eco test 2 mea ahlberg

Suppose the equilibrium price for apartments is $800 per month and the government imposes rent controls of $500. Which of the following is unlikely to occur as a result of the rent controls?

. The quality of apartments will improve

A $1 per unit tax levied on consumers of a good is equivalent to

. a $1 per unit tax levied on producers of the good.

The price of a good rises from $16 to $24, and the quantity supplied rises from 90 to 110 units. Calculated with the midpoint method, the price elasticity of supply is

1/2

A price floor

A legal minimum on the price at which a good can be sold

more elastic: A)Shoes in general or light-up shoes B)Vanilla ice cream or desserts C)Gasoline over the next 3 years or gasoline over the next 4 months D)Pens in general or blue ballpoint pens

A) light up shoes B)vanilla ice cream C)gas over 3 yrs D)blue pens

Which of the following is likely to have the most price inelastic demand?

Athletic shoes

What happens to consumer surplus in the cell phone market if cell phones are normal goods and income of the cell phone buyers rises?

Consumer surplus may increase, decrease, or remain unchanged.

Which of the following is likely to have the most price elastic demand?

Häagen-Dazs® vanilla bean ice cream

Which of the following is true when the price of a good or service falls?

More buyers enter the market.

If the price of milk rises, when is the price elasticity of demand likely to be the highest?

One year after the price increase

Which of the following is not a rationing mechanism used by landlords in cities with rent control?

Price

Which of the following events would increase producer surplus?

Sellers' costs stay the same and the price of the good increases.

Which of the following causes the price paid by buyers to be different than the price received by sellers?

Tax on the good

The minimum wage was instituted to ensure workers

a minimally adequate standard of living.

If the price elasticity of supply is zero, the supply curve is

a. vertical

When the government imposes a binding price floor, it causes

a. a surplus of the good to develop

Which of the following takes place when a tax is placed on a good?

a. an increase in the price buyers pay, a decrease in the price sellers receive, and a decrease in the quantity sold

If the income elasticity of demand for a good is negative, it must be

a. an inferior good.

The surplus caused by a binding price floor will be greatest if

a. both supply and demand are elastic.

Studies show that a 10 percent increase in the minimum wage

a. decreases teenage employment by about 1 to 3 percent.

Within the supply-and-demand model, a tax collected from the buyers of a good shifts the

a. demand curve downward by the size of the tax per unit.

The burden of a tax falls more heavily on the buyers in a market when

a. demand is inelastic and supply is elastic

A decrease in supply (shift to the left) will increase total revenue in that market if

a. demand is price inelastic.

A tax placed on a good that is a necessity for consumers will likely generate a tax burden that

a. falls more heavily on buyers.

Within the supply-and-demand model, a tax collected from the sellers of a good shifts the

a. supply curve upward by the size of the tax per unit.

If a supply curve for a good is price elastic, then

a. the quantity supplied is sensitive to changes in the price of that good.

When a tax is collected from the buyers in a market,

a. the tax burden on the buyers and sellers is the same as an equivalent tax collected from the sellers.

An increase in the supply of grain will reduce the total revenue grain producers receive if

b. the demand curve is inelastic

The ability of firms to enter and exit a market over time means that, in the long run,

b. the supply curve is more elastic.

If consumers always spend 15 percent of their income on food, then the income elasticity of demand for food is

b. 1.00

The burden of a tax falls more heavily on the sellers in a market when

b. demand is elastic and supply is inelastic.

If supply is price inelastic, the value of the price elasticity of supply must be

b. less than 1.

Because the demand curve for oil is ________ elastic in the long run, OPEC's reduction in the supply of oil had a ________ impact on the price in the long run than it did in the short run.

b. more, smaller

A tax of $1.00 per gallon on gasoline

b. places a tax wedge of $1.00 between the price the buyers pay and the price the sellers receive.

When a good is taxed, the burden of the tax falls mainly on consumers if

b. supply is elastic and demand is inelastic

Which of the following causes a surplus of a good?

binding price floor

A good will have a more inelastic demand, the

broader the definition of the market

When a tax is placed on the buyers of lemonade, the

burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal.

Demand is said to be price elastic if

buyers respond substantially to changes in the price of the good

The citizens of Lilliput spend a higher fraction of their income on food than do the citizens of Brobdingnag. The reason could be that

c. Lilliput has lower income, and the income elasticity of demand is 0.5.

An increase in a good's price reduces the total amount consumers spend on the good if the ________ elasticity of demand is ________ than one.

c. price, greater

Which of the following statements is true if the government places a price ceiling on gasoline at $4.00 per gallon and the equilibrium price is $3.00 per gallon?

c. A significant increase in the demand for gasoline could cause the price ceiling to become a binding constraint.

Which of the following statements about a binding price ceiling is true?

c. The shortage created by the price ceiling is greater in the long run than in the short run.

For which of the following products would the burden of a tax likely fall more heavily on the sellers?

c. entertainment

Rent control causes larger shortages in the ________ run because over that time horizon, supply and demand are ________ elastic

c. long, more

If a small percentage increase in the price of a good greatly reduces the quantity demanded for that good, the demand for that good is

c. price elastic.

Technological improvements in agriculture that shift the supply of agricultural commodities to the right tend to

c. reduce total revenue to farmers as a whole because the demand for food is inelastic.

