MICRO ECONOMICS TWO
The table shows the demand and supply schedules for on-campus housing. If the college puts a rent ceiling on rooms of $325 a month, rent is and the number of rooms rented is. The on-campus housing market is
$300 4000 efficient.
Why the tepid response to higher gasoline prices?Most studies report that when U.S. gas prices rise by 10 percent, the quantity purchased falls by 1 to 2 percent. In September 2005, the average retail gasoline price was $2.90 a gallon, about $1.00 higher than a year before but purchases of gasoline fell by only 3.5 percent.The studies imply that the price elasticity of demand for gasoline is between a low of _____ and a high of _____.
0.1 and 0.2
When the price of ice cream rises from $3 to $5 a scoop, the quantity of ice cream bought decreases by 10 percent. the price elasticity of demand for ice cream is _______ ?
0.2
When the price of a good rises from $5 to $7 a unit, the quantity supplied increases from 110 to 130 units a day. The price elasticity of supply is _______. The supply of the good is _______.
0.5; inelastic
A 2 percent increase in income increases the quantity demanded of a good by 1 percent. The income elasticity of demand for this good is _______. The good is a _______ good.
1/2; normal
The graph shows the market for wool. Draw a shape that represents the consumer surplus from wool. Label it CS. Draw a shape that represents the producer surplus from wool. Label it PS. Consumer surplus from wool equals $nothing and the producer surplus from wool equals $nothing. The market for wool is efficient because ______. A. consumer surplus is greater than producer surplus B. the market is producing the maximum possible quantity given the constraints on technology and capital C. at the market equilibrium marginal benefit equals marginal cost, and total surplus is maximized D. consumer surplus is greater than zero
120 . 40 C. at the market equilibrium marginal benefit equals marginal cost, and total surplus is maximized
The table shows a nation's marginal benefit and marginal cost schedules and the graph shows the nation's PPF. Bananas (pounds) Willing to give up Must give up (pounds of coffee per pound of bananas) 1 3 1 2 2 2 3 1 3 Draw a point that shows a point of production efficiency but too much coffee is produced for allocative efficiency. Label it A. Draw a point that shows the nation's point of allocative efficiency. Label it B.
A 1, 8.8 b 2, 7
The price controls described in the news clip are ______. A. price ceilings B. price floors
A. price ceilings
When Elle's Espresso Bar raised its price by 10 percent, the quantity of coffee that Elle sold decreased by 40 percent. When Elle and all her competitors cut their prices by 10 percent, the quantity of coffee sold by Elle increased by only 4 percent.Explain the difference between the responses to Elle's price hike and the price cut. Why did the price increase bring a large response in the quantity sold while the price cut had only a small effect?
A. Elle's coffee has lots of close substitutes while coffee has few substitutes, so the demand for Elle's coffee is more elastic than the market demand for coffee.
The graph shows the market for paper. The government passes a new law that limits the quantity of paper that producers sell to 20 tons of paper a day.
A. inefficient; the marginal benefit from the 20th ton of paper is greater than the marginal cost of the 20th ton of paper
The table shows the demand and supply schedules for hay before and during a major drought. During the drought, suppose the government gave all farmers an equal quantity of hay. Resale of hay is not permitted.
A. maximized; rises E. decreases; rises
The method of allocation that most stores use during Thanksgiving sales is _______. A. a combination of contest and command B. a combination of market price and first-come, first-served C. a combination of market price and lottery D. first-come, first-served
B. a combination of market price and first-come, first-served
The world's largest tulip and flower market Every day over 19 million tulips and flowers are auctioned at the Dutch market called "The Bloemenveiling." These Dutch auctions match buyers and sellers. Source: Tulip-Bulbs.com In a Dutch auction, the auctioneer announces the highest price. If no one offers to buy the flowers, the auctioneer lowers the price until a buyer is found. What method is used to allocate flowers at the Bloemenveiling?
B. market price
The price controls described in the news clip are ______. A. price floors B. price ceilings
B. price ceilings
The graph shows a market for labor. Draw a line that illustrates a minimum wage that creates unemployment of 3 million hours a year. Label it. A minimum wage is a _______ applied to labor markets. A. price ceiling B. price floor C. quantity floor D. quantity ceiling
B. price floor
LOADING... Click on the icon to read the news clip, then complete the following steps. The graph shows the market for fast-food workers. Draw a point to show the wage rate and the number of fast-food workers employed if the minimum wage is: 1) $13.00 an hour. Label the point 1. 2) $15.00 an hour. Label the point 2. In the graph, at a minimum wage of $15.00 an hour _____; and at a minimum wage of $13.00 an hour _____. A. no one is unemployed and firms have all the workers they want; some workers are unemployed B. some workers are unemployed; no one is unemployed and firms have all the workers they want C. some workers are unemployed; firms cannot hire as many workers as they want D. firms cannot hire as many workers as they want; no one is unemployed and firms have all the workers they want
B. some workers are unemployed; no one is unemployed and firms have all the workers they want
The graph shows the market for milk in Venezuela when a price control is in effect. Draw a shape that represents: 1) consumer surplus. Label it CS. 2) producer surplus. Label it PS. 3) the deadweight loss. Label it DWL. Also draw a shape that show the resources lost from time spend in line. Label it Loss. Moving from a milk market with no price controls to a milk with price controls _______ consumer surplus and _______ producer surplus.
