Microecon Test 2
Figure 6-18The vertical distance between points A and B represents the tax in the market. Refer to Figure 6-18. The amount of the tax per unit is
$14.
QUESTION 24 Figure 6-25 Refer to Figure 6-25. The amount of the tax per unit is
$3.
Figure 6-22 Refer to Figure 6-22. How much tax revenue does this tax generate for the government?
$60.
The quantity sold in a market will increase if the government
. decreases a binding price floor in that market. b. increases a binding price ceiling in that market. c. decreases a tax on the good sold in that market. d. More than one of the above is correct. more than 1 is correct
If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is about
0.5, and supply is inelastic.
If the price elasticity of demand for a good is 0.5, then a 5 percent increase in price results in a
2.5 percent decrease in the quantity demanded
If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in quantity supplied, then the price increase is about
4.2%.
Refer to Figure 4-18. At the equilibrium price,
400 units would be supplied and demanded.
Figure 4-20 Refer to Figure 4-20. If price is $25, then quantity demanded and quantity supplied, respectively, are
500 units and 800 units.
QUESTION 14 Table 6-2 Price QuantityDemanded QuantitySupplied $0 375 0 $5 300 50 $10 225 100 $15 150 150 $20 75 200 $25 0 250 Refer to Table 6-2. A price floor set at $20 results in
75 units sold.
Panel (a) Panel (b) Refer to Figure 4-9. The graphs show the demand for cigarettes. In Panel (a), the arrows are consistent with which of the following events?
A tax was placed on cigarettes
Which of the following would increase in response to a decrease in the price of ironing boards?
All of the above are correct.
Which of the following statements is correct concerning the burden of a tax imposed on take-out food?
Buyers and sellers share the burden of the tax.
QUESTION 45 Table 4-9 An Increase in Supply A Decrease in Supply An Increase in Demand A B A Decrease in Demand C D Refer to Table 4-9. Which combination would produce a decrease in equilibrium quantity and an indeterminate change in equilibrium price?
D
Figure 6-29Suppose 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
D2, and the supply is S2
Beef is a normal good. You observe that both the equilibrium price and quantity of beef have fallen over time. Which of the following explanations would be most consistent with this observation?
New medical evidence has been released that indicates a negative correlation between a person's beef consumption and life expectancy
Which of the following statements about agriculture in the U.S. is correct?
Increasing the supply of agricultural products typically benefits consumers but harms farmers
What would happen to the equilibrium price and quantity of peanut butter if the price of peanuts went up, the price of jelly fell, fewer firms decided to produce peanut butter, and health officials announced that eating peanut butter was good for you?
Price will rise, and the effect on quantity is ambiguous
Table 5-11 Supply isDemand isScenario AelasticelasticScenario BelasticinelasticScenario CinelasticelasticScenario Dinelasticinelastic Refer to Table 5-11. Which scenario describes the market for oil in the short run in comparison to the long run?
Scenario D describes the short run, whereas scenario A describes the long run.
In competitive markets, which of the following is not correct?
Some sellers can set prices.
For a particular good, a 12 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?
The good is a necessity.
A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to raise revenues. Who is correct?
The mayor would be correct if demand were price inelastic; the city manager would be correct if demand were price elastic
Which of the following statements is correct?
Who actually pays a tax depends on the price elasticities of supply and demand.
QUESTION 19 Figure 4-5 Refer to Figure 4-5. Which of the following would cause the demand curve to shift from Demand B to Demand C in the market for mattresses?
a decrease in the price of custom wooden sleigh bed frames
When demand is inelastic, a decrease in price will cause
a decrease in total revenue.
QUESTION 9 Figure 6-6 Refer to Figure 6-6. In which of the following cases would sellers have to develop a rationing mechanism?
a price ceiling set at $6
In response to a shortage caused by the imposition of a binding price ceiling on a market,
a. price will no longer be the mechanism that rations scarce resources. b. long lines of buyers may develop. c. sellers could ration the good or service according to their own personal biases. d. All of the above d. All of the above are correct.
Figure 4-7 Refer to Figure 4-7. The movement from Db to Da could be caused by
an increase in the price of a complement.
Which of the following would not shift the supply curve for mp3 players?
an increase in the price of mp3 players
Suppose that the demand for light bulbs is inelastic, and the supply of light bulbs is elastic. A tax of $2 per bulb levied on light bulbs will increase the price paid by buyers of light bulbs by
between $1 and $2
QUESTION 25 Figure 6-20 Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed?
between $5 and $10
A market includes
both buyers and sellers.
When a tax is placed on the sellers of energy drinks, the
burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal
The price elasticity of demand for a good measures the willingness of
consumers to buy less of the good as price rises.
