Microeconomics Final

The price elasticity of demand for good X is equal to zero (completely inelastic), and the price elasticity of supply is equal to 0.5; if a $1 excise tax is levied on producers, how much of this tax will eventually be paid by consumers? $0.50 $1.50 $1 $0

$1

Following that labor market, where demand and supply are described as: Qd = 53 - 3 W; and Qs = -10 + 6 W; W = wage (price of labor), and Q is in million workers. The deadweight loss due the minimum wage at $8 is: $2.25 million $2 million $4 million $4.50 million

$2.25 million

If price elasticity of demand for good X is 2 and the price elasticity of supply for good X is 3; if an excise tax of $40 levied on good x, consumers will end up paying _______ and producers paying __________. $15; $25 $24; $16 $16; $24 $25; $15

$24; $16

In the market for labor, demand and supply are described as: Qd = 53 - 3 W; and Qs = -10 + 6 W; W = wage (price of labor), and Q is in million workers. The equilibrium wage and quantity are: $6 and 30 million workers $7 and 30 million workers $6 and 32 million workers $7 and 32 million workers

$7 and 32 million workers

Using the same Demand and Supply curves that can be represented by: Qd = 90-2P; and Qs = 3P. Consumer Surplus is: $486 $729 $1944 $342

$729

If the government follows an income tax system in which income up to $25,000 is taxed 4%, income greater than $25,000 and less than or equal to $50,000 is taxed at a rate of 10% and income over $50,000 is taxed at a rate of 25%; then a family earning $60,000 will pay an average tax rate of (assumed there is no deductions or exemptions): 12.5% 10% 15% 25%

10%

In Swedagon nation, the tax system is as follows: income from $0 to $20,000, tax rate is 25%; and income above $20,000 is taxed at 50%. What effective percentage of income does an individual pay in taxes under this tax system if that individual's pre-tax income is $40,000? 125% 12.5% 25% 37.5%

37.5%

Suppose there are 30,000 people stay in hotel rooms on an average night in San Diego. If the average level of consumer surplus for each hotel guest equals $24, what is the total consumer surplus per night? A: $720,000 B: $600,000 C: $480,000 D: $528,000

A: $720,000

Using all his resources, Lorenzo can make 15 pizzas a day or 25 colas a day. The opportunity cost of producing 1 pizza is: A: 1.67 colas B: 1.67 pizzas C: 0.6 pizzas D: 0.6 colas

A: 1.67 colas

Ted's annual salary is $35,000 and he pays his last year tax $5,000. While Gaby's salary is $45,000, and she pays tax of $7,500. Based on these two persons, we can say that the tax rate (slope) is: A: 25% B: 23% C: 10% D: 20%

A: 25%

Which of the following statements is true? A: All countries can gain from trade if they all specialize in production according to comparative advantage B: Comparative advantage in producing a certain item arises from being the first country to manufacture that item. C: A country cannot have a comparative advantage in producing a particular good unless it first has an absolute advantage in producing that good. D: A country cannot have comparative advantage in producing a certain item if it causes an increasing opportunity cost in producing the item

A: All countries can gain from trade if they all specialize in production according to comparative advantage

Which of the following is a normative statement? A: Camera makes a good wedding gift. B: An increase in the price of cameras will decrease the number of cameras sold. C: The United States imports most of its cameras from Asia. D: A decrease in the price of digital cameras will decrease the demand for camera film.

A: Camera makes a good wedding gift.

Assume the cross-price elasticity of demand for Coke and Pepsi is equal to 3. If Pepsi raises its price by 10%, then the quantity of: A: Coke demanded will increase by 30% B: Pepsi demanded will decrease by 30% C: Pepsi demanded will increase by 30% D: Coke demanded will decrease by 30%

A: Coke demanded will increase by 30%

Which of the following is NOT a predictable result of a price ceiling? A: Excessive profits for producers of the good B: development of an illegal black market C: persistent shortage D: an inefficiently low quality of the good

A: Excessive profits for producers of the good

Which of the following provides the best example of the law of supply? A: Falling labor costs cause an increase in supply B: improved technology shifts the supply curve to the left C: producers are willing to supply a greater quantity of a good at a lower price. D: some producers leave the industry, and the supply curve shifts to the right

A: Falling labor costs cause an increase in supply

Research finds that there's no relationship between how many diet books bought with how many pounds weight loss. A: Number of diet books is the independent variable B: The correlation is negative C: Number of diet books is the dependent variable D: The correlation is positive

A: Number of diet books is the independent variable

Excise tax cause deadweight loss when it: A: Raises the price of the good being taxed B: Increases the quantity of the good supplied and demanded in the market C: All (a,b,c) are true D: Creates an incentive for mutually beneficial exchanges to take place.

