Microeconomics test 1

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David buys pizza from the campus pizzeria. He calculates his total utility from pizza as​ follows: Slices of Pizza 0 1 2 3 4 Total Utility 0 12 17 20 22 All of the following statements regarding​ David's utility from pizza are true except

David experiences increasing marginal utility since his total utility is rising.

There are simultaneous changes in the demand for and supply of tablet​ devices, with the consequences being an unambiguous decrease in the equilibrium quantity of these devices but no change in the market clearing price. What changes in the demand for and supply of tablet devices could have generated these​ outcomes?

Demand decreases and supply decreases

There are simultaneous changes in the demand for and supply of tablet​ devices, with the consequences being an unambiguous increase in the equilibrium quantity of these devices but no change in the market clearing price. What changes in the demand for and supply of tablet devices could have generated these​ outcomes?

Demand increases and supply increases.

What if the increase in demand were smaller than the increase in​ supply?

Equilibrium price falls and quantity rises.

The economic system in which a government establishes ownership of resources and issues rules for how to manage the production of products is best described as

a command and control system.

Consider in the graph to the right the demand curve for bananas. The movement from point A to point B could have been caused by

a decrease in the price of bananas

Dynamic tax analysis shows that a likely response to an increase in a tax rate is

a decrease in the tax base.

There is normally a direct relationship between price and quantity of a good​ supplied, other things held constant. The supply curve normally shows a direct relationship between price and quantity supplied. The market supply curve is obtained by horizontally adding individual supply curves in the market.

a direct supply market supply

Which factor would cause a movement along the demand curve for​ pizza?

a drop in the price of pizza

The effect of a quantity restriction is

a higher price.

To remain in consumer optimum

a price decrease requires an increase in consumption

The minimum wage is an example of

a price floor.

The demand curve is downward sloping because

a reduction in the price of a good causes individuals to increase their purchase of that good.

Which of the following does NOT cause a rightward shift in the supply​ curve?

a reduction in the price of the good

In the figure at​ right, what would result if the price was​ $10?

a shortage

Which of the following will cause the demand curve for beer to shift​ right?

a successful advertising campaign linking beer consumption to lower cholesterol

A specified interval of income to which a specific and unique marginal tax rate is applied is called

a tax bracket.

All of the following will decrease the supply of airline flights except

a technological change that makes airplanes safer and more​ fuel-efficient.

All of the following will decrease the supply of train trips except

a technological change that makes trains safer and more​ fuel-efficient.

Imposing a unit excise tax on the final sale of a good or service can be displayed graphically as

a vertical shift upward of the supply curve.

Scarcity implies that

a way of rationing supplies of goods must be found.

The relative price of any commodity is its price in terms of

another commodity.

Advocates of behavioral economics

argue that utility theory is explained by applying the assumption of bounded rationality.

The law of supply states that

as price​ increases, quantity supplied​ increases, all other things equal.

Sales taxes are

assessed on the prices paid on a large set of goods and services.

Total revenues are maximized

at the point of​ unit-elasticity on the demand curve.

Observations of​ real-world situations that appear to violate a consumer optimum could be offered as evidence favoring

bounded rationality.

Most of the benefits from agricultural price supports have gone to​ small, family-owned farms.

false

The minimum wage is an example of a price ceiling.

false

The smaller the share of a​ person's total budget that is spent on a​ commodity, the greater that​ person's price elasticity of demand is for that commodity.

false

Buyers and sellers receive information about what should be bought and what should be produced

from prices in a market system.

Compared to the​ short-run price elasticity of​ demand, the​ long-run price elasticity of demand is

greater

According to the​ diamond-water paradox, the total uitlity of water is​ ________ the total utility derived from​ diamonds, and the marginal utility of the last unit of water consumed is​ ________ the marginal utility of the last diamond consumed.

greater​ than; less than

The use of​ utility-based consumer choice theory

has allowed economists to make a wide array of predictions about how consumers respond to changes in​ prices, incomes, and other factors.