B. decreases; decreases B. total surplus is maximized and no deadweight loss arises
The graph shows the market for wool. The government passes a new law that requires producers to sell 100 pounds of wool a day. This market for wool is ______ because ______. A. efficient; the marginal cost of the 100th pound of wool equals the marginal benefit from the 100th pound of wool B. inefficient; the marginal cost of the 100th pound of wool is greater than the marginal benefit from the 100th pound of wool C. inefficient; the marginal benefit from the 100th pound of wool is greater than the marginal cost of the 100th pound of wool D. inefficient; more wool could be produced E. efficient; production is greater than zero Draw the deadweight loss when production is 100 pounds of wool a day. Label it DWL.
B. inefficient; the marginal cost of the 100th pound of wool is greater than the marginal benefit from the 100th pound of wool
The graph shows the market for basketballs in which sellers are taxed $6 a ball. Draw a shape that shows the excess burden of the tax on basketballs. The excess burden of the tax on basketballs is $12 million. The supply of basketballs is more _______ than the demand for basketballs, and the _______ pays most of the tax. A. elastic; seller B. inelastic; seller C. inelastic; buyer D. elastic; buyer
B. inelastic; seller 12 million
Choose the best statement. A. Producer surplus equals the total revenue from selling the good. B. If producers decrease the supply of a good, their producer surplus will increase. C. An increase in the demand for a good increases producer surplus. D. Producer surplus is the excess of the value of the good over the market price, summed over the quantity produced.
C. An increase in the demand for a good increases producer surplus.
The graph shows the market for walnuts. The government introduces a production quota of 4 billion pounds a year. _______ from the production quota. _______ from the production quota. A. No one loses; Farmers and consumers gain B. Farmers and consumers lose; No one gains C. Consumers lose; Farmers gain D. Farmers lose; Consumers gain The deadweight loss created by the government's price support is
C. Consumers lose; Farmers gain 16
$30 a week boost to minimum wage The government increased the minimum wage by $30 a week to $570 a week. Unions wanted a $35 a week increase, but employers argued that a $35 a week increase was unaffordable. Source: ABC Australia, February 11, 2011 The graph shows a market for low-skilled labor. If the minimum wage is set at $570 a week, _____. If the minimum wage is set at $540 a week, _____ .
C. some people who want a job can't get one; everyone who wants a job has one
The tax is _______. A. split between the seller and the buyer, and the buyer pays more than the seller B. paid by the sellers because it is imposed on the sellers by the government C. split evenly between the seller and the buyer
C. split evenly between the seller and the buye
The more ______ the supply of coal, ______. A. inelastic; the larger is the amount of the tax paid by the buyer B. elastic; the more equally is the split of the tax between the buyer and the seller C. elastic; the larger is the amount of the tax paid by the buyer D. elastic; the larger is the amount of the tax paid by the seller
C. elastic; the larger is the amount of the tax paid by the buyer
Enforced price ceilings in China's markets for coal and gasoline have ______ consumer surplus and producer surplus and a deadweight loss ______.
C. increased; arises
Which of the following statements describes an elastic supply?
D. A rise in the price of tomatoes by 10 percent increases the quantity supplied by more than that.
National parks to offer free-entry weekends Interior Secretary Ken Salazar said he hoped American families would take the opportunity during these hard times to enjoy an affordable weekend vacation in our national parks. Most Americans live within an hour's drive of a national park. Source: Los Angeles Times, June 3, 2009 Which families will be most likely to visit the national parks on the free weekends? Is the policy to waive the admission fair?
D. own a car and don't work on weekends D. the families hit by hard times are the ones that visit the national parks; the families who visit the national parks do so voluntarily
The more ______ the demand for the drug, ______. A. inelastic; the more equally is the tax split between the buyer and the seller of the drug B. elastic; the larger is the amount of the tax paid by the buyer of the drug C. elastic; the more equally is the tax split between the buyer and the seller of the drug D. inelastic; the larger is the amount of the tax paid by the buyer of the drug
D. inelastic; the larger is the amount of the tax paid by the buyer of the drug
In Pioneer Ville, the price elasticity of demand for bus rides is 0.5, the income elasticity of demand for bus rides is 0.1, and the cross elasticity of demand for bus rides with respect to gasoline is 0.2.