A: Raises the price of the good being taxed

In contrast to Federal taxes, taxes at the state and local level in the United States: A: Tend to be more regressive B: Apply the ability-to-pay principle more frequently C: Tend to be more proportional D: Tend to be more progressive

A: Tend to be more regressive

If an economist argues that everyone gains from trade, what reasoning is most likely underlying her argument? A: That production according to the principle of comparative advantage lowers overall costs and therefore allows everyone to have a higher standard of living. B: That trading with other countries does not affect the number or the type of remaining domestic jobs. C: That export industries are the most important part of the economy. D: That trading with other countries enriches those who work in the shipping industry, and that shipping is a key sector of the economy

A: That production according to the principle of comparative advantage lowers overall costs and therefore allows everyone to have a higher standard of living.

Consumer surplus is: A: The difference between the price that consumers are willing to pay for a good and the amount they actually pay. B: The quantity of a good that remains on the market in instances of market failure. C: The amount of revenue collected from a tax D: The difference between the quantity of a good demanded and the quantity supplied.

A: The difference between the price that consumers are willing to pay for a good and the amount they actually pay.

The more a good is a necessity: A: The more inelastic its demand curve B: the more unit elastic its demand curve C: the more elastic its demand curve

A: The more inelastic its demand curve

Which of the following does not cause a shift in the demand curve? A: The price of the good itself B: The availability and price of other goods C: Income D: Tastes

A: The price of the good itself

Assume that after graduation, you land a marketing job with Canon - in the digital camera division. After introducing a new digital camera, you estimate that the price elasticity of demand for the camera equals 2, and the income elasticity of demand is equal to 0.5; furthermore, the cross-price elasticity with a similar Kodak camera is equal to 1.25. Based on the above elasticity information, you would conclude for the new Canon camera: A: The product demand is elastic, and if your firm decreases the price, total revenue will increase. B: The product demand is inelastic, and if your firm decreases the price, total revenue will increase. C: The product demand is inelastic, and if your firm increases the price, total revenue will increase. D: The product demand is elastic, and if your firm increases the price, total revenue will increase.

A: The product demand is elastic, and if your firm decreases the price, total revenue will increase.

As a manager, you have determined that the demand for your good is quite elastic, therefore: A: decreasing the price of your good will increase revenue B: any change in your price will not impact revenues. C: increasing the price of your good will increase revenue D: increasing the price of your good will have no impact on the quantity demanded

A: decreasing the price of your good will increase revenue

Policymakers wish to impose a proportional, or flat, tax based on income. Which of the following is in line with the policy? A: income tax rate (in percent) is constant or unchanged at any level of income B: income tax rate (in percent) is increasing as income rises C: income tax rate (in percent) is decreasing as income rises

A: income tax rate (in percent) is constant or unchanged at any level of income

Policymakers wish to impose a regressive tax based on income. Which of the following is in line with the policy? A: income tax rate (in percent) is decreasing as income rises B: income tax rate (in percent) is constant or unchanged at any level of income C: income tax rate (in percent) is increasing as income rises

A: income tax rate (in percent) is decreasing as income rises

Graciela is willing to sell 1 dozen roses for $50, while Giuseppe is willing to sell 1 dozen roses for $60. Carlos is willing to buy 1 dozen roses for $60, while Yuriko is willing to pay $50. If the market PRICE is $52, how many roses are sold, and what is the sumtotal of consumer and producer surplus after the transaction: A: one dozen roses will be sold, and the total surplus will be $10 B: one dozen roses will be sold, and the total surplus will be $16 C: no roses will be sold, and consequently the total surplus will be $0. D: two dozen roses will be sold, and the total surplus will be $10

A: one dozen roses will be sold, and the total surplus will be $10

Which group would be most likely to benefit from a price floor imposed on wheat? A: sellers of wheat who are seeking higher prices B: sellers of goods considered complements to wheat, who hope to sell larger quantities of their product C: consumer goods hoping to keep overall food prices low D: buyers of wheat who are seeking lower prices

