ECN 101 Exam 2- Syracuse

If a 20 percent increase in the price of Red Bull energy drinks results in a decrease in the quantity demanded of 25 percent, the price elasticity of demand is:

1.25

The current price of wheat is $1.00 per bushel, and the price elasticity of demand for wheat is known to be 0.50. A bad harvest causes the supply of wheat to decrease and as a result the price of wheat rises by 20 percent. What will be the percentage change in quantity demanded for wheat and will farm revenues rise or fall?

10 percent and the total revenue of farmers will rise

Which of the following is an example of a price ceiling or price cap​?

A regulation requires cable service to be provided for no more than​ $30 a month.

If the income elasticity of SUVs is greater than 1, what is the good considered?

A luxury

Which of the following statements describes an elastic supply​? A. A rise in the price of tomatoes by 10 percent increases the quantity supplied by more than that. B. Ron grows both corn and soybean in his field and supplies them to the market. C. Federal officials say that food supply is safe even though a fourth case of mad cow disease has been detected in California. D. A fall in​ Tom's profits by 5 percent changes his supply of chocolates by 1 percent.

A. A rise in the price of tomatoes by 10 percent increases the quantity supplied by more than that.

Which of the following statements describes an elastic demand​? A. Mary's quantity demanded of milk decreased by 8 percent when the price of milk rose by 5 percent. B. A fall in​ Ralph's income by 5 percent changes his demand for chocolates by 1 percent. C. I​ can't afford as many books because my income has fallen. D. Tom's demand for apples does not change when the price of bananas rises.

A. Mary's quantity demanded of milk decreased by 8 percent when the price of milk rose by 5 percent.

When the price of tomatoes rises from​ $3 per pound to​ $4 per​ pound, the quantity of tomatoes sold decreases from 15 pounds to 10 pounds. Total revenue​ _____, and using the total revenue test​, we can determine that the demand for tomatoes is​ _____ . A. decreases from​ $45 to​ $40; elastic B. decreases by​ $5; inelastic C. equals quantity sold divided by​ price; elastic D. initially is​ $45; unit elastic

A. decreases from​ $45 to​ $40; elastic

If the cross-price elasticity of demand between two products is -3.0, then the two products are:

Compliments

Which of the following statements is an example of price elasticity of supply? A. The quality of fruits sold by Safeway is getting better. B. A 10 percent fall in the price of turkey with no other change decreases quantity supplied by 12 percent. C. A 20 percent discount at all Old Navy stores is drawing large crowds. D. Farmers increase their supply of potatoes when the price of onions rises.

B. A 10 percent fall in the price of turkey with no other change decreases quantity supplied by 12 percent.

Which of the following is an example of a positive externality​? A. Singapore has adopted a comprehensive savings plan for all workers known as the Central Provident Fund. Your answer is not correct. B. Compulsory flu shots for all students prevents the spread of illness in the general public. C. A lower inflation rate would benefit most consumers. D.Promoting generic drugs would benefit people.

B. Compulsory flu shots for all students prevents the spread of illness in the general public.

Which of the following statements describes a perfectly inelastic demand​? A. The government is promoting generic drugs that are much cheaper. B. Walgreens does not find any change in the number of people buying chlorthalidone after a 7 percent rise in its price. C. A large number of youngsters buy roses from Colombian​ rose-growers before​ Valentine's Day. D. I prefer taking the subway to work rather than driving because of high fuel prices.

B. Walgreens does not find any change in the number of people buying chlorthalidone after a 7 percent rise in its price

Which of the following is an example of price elasticity of demand​? A. Banana farmers enjoyed higher prices when the demand for bananas increased. B. When the price of bananas increased by 5 percent and incomes​ slumped, banana sales decreased by 5 percent. C. Richer people buy fewer bananas than poorer people. D. When the price of bananas increased by 5 percent and nothing else​ changed, the quantity of bananas demanded decreased by 2 percent.

B. When the price of bananas increased by 5 percent and incomes​ slumped, banana sales decreased by 5 percent.

The demand for plums is unit elastic if​ _____. A. the price of plums does not change after a drought B. a 5 percent rise in the price of plums results in a 5 percent decrease in the quantity of plums demanded C. my demand for plums increases when the price of apples falls D. any increase in the price of plums results in a 1 percent decrease in the quantity of plums demanded

B. a 5 percent rise in the price of plums results in a 5 percent decrease in the quantity of plums demanded

Which of the following statements illustrates income elasticity of demand​? A. A rise in​ Annie's income by 5 percent decreases supply of canned fruits by 6 percent. B. Poor economic conditions are resulting in higher unemployment and lower aggregate demand. C. A salary cut and no other changes has resulted in Mary buying less fast food. D. A 2 percent fall in the price of peanuts increases​ Ralph's demand for almonds by 5 percent.

C. A salary cut and no other changes has resulted in Mary buying less fast food.

Which of the following statements describe an inelastic demand​? A. A rise in the tax rate has decreased imports of auto parts from China. B. People are buying HDTVs before the Super Bowl game begins. C. Megan did not buy too many hockey tickets even though their price dropped by 10 percent. D. Housing prices in London rose by 10 percent due to rock bottom interest rates.

C. Megan did not buy too many hockey tickets even though their price dropped by 10 percent.

Which of the following goods is probably the most highly income elastic? A. Salt B. Food C. Private Education

C. Private Education

Which of the following statements is an example of perfectly inelastic supply​? A. Twitter plans to raise​ $1 billion in an IPO. B. In​ India, poor supply chain management is one of the reasons for high inflation. C. When the price of insulin falls by 10​ percent, Rite Aid pharmacy continues to supply the same quantity. D. A 5 percent rise in the price decreases quantity supplied by zero percent.