Utility analysis helps economists understand

how people make decisions about what they buy and how much.

A major criticism of static tax analysis is that it

ignores the incentive effects created by higher tax rates.

if doughnuts are an inferior ​good, we can conclude that the

income elasticity of demand is negative

When a government assesses a unit excise​ tax, the market price of the good or service typically rises by an amount less than the​ per-unit tax.​ Hence, consumers pay a portion of the​ tax, and firms pay the remainder.

less than

Suppose that Norma is disappointed in the revenue her custom dress shop is bringing in. She is thinking of raising the price of each​ dress, but she asks you for advice. You decide she should

lower the price if demand is elastic.

Voluntary exchange

makes both parties to a trade better off.

The market price people are willing to pay for a unit of a particular commodity is determined by

marginal utility.

Income elasticity of demand

measures the responsiveness of quantity demanded to a change in income and refers to the horizontal shift of the demand curve.

The absolute value of the​ short-run elasticity of demand for bread has been estimated to be 0.15. Its​ long-run elasticity of demand is

more than 0.15.

When supply increases and the​ (downward-sloping) demand curve remains in the same​ position,

price falls and equilibrium quantity rises.

Refer to the figure at right. A price control has been set which has led to a surplus. This means that a

price floor has been set at p1

The way we know what commodities are relatively scarce or abundant is through

prices.

Suppose the federal government replaced the current income tax system with a system that taxed all income at 20​%, but the first ​$20 comma 000 of income was tax exempt. Such a system would be a​ ________________ tax system.

progressive

Suppose the federal government replaced the current income tax system with a system that taxed all income at 40​%, but the first ​$35 comma 000 of income was tax exempt. Such a system would be a​ ________________ tax system.

progressive

Suppose the price of apples falls relative to other similar​ goods, and as a result the quantity of apples demanded increases. This is caused by

substitution effect.

a decrease in the number of pizza producers or an increase in the cost of mozzarella cheese used to make pizza will shift the

supply curve for pizza inward

An increase in the number of pizza producers or a decrease in the cost of mozzarella cheese used to make pizza will shift the

supply curve for pizza outward.

If we wanted to analyze the effects of a​ $2 unit tax​ graphically, we would shift the

supply curve upward by​ $2.

Suppose the market price of corn is​ $5 a bushel but the government sets a price of​ $7. As a​ result,

the government must purchase the surplus to maintain the price

When two goods are​ unrelated,

their cross price elasticity of demand will be 0.

Consider the figure to the right. At a price of ​$2​,

there is a tendency for price to rise

Refer to the figure at right. If a price ceiling of​ $3 was​ set,

there would be a shortage of 20 units.

Some economists argue that corporate income taxes are typically not paid by the​ firm, but by

the​ stockholders, employees, and customers.

Black markets usually arise when there are

price ceilings.

Rational economic agents would resist consuming any good where

Both A and C.

An excise tax of ​$0.40 is levied on a product. As a result of the​ tax, the market price of the product goes from ​$2.00 to ​$2.30. How much of the tax does the consumer​ pay?

$0.30.

Refer to the figure at right. When the price increases from​ $2 to​ $10, the absolute price elasticity of demand is

0.25.

Sandy's Sandwich Sitdown priced its lunch treats at ​$2.00​, they sold 250 per week. When the price was ​$3.00​, they sold 200 per week. Based on this​ information, the absolute value of the price elasticity of demand for lunch treats is..... Based on the above​ calculation, demand for lunch treats is considered to be ...... .

0.56 inelastic

If the price of pineapples increases from​ $3 to​ $5, and in response the quantity of pineapples purchased decreases from 28 to​ 20, the price elasticity of demand for pineapples during this period is

0.67

When the price of cell phones increased from ​$14 to ​$16​, production increased from 1 comma 800 to 2 comma 000 units per month. The price elasticity of supply is

0.85

​Carl's marginal utility for consuming beer and hotdogs with​ $8.00 in income is given in the table at right. In the​ table, Carl experiences diminishing marginal utility after consuming how many​ hotdogs?

