Micro

Midpoint formula

(Qb-Qa/(Qb+Qa/2))/(Pb-Pa/(Pb+Pa/2))

If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is

1.33

suppose the government has imposed a price floor on cell phones. Which of the following events could transform the price floor from one that is binding to one that is not binding? a. cellular phones become less popular b. traditional land line phones become more expensive c. the componenets used to produce cell phones become less expensive d. firms expect the price of cell phones to fall in the future

traditional land line phones become more expensive

eD=1

unit elastic

When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is a. downward sloping b. upward sloping c. horizontal d. vertical

upward sloping

If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market, then the individual farmer's elasticity of demand a. will also be -0.3 b. depends on how large a crop the farmer produces c. will range between -0.3 and -1.0 d. will be infinite

will be infinite

In a perfectly competitive market, the process of entry and exit will end when

Economic profits equal zero, and the price equals the minimum average total cost

Which of the following is held constant when calculating an income elasticity of demand a. the price of the good b. prices of related goods c. tastes d. all of the above

all of the above

According to Arthur Laffer, the graph that represents the amount of tax revenue (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like a. a U b. an upside down U c. a horizontal straight line d. an upward-sloping line or curve

an upside down U

Which of the following statements is correct? a. assuming that explicit costs are positive, economic profit is greater than accounting profit b. assuming that implicit costs are positive, accounting profit is greater than economic profit c. assuming that explicit costs are positive, accounting profit is equal to economic profit d. assuming that implicit costs are positive, economic profit is positive

assuming that implicit costs are positive, economic profit is positive

when a firm is experiencing economies of scale, long-run a. average total cost is minimized b. average total cost is greater than long-run marginal cost c. average total cost is less than long-run marginal cost d. marginal cost is minimized

average total cost is greater than long-run marginal cost

The price elasticities of supply and demand affect a. both the size of the deadweight loss from a tax and the tax incidence b. the size of the deadweight loss from a tax but not the tax incidence c. the tax incidence but not the size of the deadweight loss from a tax d. neither the size of the deadweight loss from a tax nor the tax incidence

both the size of the deadweight loss from a tax and the tax incidence

which of the following is the most likely explanation for the imposition of a price ceiling on the market for milk? a. policymakers have studied the effects of a price ceiling carefully, and they recognize that the price ceiling is advantageous for society as a whole b. buyers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling c. sellers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling d. buyers and sellers of milk have agreed that the price ceiling is good for both of them and have therefore pressured policymakers into imposing the price ceiling

buyers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling

A tax on the sellers of coffee will increase the price of coffee paid by buyers, a. increase the effective price of coffee received by sellers, and increase the equilibrium quantity of coffee b. increase the effective price of coffee received by sellers, and decrease the equilibrium quantity of coffee c. decrease the effective price of coffee received by sellers, and increase the equilibrium quantity of coffee d. decrease the effective price of coffee received by sellers, and decrease the equilibrium quantity of coffee

decrease the effective price of coffee received by sellers, and decrease the equilibrium quantity of coffee

If the government removes a tax on a good, then the price paid by buyers will a. increase, and the price received by sellers will increase b. increase, and the price received by sellers will decrease c. decrease, and the price received by sellers will increase d. decrease, and the price received by sellers will decrease

decrease, and the price received by sellers will increase

In the long run, when marginal cost is above average total cost, the average total cost curve exhibits a. economies of scale b. diseconomies of scale c. constant returns to scale d. efficient scale

diseconomies of scale

eD>1

elastic

if the government removes a binding price ceiling from a market, then the price received by sellers will a. decrease, and the quantity sold in the market will decrease b. decrease, and the quantity sold in the market will increase c. increase, and the quantity sold in the market will decrease d. increase, and the quantity sold in the market will increase

increase, and the quantity sold in the market will increase

eD<1

inelastic

when the price of a candy bar is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, the quantity demanded increases to 600. Given this information and using the midpoint method, we know that the demand for candy bars is a. inelastic b. elastic c. unit elastic d. perfectly inelastic

inelastic

Firms may experience diseconomies of scale when a. they are too small to take advantage of specialization b. large management structures are bureaucratic and inefficient c. there are too few employees, and managers do not have enough to do d. average fixed costs begin to rise again

large management structures are bureaucratic and inefficient

The supply of a good will be more elastic, the a. more the good is considered a luxury b. broader is the definition of the market for the good c. larger the number of close substitutes for the good d. longer the time period being considered

longer the time period being considered

When studying how some event or policy affects a market, elasticity provides information on the: a. equity effects on the market by identifying the winners and losers b. magnitude of the effect on the market c. speed of adjustment of the market in response to the event or policy d. number of market participants who are directly affected by the event or policy

magnitude of the effect on the market

which of the following statements is correct? a. for all firms, marginal revenue equals the price of the good b. only for competitive firms does average revenue equal the price of the good c. marginal revenue can be calculated as total revenue divided by the quantity sold d. only for competitive firms does average revenue equal marginal revenue

only for competitive firms does average revenue equal marginal revenue

eD=0

perfectly inelastic

To fully understand how taxes affect economic well-being, we must compare the a. consumer surplus to the producer surplus b. price paid by buyers to the price received by sellers c. reduced welfare of buyers and sellers to the revenue raised by the government d. consumer surplus to the deadweight loss

reduced welfare of buyers and sellers to the revenue raised by the government

As we move downward and to the right along a linear, downward-sloping demand curve a. both slope and elasticity remain constant b. slope changes but elasticity remains constant c. both slope and elasticity change d. slope remains constant but elasticity changes

slope remains constant but elasticity changes

If the cross-price elasticity of 2 goods is positive, then the two goods are a. substitutes b. complements c. normal goods d. inferior goods

substitutes

Buyers of a product will bear the largest part of the tax burden, and sellers will bear a smaller part of the tax burden, when the a. tax is placed on the sellers of the product b. tax is placed on the buyers of the product c. supply of the product is more elastic than the demand for the product d. demand for the product is more elastic than the supply of the product

supply of the product is more elastic than the demand for the product

Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle. Which of the following statements is correct? a. the effective price received by sellers is $0.40 per bottle less than it was before the tax. b. sixty percent of the burden of the tax falls on sellers c. this tax causes the demand curve for perfume to shift downward by $1.00 at each quantity of perfume. d. all of the above are correct

the effective price received by sellers is $0.40 per bottle less than it was before the tax

The short-run supply curve for a firm in a perfectly competitive market is a. horizontal b. likely to slope downward c. determined by forces external to the firm d. the portion of its marginal cost that lies above its average variable cost

the portion of its marginal cost that lies above its average variable cost

if a price ceiling is not binding, then a. there will be a surplus in the market b. there will be a shortage in the market c. the market will be less efficient that it would be without the price ceiling d. there will be no effect on the market price or quantity sold

there will be no effect on the market price or quantity sold