A: sellers of wheat who are seeking higher prices

What happens to the elasticity of demand as we move down to the right along a straight-line demand curve? A: the demand becomes relatively less elastic B: It changes from a positive number to a negative number C: the demand becomes relatively more elastic D: It changes from a negative number to a positive number

A: the demand becomes relatively less elastic

Demand and Supply curves can be represented by: Qd = 90-2P; and Qs = 3P. Calculate the equilibrium price and quantity: A: P = $30; and Q = 30 B: = $18; and Q = 54 C: P = $90; and Q = 45 D: P = $30; and Q = 54

B: = $18; and Q = 54

This year Joe's income increased by 15% while the quantity of bananas he consumed increased by 8%, and the quantity of orange juice he consumed increased by 6%. Which of the following statement is true for Joe? A: Bananas and orange juice are both inferior goods. B: Bananas and orange juice are both normal goods C: Bananas are normal good, and orange juice is an inferior good D: Bananas are inferior good and orange juice is a normal good

B: Bananas and orange juice are both normal goods

Drinking one more cup of coffee this afternoon will give me that jittery feeling, but it will keep me awake for four more hours to work on my assignment. The principle underlying this is: A: exploit opportunities to better off B: marginal analysis C: Opportunity cost D: none of the above

B: Marginal Analysis

Suppose that in Australia, it takes 1 hour of labor to harvest 5 bushels of apples or 2.5 bushels of tomatoes. Suppose that a worker in Brazil in one hour, can harvest 2.5 bushels of apples or 2 bushels of tomatoes. Which of the following is true? A: Of the two countries, Brazil has comparative advantage in producing apples. B: Of the two countries, Brazil has a comparative advantage in producing tomatoes. C: In trade between these two countries, Australia would gain and Brazil would lose. D: Brazil has an absolute advantage in producing both goods.

B: Of the two countries, Brazil has a comparative advantage in producing tomatoes.

More people choose to do their own home repairs when the economy is slow and wages are down. The principle underlying this is: A: none of the above B: Opportunity cost C: marginal analysis D: Equilibrium

B: Opportunity Cost

Most individuals choose careers in which they specialize, yet as consumers they have access to a wide variety of goods and services. What principle allows for this? A: Equity B: Opportunity Cost C: Trade D: Scarcity

B: Opportunity cost

You promise yourself that you will be having a nice dinner if you can get a good result on your economic test tonight; the principle underlying this is: A: government policies impact on spending B: incentives work C: opportunity cost D: resources are scarce

B: incentives work

Given a downward-sloping market demand curve for digital cameras, if the price of digital cameras decreases from $350 to $250, then, ceteris paribus, the: A: quantity demanded of digital cameras will decrease B: quantity demanded of digital cameras will increase C: Demand for digital cameras will decrease D: supply of digital cameras will increase since sellers know that consumers will buy more.

B: quantity demanded of digital cameras will increase

The sign (negative or positive) on the cross-price elasticity of demand for wine and chocolate tells us: A: whether wine is a normal good B: whether wine and chocolate are substitutes or complements C: that the burden of tax on either good would be split between consumers and producers D: whether chocolate is a normal good

B: whether wine and chocolate are substitutes or complements

Using the same Demand and Supply curves that can be represented by: Qd = 90-2P; and Qs = 3P. Producer Surplus is: A: $900 B: $243 C: $486 D: $118

C: $486

"The aggregate, overall, price rate is expected to increase in the coming years". This statement is an issue of: A: Microeconomics B: None of the above C: Macroeconomics

C: Macroeconomics

Mario is willing to mow one lawn for $18, he will mow a second for $22, and a third for $28. Assume that the market rate for lawn-mowing is $24. How many lawns will Mario mow? What will be his total revenue? What will be his producer surplus? A: Mario will mow three lawns for total revenue of $72, and his producer surplus will be $4 B: Mario will mow two lawns for total revenue of $72, and his producer surplus will be $2 C: Mario will mow two lawns for total revenue of $48, and his producer surplus will be $8 D: Mario will mow two lawns for total revenue of $48, and his producer surplus will be $2

C: Mario will mow two lawns for total revenue of $48, and his producer surplus will be $8

Assume that we have a PPF. Point A lies inside (to the left) of the frontier. Point B and C are located along the frontier, and Point D is located outside (to the right) the frontier. Which points represent efficient production points? A: All points (A,B, C and D) are efficient. B: Points A, B and C are efficient C: Points B and C are efficient D: Points B, C, and D are efficient

C: Points B and C are efficient

Which of the following statements regarding price floors is true? A: price floor makes markets more efficient, but they diminish profit levels. B: Price floors result in shortages. C: Price floors are intended to help producers, but they have side effects that may harm others. D: price floors always benefit consumers and harm producers.