1

A student organization finds that when it prices logo emblazoned shirts at ​$12​, the organization sells 200 per day. When the price is reduced to ​$10​, the organization sells 250 per day. Based on this​ information, use the​ average-values formula to find the price elasticity of demand for logo emblazoned shirts. Provide the absolute value of the price elasticity of demand.

1.22

Remembering that the price elasticity of demand is evaluated in terms of absolute​ values, which of the following is an example of an elastic​ demand?

1.5

We observe a 15 percent decrease in units purchased and​ a(n) 10 percent increase in price. The price elasticity of demand in terms of absolute values is

1.5

When the price of cell phones decreased from ​$14 to ​$10​, production decreased from 2 comma 000 to 1 comma 200 units per month. The price elasticity of supply is

1.52

Suppose that the price of a pair of shoes is ​$15 and the price of a jar of jelly is ​$9. What is the relative price of a pair of shoes​? What is the relative price of a jar of jelly​?

1.667 0.006

Kalia receives 40 utils from her first slice of pizza​, 20 utils from her second slice of pizza​, and 10 utils from her third slice of pizza. Kalia​'s marginal utility from her third slice of pizza is

10

The following table indicates the demand schedules for four types of​ consumers: ​A, B, C​, and D and the number of consumers in each group​ (top ​row). The quantity demanded by each type of consumer ​(QA​, QB​, QC​, and QD​) is shown for market prices ranging from​ $10 down to​ $4. What is the combined quantity demanded at a market price of ​$4​? Number of Consumers A​ = 200 B​ = 300 C​ = 300 D​ = 200 Market Price QA QB QC QD ​$10 0 0 1 1 9 0 1 2 3 8 1 3 3 5 7 2 5 4 8 6 3 7 5 11 5 4 9 6 15 4 5 11 7 20

10,400

Corporate income taxes account for

11.5 percent of all federal taxes collected and make up about 2 percent of all state and local taxes collected.

At a consumer optimum involving goods X and​ Y, the marginal utility of good X equals 2 utils. The price of good Y is six times the price of good X. What is the marginal utility of good​ Y?

12

Jeanne receives 50 utils from her first hamburger​, 25 utils from her second hamburger​, and 13 utils from her third hamburger. Jeanne​'s marginal utility from her third hamburger is

13

A senior citizen gets a​ part-time job at a​ fast-food restaurant. She earns ​$9 per hour for each hour she​ works, and she works exactly 29 hours per week.​ Thus, her total pretax weekly income is ​$261. Her total income tax assessment each week is ​$40​, but she has determined that she is assessed ​$3 in taxes for the final hour she works each week. This​ person's average tax rate each week is percent. ​(Round your answer to one decimal​ place he marginal tax rate for the last hour she works each week is percent. ​

15.3 33.3

Suppose a government has access to the following sources of funding currently as well as over the long​ run: Source Dollar Amount Taxes ​$1 , 500 User charges ​ $ 200 Borrowed funds ​ $ 500 In the current time​ period, this​ government's spending on goods and services and transfer payments is limited to Over the long​ run, this​ government's fundamental revenues are equal to

2,200 1,700

When the Gizmo Company could sell a gizmo for​ $10, it produced​ 2,500 per month. More​ recently, the price of a gizmo has fallen to​ $9 and so Gizmo is only producing​ 2,000 units per month. What is the price elasticity of supply for​ gizmos?

2.11

Refer to the table at right. What is the absolute price elasticity of demand when a price rises from​ $9 to​ $9.50?

2.85

At a consumer optimum involving goods X and​ Y, the marginal utility of good X equals 4 utils. The price of good Y is five times the price of good X. What is the marginal utility of good​ Y?

