwiches, and the price would be expected to fall from its current level of $5.00.

D. surplus of 5 sandwiches, and the price would be expected to fall from its current level of $5.00.

Suppose that gasoline prices increase dramatically this month. Lola commutes 100 miles to work each weekday. Over the next few months, Lola drives less on the weekends to try to save money. Within the year, she sells her home and purchases one only 10 miles from her place of employment. These examples illustrate the importance of A. the availability of substitutes in determining the price elasticity of demand. B. a necessity versus a luxury in determining the price elasticity of demand. C. the definition of a market in determining the price elasticity of demand. D. the time horizon in determining the price elasticity of demand.

D. the time horizon in determining the price elasticity of demand.