Which of the following is an example of a price floor?

c. the minimum wage

The price elasticity of demand is defined as

c. the percentage change in the quantity demanded of a good divided by the percentage change in the price of that good.

Which side of the market is more likely to lobby government for a price floor?

c. the sellers

If an increase in the price of a good has no impact on the total revenue in that market, demand must be

c. unit price elastic.

If a consumer places a value of $14 on a particular good and if the price of the good is $12, then the

consumer enjoys consumer surplus if he or she buys the good.

On a graph, the area below a demand curve and above the price measures

consumer surplus.

Justin builds furniture for a living. Justin's out-of-pocket expenses (for wood, paint, etc.) plus the value that he places on his own time amount to his

cost of building furniture.

In competitive markets, farmers adopt new technologies that will eventually reduce their revenue because

d. each farmer is a price taker.

A linear, downward-sloping demand curve is

d. inelastic at some points, and elastic at others.

A good tends to have a small price elasticity of demand if

d. the good is a necessity.

Which of the following statements about the burden of a tax is correct?

d. The distribution of the burden of a tax is determined by the relative elasticities of supply and demand and is not determined by legislation.

A binding price ceiling creates

d. a shortage.

For a price ceiling to be a binding constraint on the market, the government must set it

d. below the equilibrium price.

In a market with a binding price ceiling, increasing the ceiling price will

d. decrease the shortage

If consumers think that there are very few substitutes for a good, then

d. demand would tend to be price inelastic

An increase in the minimum wage reduces the total amount paid to the affected workers if the price elasticity of ________ is ________ than one.

d. demand, greate

The demand for which of the following is likely to be the most price inelastic?

d. transportation

Steak and chicken are substitutes. A sharp reduction in the supply of steak would

decrease consumer surplus in the market for steak and increase producer surplus in the market for chicken.

The demand for grape-flavored Hubba Bubba bubble gum is likely

elastic because there are many close substitutes for grape-flavored Hubba Bubba.

If demand is linear (a straight line), then price elasticity of demand is

elastic in the upper portion and inelastic in the lower portion.

Complete the following table by indicating whether the elasticity of demand, the elasticity of supply, both, or neither affect the magnitude of the change in employment and unemployment.

employment: elastic of demand and Unemployment elastic of supply and demand

Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the

flatter the demand curve will be.

The goal of rent control is to

help the poor by making housing more affordable

An example of positive analysis is studying

how market forces produce equilibrium.

If the demand for unskilled labor were inelastic, the proposed increase in the minimum wage would _____ the total wage payments to unskilled workers.

increase

When large changes in price lead to no changes in quantity demanded, demand is perfectly

inelastic, and the demand curve will be vertical

to say that a price ceiling is nonbinding is to say that the price ceiling

is set above the equilibrium price

Most labor economists believe that the supply of labor is

less elastic than the demand, and, therefore, workers bear most of the burden of the payroll tax.

The supply of a good will be more elastic, the

longer the time period being considered.

One disadvantage of government subsidies over price controls is that subsidies

make higher taxes necessary.

Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market

may increase, decrease, or remain unchanged.

Goods with many close substitutes tend to have

more elastic demands

The burden of a luxury tax usually falls

more on the middle class than on the rich.

When a tax is placed on the sellers of a product, buyers pay

more, and sellers receive less than they did before the tax.

As a result of a decrease in price,

new buyers enter the market, increasing consumer surplus

If a tax is levied on the sellers of a product, then the demand curve will

not shift

The presence of a price control in a market for a good or service usually is an indication tha

policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.

If there is excess capacity in a production facility, it is likely that the firm's supply curve is

price elastic.

Suppose that in a particular market, the supply curve is highly inelastic and the demand curve is highly elastic. If a tax is imposed in this market, then the

sellers will bear a greater burden of the tax than the buyers.

A supply curve can be used to measure producer surplus because it reflects

sellers' costs.

For a good that is a luxury, demand

tends to be elastic

In the 1970s, long lines at gas stations in the United States were primarily a result of the fact that

the U.S. government maintained a price ceiling on gasoline.

Which of the following increases quantity supplied, decreases quantity demanded, and increases the price that consumers pay

the imposition of a binding price floor

Income elasticity of demand measures how

the quantity demanded changes as consumer income changes.

Demand is said to be inelastic if

the quantity demanded changes only slightly when the price of the good changes.

Which of the following increases quantity supplied, increases quantity demanded, and decreases the price that consumers pay?

the repeal of a tax on a good

If marijuana were legalized, it is likely that there would be an increase in the demand for marijuana. If demand for marijuana is inelastic and the supply of marijuana is perfectly elastic, this will result in

the same price and higher total revenue from marijuana sales.

Efficiency in a market is achieved when

the sum of producer surplus and consumer surplus is maximized.

Metta says that she will spend exactly $25 each month on new apps for her mobile device, regardless of the price of apps. Metta's demand for apps is

unit elastic.

A seller's opportunity cost measures the

value of everything she must give up to produce a good.

The maximum price that a buyer will pay for a good is called

willingness to pay .

Consider the market for gasoline. Buyers

would lobby for a price ceiling, whereas sellers would lobby for a price floor.

If a fisherman must sell all of his daily catch before it spoils for whatever price he is offered, once the fish are caught, the fisherman's price elasticity of supply for fresh fish is

zero