20

The following table shows the marginal tax rate under tax systems A and B. Income Range Tax System A Marginal Tax Rate Tax System B Marginal Tax Rate 0 -​$20,000 ​0% ​5% ​$20,001 -​$40,000 ​20% ​15% ​$40,001 -​$80,000 ​28% ​30% ​$80,001 -​$200,000 ​35% ​50% ​> $200,000 ​35% ​80% Under tax system​ A, the average tax rate for an income level of​ $100,000 is

22.2%

Quantity of​ Hamburgers/Wk 1 2 3 4 5 6 Total Utility Hamburgers 40 60 76 86 91 93 Marginal Utility Hamburgers 40 20 16 10 5 2 Quantity of​ Movies/Wk 1 2 3 4 5 6 Total Utility Movies 400 700 850 950 1000 1025 Marginal Utility Movies 400 300 150 100 50 25 Refer to the table above. Suppose the price of a movie is​ $5 and the​ consumer's income is​ $29. What are the quantities demanded of hamburgers at prices of​ $2 and​ $1 respectively?

2; 4

Between 2017 and​ 2018, a small​ businessperson's income increased from​ $200,000 to​ $220,000. The annual state income taxes that she paid increased from ​$6 , 000 to ​$6 , 600. What was her average state income tax rate in each​ year? This small​ businessperson's average state income tax rate in 2017 was ... percent. ​(Enter your response rounded to one decimal​ place.) Her average state income tax rate in 2018 was ... percent. ​(Enter your response rounded to one decimal​ place.)

3.0 3.0

When the price of cell phones decreased from ​$16 to ​$14​, production decreased from 2 comma 800 to 1 comma 800 units per month. The price elasticity of supply is

3.31

Refer to the above table. The marginal utility of the 6th movie for Michael is

30 units of utility.

When Jennifer consumes one​ apple, her total utility is 6 utils. When she consumes two​ apples, her total utility increases to 10 utils. What is​ Jennifer's marginal utility from consuming the second​ apple?

4 utils

We observe a 10 percent increase in units purchased and​ a(n) 2 percent decrease in price. The price elasticity of demand in terms of absolute values is

5.0

Refer to the above table. The marginal utility of the 5th movie for Rosie is

60 units of utility.

Using the figure at​ right, which of the lines in the above diagram represents a progressive​ tax?

A

Refer to the figure at right. Demand will be​ unit-elastic when quantity is between

A and B.

Which of the following would cause a decrease in the demand for beef​?

A decrease in the price of fish​, a substitute for beef.

Which of the following is consistent with the law of​ demand?

A doubling of the price of salt led to a 5 percent drop in the quantity of salt purchased.

Which of the following is consistent with the law of​ demand?

A reduction of the price of salt led to a 5 percent increase in the quantity of salt purchased.

What has been the market outcome of​ government-enforced price floors for agricultural​ products?

A surplus of agricultural products has resulted.

Which of the following will cause an outward​ (rightward) shift in​ supply?

A technological improvement.

Consider the figure​ 4B-2. If the price is​ $20, find the area that represents producer surplus.

A+B+C

Which of the following is not a determinant of the degree of price elasticity of demand for an​ item?

All of the above are determinants of the degree of price elasticity of demand for an item.

A change in which of the following will result in a shift of the supply​ curve?

All of the above.

Given the existence of relative​ scarcity, resources can be rationed by

All of the above.

Price​ ceilings, such as rent controls

All of the above.

Total utility

All of the above.

What is the economic effect of price​ ceilings?

An effective price ceiling will lead to a shortage.

Which of the following is consistent with the law of​ supply?

An increase in the market price of oranges causes an increase the production of oranges

Which of the following would cause an increase in the demand for fish​?

An increase in the price of chicken​, a substitute for fish.