D. SUBSTITUTES AND If the price of gasoline increases by 10 percent with no change in the price of a bus ride, the number of bus rides increases by 22 percent.
concerned about the political fallout from rising college tuition, the U.S government decides to impose a price ceiling on tuition at $25,000 a student. If more colleges opened and drove the equilibrium price to $20,000 a student, __ of college education would emerge. The U.S market for college educaiton would be ___.
Neither a surplus nor shortage; efficient
Oil prices rise ahead of OPEC meetingThe Organization of the Petroleum Exporting Countries (OPEC) produces about 40 percent of the world's output of crude oil. With the global demand for oil falling, OPEC has cut production in an attempt to stop the price sliding further from its high of $147 a barrel. OPEC knows that to raise the world price of oil it has to cut the total production of its member countries.OPEC also knows that the demand for crude oil is inelastic. Is it possible to conclude from these facts that OPEC's total revenue would increase if it were to cut its production?
No because non-OPEC oil producers can increase production, which lowers the price.
Valentine RosesOn Valentine's Day 2015, 257 million roses were sold for about double the normal price. On a normal day, 3 million roses are sold.Source: aboutflowers.com, 2015What is the magnitude of the elasticity that you can estimate using the information provided?If we assume that, by using the midpoint method, the percentage change in the price is 100 percent, then the _______.
On Valentine's Day the demand for roses increases.The demand curve shifts rightward and the change in the quantity bought and sold is equal to the change in the quantity supplied.The price elasticity of supply is equal to the percentage change in the quantity supplied divided by the percentage change in the price.The average quantity sold is (3 million + 257 million) divided by ÷2, which is 130 million.When the quantity sold increases from 3 million to 257 million, the percentage change in the quantity supplied is [(257 millionminus−3 million) divided by ÷130 million] times ×100, which is 195 percent.The percentage change in price is 100 percent.The price elasticity of supply is 195 percent divided by ÷100 percent, which is 1.95.
As gas costs soar, buyers are flocking to small cars Faced with high gas prices, Americans are substituting smaller cars for SUVs. In April 2008, Toyota Yaris sales increased 46 percent and Ford Focus sales increased 32 percent from a year earlier. Sales of SUVs decreased by more than 25 percent in 2008 and Chevrolet Tahoe sales fell 35 percent. Full-size pickup sales decreased more than 15 percent in 2008 and Ford F-Series pickup sales decreased by 27 percent in April 2008. The effect of a downsized vehicle fleet on fuel consumption is unknown. In California, gasoline bought decreased by 4 percent in January 2008 from a year earlier. Source: The New York Times, May, 2, 2009 Use the information in the news clip, along with the fact that in California, the price of gasoline in January 2008 increased by about 30 percent from a year earlier. Calculate the cross elasticity of demand for Toyota Yaris with respect to the price of gasoline and the cross elasticity of demand for Ford Focus with respect to the price of gasoline.
The cross elasticity of demand for Toyota Yaris with respect to the price of gasoline is 1.53 The cross elasticity of demand for Ford Focus with respect to the price of gasoline is 1.06
The _______ pays more of the tax because _____. A. seller; the elasticity of demand is greater than the elasticity of supply B. buyer; sellers can always pass on the tax to buyers C. buyer; the elasticity of supply is greater than the elasticity of demand D. seller; competition among sellers forces sellers to absorb the tax and not pass it on to buyers
buyer; the elasticity of supply is greater than the elasticity of demand
The graph illustrates a labor market in which there is a minimum wage of $5 an hour. Draw shapes that represent the following: 1) firms' surplus. Label it FS. 2) workers' surplus. Label it WS. 3) deadweight loss. Label it DWL. 4) the potential loss from job search. Label it Loss.
graph
In Pioneer Ville, the price elasticity of demand for bus rides is 0.5, the income elasticity of demand for bus rides is 0.1, and the cross elasticity of demand for bus rides with respect to gasoline is 0.2. The demand for bus rides is ______ with respect to the price of a bus ride because the ______ elasticity of demand is less than 1.
inelastic; price; increase
The income elasticity of demand for haircuts is 1.5 and the income elasticity of demand for food is 0.14.You take a weekend job and the income you have to spend on food and haircuts doubles.If the prices of food and haircuts remain the same, you will _______.
more than double your expenditure on haircuts and less than double your expenditure on food
The elasticity of supply of a good today is influenced by _______.
the possibility to store some of today's productions for later sale