C: Price floors are intended to help producers, but they have side effects that may harm others.

As an economy moves from point to point along its PPF, what is changing? A: the amount of resources available in the economy B: the productivity of the economy C: The allocation of resources used for different combination of goods D: the size of the labor force

C: The allocation of resources used for different combination of goods

Which of the following will typically cause a decrease in the demand for automobiles? A: consumer expectations that the price of automobiles will be higher next year. B: an increase in consumers' income C: an increase in gasoline prices D: an decrease in the price of automobiles

C: an increase in gasoline prices

If coffee sold at Starbucks is a normal good, then an increase in income will: A: increase the supply of Starbucks coffee B: decrease the demand for Starbucks coffee C: increase the demand for Starbucks coffee D: decrease the supply of Starbucks coffee

C: increase the demand for Starbucks coffee

Consider two competing gas stations located on opposite corners: BP and Shell. If BP lowers the price per gallon that it charges customers, and the effect on Shell is a: A: rightward shift in demand for Shell's gas and a higher price for Shell's gas. B: decrease in the quantity demanded for Shell and a higher price C: leftward shift in demand for Shell's gas and a lower price for Shell's gas D: rightward shift in Shell's supply curve and a lower price for Shell's gas

C: leftward shift in demand for Shell's gas and a lower price for Shell's gas

Consider a BP gas station. As a result of an economic recession and decreases in consumer incomes, there will be a: A: leftward shift in the station's supply curve and higher gas prices B: rightward shift in the station's demand curve and higher gas prices C: leftward shift in the station's demand curve and lower gas prices D: rightward shift in the station's supply curve and lower gas prices

C: leftward shift in the station's demand curve and lower gas prices

Laffer curve (the relationship between tax rate and tax revenue) states that tax revenue increases along with the increase in tax rate, but at a certain level of tax rate, it starts discourage workers, hence the tax revenue might decrease; the curve will be: A: slope downward B: slope upward C: non-linear D: be horizontal line

C: non-linear

Bar owners often offer lower beer prices to women than they do to men. This will enhance bar revenues if: A: women have a unit-elastic demand for beer B: women have an inelastic demand for beer C: women have an elastic demand for beer D: women have a negative income elasticity of demand for beer

C: women have an elastic demand for beer

When the price elasticity of demand is low and the price elasticity of supply is high, the burden of an excise tax falls primarily on: Producers Consumers Equally divided None of the above

Consumers

The deadweight loss due to the imposition of an excise tax is lowest when: A: Demand is relatively inelastic and supply is relatively elastic B: Demand is relatively elastic and supply is relatively elastic C: Demand is relatively elastic and supply is relatively inelastic D: Demand is relatively inelastic and supply is relatively inelastic

D: Demand is relatively inelastic and supply is relatively inelastic

According to the law of demand, a demand curve: A: Is a horizontal, or flat, line B: Slopes upward to the right C: Exceeds the economy's ability to produce because people have unlimited wants D: Slopes downward to the right

D: Slopes downward to the right

In his book, The Wealth of Nations, Adam Smith used the example of pin-making to illustrate the advantages of: A: Equity B: interaction of choices C: marginal analysis D: Specialization

D: Specialization

Economists typically depict the PPF as a bowed out (concave) curve rather than as a straight line in order to show that: A: opportunity cost is always present. B: resources used in the production of one good are less than in another C: The opportunity cost of producing a good declines as more is produced D: The opportunity cost of producing a good rises as more is produced

D: The opportunity cost of producing a good rises as more is produced

If a PPF has an increasing marginal opportunity cost, the curve looks like: A: infinite line B: straight line C: bowed-in curve D: bowed-out curve

D: bowed-out curve

Cet. par., a leftward shift of the supply curve causes the equilibrium price to ____ and the equilibrium quantity to ________. A: increase; increase B: decrease; decrease C: decrease; increase D: increase; decrease

D: increase; decrease

Scarcity could be reduced if: A: innovation comes to a halt. B: world population grows and world production remains the same C: individuals work less and want fewer consumption goods D: individuals work more and want fewer consumption goods

D: individuals work more and want fewer consumption goods

The price of a book declines from $50 to $47.50, and quantity demanded rises from 1,000 to 1,075; which of the following is true: A: price elasticity of demand is elastic and therefore total revenue declines. B: price elasticity of demand is inelastic and therefore total revenue declines. C: price elasticity of demand is inelastic and therefore total revenue increases. D: price elasticity of demand is elastic and therefore total revenue increases.

