Micro

If a tax shifts the demand curve downward (left), we can infer that the tax was levied on

buyers of the good.

Bob purchases a book for S6, and his consumer surplus is $2. How much is Bob willing to pay for the book?

$8

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

2.33

All else equal, what happens to consumer surplus if the price of a good increases?

Consumer surplus decreases

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

A 13.33 percent increase in the price of the good

Suppose a tax of $2 per unit is imposed on this market. What will be the new equilibrium quantity in this market?

Between 60 units and 100 units

Suppose the government imposes a $10 per unit tax on a good.

D+F+J

Suppose the goverment imposes a SI tax in each of the four markets represented by demand curves D1, D2. Ds, and Da. The deadweight will be the smallest in the market represented by

D1

For which pairs of goods is the cross-price elasticity most likely to be positive?

Pens and pencils

Which of the following will cause an increase in producer surplus?

The price of a substitute increases

Which of the following is not a determinant of the price elasticity of demand for a good?

The steepness or flatness of the supply curve for the good

A price ceiling is

a legal maximum on the price at which a good can be sold.

When the price ceiling is enforced in this market and the supply curve for gasoline shifts from S to s2.

a shortage will occur at the new market price of P2.

A shortage results when a

binding price ceiling is imposed on a market.

Suppose demand is perfectly elastic, and the supply of the good in question decreases. As a result,

buyers' total expenditure on the good is unchanged.

The imposition of the tax causes the qutintity sold to

decrease by 1 unit.

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

fall by 50 percent.

Suppose the cross-price elasticity of demand between peanut butter and jelly is -2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

fall by 50 percent.

When the price of candy bars 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

inelastic

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

not shift.

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of S3 per tube. As a result of the price floor, the

quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases.

When a tax is levied on a good, the buyers and sellers of the good share the burden,

regardless of how the tax is levied.

A tax levied on the sellers of a good shifts the

supply curve upward by the size of the tax.

If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of

the availability of close substitutes in determining the price elasticity of demand.

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that

the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.

Efficiency in a market is achieved when

the sum of producer surplus and consumer surplus is maximized.

A simultaneous increase in both the demand for tablets and the supply of tablets would imply that

the value of tablets to consumers has increased, and the cost of producing tablets has decreased.