C. When the price of insulin falls by 10​ percent, Rite Aid pharmacy continues to supply the same quantity.

Which of the following statements describes cross price elasticity of demand​? A. A 10 percent rise in the price of ink cartridges decreases the quantity demanded of ink cartridges by 6 percent. B. A quota imposed on the production of potatoes has increased supply of onions. C. A weaker rupee against the dollar has increased​ India's export competitiveness. D. As a result of a rise in the price of spinach with all else remaining​ constant, Ralph buys more​ broccoli, a substitute for spinach.

D. As a result of a rise in the price of spinach with all else remaining​ constant, Ralph buys more​ broccoli, a substitute for spinach.

Which of the following illustrates a unit elastic supply​? A. Webster Dictionaries and Oxford Dictionaries are almost perfect substitutes and therefore have a constant elasticity of substitution. B. A 5 percent increase in wage rates has increased the cost of production in China by 5 percent. C. The supply of lettuce will be more elastic in the long run than the supply today. D. Dan says that a 10 percent rise in the price of movie tickets increases the quantity of movie tickets supplied by the same proportion.

D. Dan says that a 10 percent rise in the price of movie tickets increases the quantity of movie tickets supplied by the same proportion.

Which of the following best describes a subsidy? A. Farmers pay the government $100 per ton of wheat produced. B. Banks make low-interest loans to farmers. C. The government puts a tax of $100 per ton on wheat imports. D. The government pays farmers $100 per ton of wheat produced.

D. The government pays farmers $100 per ton of wheat produced.

Which of the following is an example of a production quota​?

The government sets an upper limit on the quantity that each dairy farmer can produce.

When a competitive market is in equilibrium, what is the economically efficient level of output?

The level of output where marginal benefit is equal to marginal cost.

When is output less than the efficient level?

When marginal benefit is greater than marginal cost

When resources are used to produce the goods and services with the greatest value, there is

allocative efficiency

Marginal external benefit is the benefit from​ _____ of a good or service that people other than the​ _____ of that good or service enjoy.

an additional​ unit; consumer

Marginal private benefit is the benefit from​ ______ of a good or service that the​ _____ of the good or service receives.

an additional​ unit; consumer

Marginal external cost is the cost of producing​ _____ of a good or service that falls on people other than the​ _____.

an additional​ unit; producer

Marginal private cost is the cost of producing​ _____ of a good or service that is borne by the​ _____ of that good or service.

an additional​ unit; producer

An increase in the price of a substitute for iPads will lead to __________ in the quantity demanded of iPads so the cross-price elasticity of demand will be __________.

an increase, positive

Tax incidence is the division of the burden of a tax between the​ _____ and the​ _____.

buyer; seller

The difference between the highest price a consumer is willing to pay and the amount a consumer actually pays for a good or service is known as:

consumer surplus

Total surplus is the sum of​ _____ and​ _____.

consumer​ surplus; producer surplus

An externality is a​ _____ that arises from production and that falls on someone other than the​ producer; or a​ _____ that arises from consumption and that falls on someone other than the consumer.

cost or​ benefit; cost or benefit

The excess burden of a tax is the​ _____ that results from it.

deadweight loss

Market failure is a situation in which the market​ _____ .

delivers an insufficient outcome

If a 20 percent increase in the price of Red Bull energy drinks results in a decrease in quantity demanded of 25 percent, we say the demand for Red Bull is __________ in this range.

elastic

If the price elasticity of supply is 0.4, then a 20 percent increase in price will __________ the quantity supplied by __________ percent.

increase, 8.0

A perfectly inelastic supply curve:

indicates the quantity supplied does not respond to a change in price

If the price elasticity of demand is 0.33 then demand is __________ .

inelastic

The demand for a highly addictive drug is likely

inelastic

Along a linear, downward sloping demand curve, the slope __________ while the price elasticity of demand __________.

is constant, changes from one point to another

The more substitutes that exist for a particular good, the __________ the price elasticity of demand.

larger

Consumer surplus is the​ _____ from a good or​ service, in excess of the​ _____, summed over the quantity consumed.

marginal​ benefit; price paid for it

The price elasticity of supply always has a:

positive value

Producer surplus is the​ _____ a good or​ service, in excess of the​ _____ of producing​ it, summed over the quantity produced.

price​ of; marginal cost

Marginal social benefit is the benefit enjoyed by society​ - by the consumer of a good or service and by everyone else who benefits from it. It is the sum of marginal​ ______ and marginal​ ______.

private​ benefit; external benefit

Marginal social cost is the marginal cost incurred by the entire society​ - by the producer and by everyone else on whom the cost falls. It is the sum of marginal​ _____ and marginal​ _____.

private​ cost; external cost

The difference between the lowest price a producer would be willing to accept for a good or service and the price the producer actually receives is known as:

producer surplus

Which of these demand curves shows a perfectly inelastic demand?

the demand curve on the left

For goods such as computer game consoles, if the price rises the quantity supplied will be greater:

the longer the time that elapses

What does the sum of consumer surplus and producer surplus equal?

total surplus

Deadweight loss is the decrease in​ _____ that results from an inefficient​ _____ or​ _____.

total​ surplus; underproduction; overproduction

Allocative efficiency is a situation in which the quantities of goods and services produced are those that people​ _____ - it is not possible to produce more of a good or service​ _____ some of another good that people​ _____.

value most highly, without giving up, value more highly

Allocative efficiency is a situation in which the quantities of goods and services produced are those that people ___ -it is not possible to produce more of a good or service___ some of another good that people____.

value most highly: without giving up: value more highly

What is the cross-price elasticity of demand for two goods that are unrelated?

zero

A minimum wage law is a government regulation that makes hiring labor services for​ _____ than a specified wage​ _____.

​less; illegal