Exam 2 - Micro
An import ban ____ the price of sugar, ____ the total (market) quantity of sugar, and ____ the quantity of sugar produced by domestic firms
None of the above
If a 10% increase in price decreases the quantity demanded by 15%, the price elasticity of demand is:
1.5
IF the marginal cost equals average total cost, we are at the minimum point of the _____ cost curve.
Average Total
Suppose the price elasticity of demand for accordions is 2.0 and the supply elasticity is 3.0. If a subsidy on accordions increases supply by 20%, the equilibrium price will ____ by ____%.
Decrease; 4
Assume that the elasticity of demand for chewing tobacco is 0.70 and the elasticity of supply is 2.30. Suppose an antichewing campaign decreases the demand for chewing tobacco by 18%. The equilibrium price of chewing tobacco will ____ by ____%.
Decrease; 6
Because _____ typically exceeds _____, _____ typically exceeds _____.
Economic costs; accounting costs; accounting profits; economic profits
If demand is elastic, an increase in price will increase total revenue.
False
In the long run, one factor is fixed (usually plant size).
False
Suppose at the current price, the price elasticity of demand for a movie theatre is 0.25. If the price is cut, total revenue will increase.
False
The typical short-run average-cost curve is shaped like the letter U, while the typical long-run average-cost curve is shaped like the letter L because diminishing returns are not applicable in the short run.
False
Demand is relatively inelastic if the product has _____ substitutes, a _____ time passes, and the consumer spends a _____ fraction of his or her budget on the product.
Few; short; small
__________ firms can adjust all factor inputs to meet the needs of the market.
In the long run
Suppose the elasticity of demand for motel rooms is 1.0 and the elasticity of supply is 0.50. If the demand for motel rooms increases by 15%, the equilibrium price of motel rooms will ____ by ____%.
Increase; 10
Suppose the price elasticity of demand for tomatoes is 0.65 and the supply elasticity is 2.35. If there is an increase in demand of 12%, the equilibrium price will _____ by _____.
Increase; 4%
The cross-price elasticity of demand is _____ for substitute goods and _____ for complementary goods.
Positive; negative
The income elasticity of demand is _____ for normal goods and _____ for inferior goods.
Positive; negative
To compute the price elasticity of demand, we divide the percent change in _____ by the percent change in _____ .
Quantity demanded; price
Producer surplus equals _____ minus _____
The amount a producer actually receives; marginal cost
As the number of substitutes for a particular product increases, the price elasticity of demand for the product increases.
True
If demand is inelastic, an increase in price will increase total revenue.
True
Over time, the price elasticity of demand for a product will increase.
True
The demand for coffee is relatively inelastic, therefore, we would expect consumers to pay a relatively large share of a tax on coffee.
True
If demand is elastic, an increase in price _____ total revenue; if demand is inelastic, an increase in price _____ total revenue.
decreases; increases