Which of the following would cause a decrease in the supply of chicken​?

An increase in the price of inputs to chicken production.

Which of the following will cause a movement along the demand curve for​ shoes?

An increase in the price of shoes

Which of the following is consistent with dynamic tax​ analysis?

An increase in the tax rate will likely cause a decrease in the tax base.

Which of the following statements best explains how utility usually changes with the quantity of a good​ consumed?

As the quantity consumed​ increases, total utility increases but marginal utility decreases.

What will happen when there is a rightward shift in the demand​ curve?

A​ new, higher price is not instantaneously​ achieved, but the price will rise over time.

Carly is maximizing her utility buying bagels and bread. This​ week, the price of bagels has decreased. Carly considers these goods to be close substitutes. Which of the following best describes what Carly would be expected to​ do?

Carly will buy more bagels and less bread.

Because of the doubts expressed by proponents of behavioral​ economics, most economists no longer apply the assumption that people behave as if they act rationally with an aim to maximize utility.

False

Demand tends to be more inelastic at higher prices and more elastic at lower prices.

False

Elasticity of demand is greater in the short run than in the long run.

False

Governments that wish to maximize their tax revenues need to assess a high tax rate.

False

Governments that wish to maximize their tax revenues should always assess a high tax rate.

False

If the number of firms in an industry​ decreases, the supply curve will shift to the right.

False

In​ general, the less organized the​ market, the lower the transaction costs.

False

Javier spends all his income on peanuts and chewing gum. The last dollar spent on peanuts yeilds 14 utils and the last dollar spent on chewing gum yields 6 utils. To increase total​ utility, Javier should spend less on peanuts and more on chewing gum.

False

Markets which are temporarily out of equilibrium will always return to equilibrium immediately.

False

Static tax analysis assumes that tax rates do not change.

False

The concept of self interest assumes that individuals can only further their goals at the expense of other individuals.

False

When price increases along the inelastic range of market​ demand, total revenues will go down.

False

Assume the cost of aluminum used by​ soft-drink companies increases. Which of the following correctly describes the resulting effects in the market for canned soft​ drinks? I. The demand for soft drinks decreases. II. The quantity of soft drinks demanded decreases. III. The supply of soft drinks decreases. IV. The quantity of soft drinks supplied decreases.

II and III

What is the relationship between tax rates and tax​ revenues?

Increasing tax rates will initially increase tax revenues. Eventually an increase in the tax rate will erode the tax base and revenues will decrease.

Which of the following is NOT true of the federal unemployment insurance​ tax?

It is paid by employers and employees.

Which of the following statements about a supply curve is​ FALSE?

It typically slopes downward to the right.

People earn​ $100 million in Year 1 and pay a flat tax rate of​ 20%. Each person earns between​ $20,000 and​ $60,000 a year​ (pre-tax), with an average of​ $40,000 per person. To make the income tax more progressive in Year​ 2, the government makes the tax rate​ 0% for the first​ $20,000 of income and​ 40% for the next​ $40,000 of income. Jacob earns​ $35,000 a year​ (pre-tax) before the change in the tax rate. Rachel earns​ $45,000 a year​ (pre-tax) before the change in the tax rate. ​ Which of the following is​ true?

Jacob pays less tax in Year​ 2; Rachel pays more tax in Year 2.

Suppose a market consists of 10​ buyers, each of whom is assumed to have the identical demand schedule given​ by: Price​ ($ per​ unit) Quantity Demanded ​$5 5 ​$4 10 ​$3 15 ​$2 20 ​$1 25 On the graph to the​ right: Using the multipoint curve drawing tool​, draw the market demand curve. Properly label this line. Carefully follow the instructions​ above, and only draw the required object.

Labeled D Market

The campus bookstore sells a CD for ​$12. When you buy a second CD​, ​however, its price is only ​$8. How does this relate to marginal​ utility?

Marginal utility is the additional satisfaction from additional units of the good.