D: price elasticity of demand is elastic and therefore total revenue increases.

If two variables are positively correlated, the line will: A: be horizontal line B: slope downward C: non-linear D: slope upward

D: slope upward

Following the labor market, where demand and supply are described as: Qd = 53 - 3 W; and Qs = -10 + 6 W; W = wage (price of labor), and Q is in million workers. Suppose the government imposed a minimum wage at $8. Calculate Qd and Qs when wage is $8. There is a: A: shortage of labor by 8 million workers B: surplus of labor by 8 million workers C: shortage of labor by 9 million workers D: surplus of labor by 9 million workers

D: surplus of labor by 9 million workers

Producer surplus is: A: the price the producer receives at equilibrium B: the difference between the quantity demanded and the quantity supplied. C: the amount of revenue collected from a tax D: the difference between the price producers receive and the amount they are willing to sell.

D: the difference between the price producers receive and the amount they are willing to sell.

. What determines the price elasticity of supply? A: the number of substitutes consumers can find for the good B: the amount of tax impose on a good C: the difference between the equilibrium price of a good and the price established by a price floor D: the ease with which suppliers can expand production of the good

D: the ease with which suppliers can expand production of the good

In a market, the equilibrium price is determined by: A: the behavior of sellers but not the behavior of buyers B: the behavior of buyers but not the behaviors of sellers C: what the government thinks is fair D: the intersection of demand and supply

D: the intersection of demand and supply

The cross-price elasticity of demand between movie tickets and theater popcorn is estimated to equal 0.6. Suppose movie ticket prices increased by 20% this year, the theater popcorn's sales will: Increase by 1.2% Decrease by 12% Increase by 12% Decrease by 1.2%

Decrease by 12%

Suppose the government imposes a $9 per unit tax on good Z. If the demand curve for good Z is perfectly elastic and the supply curve is upward-sloping, the price that consumers pay for the good will: Increase by more than $9 Not change Increase by $4.50 Increase by $9

Not change

An excise tax (sales tax) is imposed on producers of a good. For a given supply curve, the more price elastic the demand for the product, the greater the tax incidence on (the party that pays more portion of tax): Consumers Neither Both Producers

Producers

Federal Income Tax in the US in general are: Progressive tax system Regressive tax system Flat tax system Proportional tax system

Progressive tax system

If the government decides to place a $700 tax on citizens travelling abroad, then the deadweight loss from this tax will be: None of the above Relatively small Zero Relatively large

Relatively large

Which of the following taxes is NOT used in the United States? Value-added tax Property tax Profits tax Sales tax

Value-added tax

When the Government is aiming at higher tax revenue, which good is the likeliest candidate? tomatoes milk butter alcohol

alcohol

. If the price elasticity of demand for a good is 2.5, and the price of the good rises from $18 to $22, then the quantity demanded will: decrease by 8% decrease by 25% increase by 2.5% decrease by 50%

decrease by 50%

If the price elasticity of demand of a good equals infinity, then demand curve is: vertical horizontal upward sloping downward sloping

horizontal

A rise in price has just increased total revenue. We could conclude that the demand for the product is: unit elastic none of the above elastic inelastic

inelastic

Considering demand only, a tax on which of the following goods would result in a larger deadweight loss? tobacco restaurant meals Gasoline medicine

restaurant meals

Still using the same Demand and Supply curves that can be represented by: Qd = 90-2P; and Qs = 3P. Suppose price is at $15, there will be ........ as many as ........units. shortage; 60 units surplus; 15 units surplus; 45 units shortage; 15 units

shortage; 15 units

Still using the same Demand and Supply curves that can be represented by: Qd = 90-2P; and Qs = 3P. Suppose price is at $20, there will be ........ as many as ........units. surplus; 10 units surplus; 18 units shortage; 10 units shortage; 18 units

surplus; 10 units