Lead is an important input in the production of crystal. If the price of lead decreases, then we would expect the supply of
crystal to increase
Suppose you like to make, from scratch, pies filled with banana cream and vanilla pudding. You notice that the price of bananas has increased. As a result, your demand for vanilla pudding would
decrease
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%.
decrease in both the aged cheddar cheese and bread markets.
A leftward shift of a supply curve is called a(n)
decrease in supply.
A tax on the buyers of cereal will increase the price of cereal paid by buyers,
decrease the effective price of cereal received by sellers, and decrease the equilibrium quantity of cereal
The mayor of Workerville proposes a local payroll tax to fund a new water park for the city. The mayor proposes to collect half the tax from workers and half the tax from firms. The mayor will be able to successfully divide the burden of the tax equally if the
demand for labor and supply of labor are equally elastic.
For which of the following goods is the income elasticity of demand likely highest?
diamonds
Refer to Figure 6-8. When a certain price control is imposed on this market, the resulting quantity of the good that is actually bought and sold is such that buyers are willing and able to pay a maximum of P1 dollars per unit for that quantity and sellers are willing and able to accept a minimum of P2 dollars per unit for that quantity. If P1 - P2 = $3, then the price control is
either a price ceiling of $2.00 or a price floor of $5.00.
Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is
elastic, since the price elasticity of supply is equal to 1.1.
Recent forest fires in the western states are expected to cause the price of lumber to rise in the next six months. As a result, we can expect the supply of lumber to
fall now.
Pizza is a normal good if the demand
for pizza rises when income rises
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%.
greater in the bread market than in the aged cheddar cheese market.
Most markets in the economy are
highly competitive.
Suppose the income elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to
increase by 2.5%, and X is an inferior good
A movement downward and to the right along a demand curve is called a(n)
increase in quantity demanded.
Exceptionally favorable growing conditions in the vineyards of Napa Valley would cause a(n)
increase in the supply of wine, decreasing price
If suppliers expect the price of their product to fall in the future, then they will
increase supply now.
n the early 1970s, OPEC's goal was to
increase the world-wide price of oil by reducing the quantity of oil supplied.
The price paid by buyers in a market will increase if the government
increases a binding price ceiling in that market.
Figure 4-23 Refer to Figure 4-23. In this market for watermelons, a severe drought occurs which affects the watermelon crop. The equilibrium price
increases and the equilibrium quantity decreases.
Table 5-5 Price TotalRevenue $5 $70 $6 $78 $7 $84 $8 $88 $9 $90 $10 $90 Refer to Table 5-5. When price is between $5 and $9, demand is
inelastic
An increase in price causes an increase in total revenue when demand is
inelastic.
Figure 5-13 Refer to Figure 5-13. Between point A and point B on the graph, demand is
inelastic.
A tax burden falls more heavily on the side of the market that
is more inelastic.
On a downward-sloping linear demand curve, total revenue reaches its maximum value at the
midpoint of the demand curve.
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
negative, so Joan considers hamburger to be an inferior good
When OPEC raised the price of crude oil in the 1970s, it caused the United States'
nonbinding price ceiling on gasoline to become binding
When all market participants are price takers who have no influence over prices, the markets have
numerous buyers and sellers.
If the price of natural gas rises, when is the price elasticity of demand likely to be the highest?
one year after the price increase
The highest form of competition is called
perfect competition
The highest form of competition is called
perfect competition.
Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is
positive, and the good is a normal good.
Suppose that when the price of wheat is $2 per bushel, farmers can sell 10 million bushels. When the price of wheat is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true? The demand for wheat is
price inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers.
In a market economy, who or what determines who produces each good and how much is produced?
prices
Each of the following is a determinant of demand except
production technology.
If a nonbinding price ceiling is imposed on a market, then the
quantity sold in the market will stay the same.
Suppose the American Medical Association announces that men who shave their heads are less likely to die of heart failure. We could expect the current demand for
razors to increase.
Total revenue
remains unchanged as price increases when demand is unit elastic
Holding the nonprice determinants of supply constant, a change in price would
result in a movement along a stationary supply curve.
A decrease in quantity demanded
results in a movement upward and to the left along a demand curve.
Which of the following would be the most likely result of a binding price ceiling imposed on the market for rental cars?
slow replacement of old rental cars with newer ones
The two words most often used by economists are
supply and demand
Some firms eventually experience problems with their capacity to produce output as their output levels increase. For these firms,
supply is more elastic at low levels of output and less elastic at high levels of output.
When OPEC raised the price of crude oil in the 1970s, it caused the
supply of gasoline to decrease.
An example of a price floor is
the minimum wage.
An alternative to rent-control laws that would not reduce the quantity of housing supplied is
the payment by government of a fraction of a poor family's rent.
Which of the following is not held constant in a supply schedule?
the price of the good
If a tax is levied on the sellers of a product, then there will be a(n)
upward shift of the supply curve.
The demand curve for coffee shifts
when a determinant of the demand for coffee other than the price of coffee changes