The campus pizzeria sells a large pizza for ​$14. When you buy a second large pizza​, ​however, its price is only ​$10. How does this relate to marginal​ utility?

Marginal utility is the additional satisfaction from additional units of the good.

Until​ 2008, the people of the fictitious nation of Dor relied mainly on private car companies to determine how many automobiles to produce. After​ 2008, the people of Dor have been relying on the Dor government to determine how many automobiles to produce. This represents a shift in the economic system of Dor from

Market System to Central Planning.

Which of the following is not a true statement about U.S. government support programs for​ agriculture?

Most farm support goes to small​ farmers, because there are many more small farmers than large farmers.

Which of the following statement is​ false?

Only the price system can be used to ration goods.

A product has unit elasticity of demand when the price elasticity of demand is

equal to 1

​Diamonds, which are​ unnecessary, command very high​ prices, while​ water, which is essential to​ life, has a very low price. Which of the following statements best explains the​ diamond-water paradox?

Prices depend on marginal​ utility, not total​ utility, and the marginal utility of water is low because much is consumed.

Which of the following is an implication of the law of​ supply?

Producers will offer more units at a higher price and fewer units at a lower price.

Price elasticity of supply is calculated by dividing the percentage change in ... by the percentage change in ... . ​Usually, price elasticities of supply are ... long dashhigher prices yield ... quantities supplied. ​Long-run supply curves are ..... elastic than​ short-run supply curves because the .... the time​ allowed, the more resources can flow into or out of an industry when price changes.

Quantity supplied price positive greater more longer

To enhance their​ prestige, some country clubs like to point to the fact that they have a waiting list for new members. Even at clubs with high initiation​ fees, it is common that prospective members have to wait three or more years before there is room for them on the membership rolls. How do these country clubs set the price of membership to ensure that they have a waiting​ list?

Set the membership price below the market clearing price.

The campus bookstore sells a campus mug for ​$10. When you buy a second campus mug​, ​however, its price is only ​$6. How does this relate to marginal​ utility?

Since marginal utility falls as additional units of the good are​ consumed, consumers are only willing to purchase more as the price falls.

Employers match​ employees' contributions for

Social Security taxes.

Staci is maximizing her utility buying hamburger and steak. This​ week, the price of hamburger has increased. Staci considers these goods to be close substitutes. Which of the following best describes what Staci would be expected to​ do?

Staci will buy less hamburger and more steak.

Suppose that a state government implements a tax on​ mechanics' labor time at all state auto repair shops in order to enhance its tax revenues. One year later the government is disappointed to find that not only is the amount of tax collected​ small, but that​ in-state auto repair work significantly declined. This state government apparently utilized which type of tax​ analysis?

Static tax analysis.

Stella is currently spending all of her weekly income purchasing the two goods that she likes cookies and milk. She is currently purchasing 10 cookies and 5 cartons of milk. She receives 30 utils from her 10th cookie and 15 utils from her 5th carton of milk. The price of cookies is ​$12​, and the price of milk is ​$4. Is Stella maximizing her​ utility, and if​ not, what should she​ do?

Stella should buy fewer cookies and more milk.

Which of the following is not a source of funding available to​ governments?

Stock sales.

What is the economic effect of price​ floors?

Surpluses

Which one of the following statements is​ true?

The U.S. Social Security tax is regressive.

What is the structure of the U.S. income tax​ system?

The U.S. income tax system is a progressive tax system where the marginal tax rate exceeds the average tax rate.

An excise tax of 60 cents is levied on a product. As a result of the​ tax, the price of the product goes from​ $1 to​ $1.40. Which of the following is​ true?

The consumer pays the majority of the tax but not the entire tax.

Suppose that you are investigating the market for aluminum. The price of steel​, a substitute​ good, has decreased. Which of the following would best describe the market reaction to this​ event?

The demand for aluminum ​decreases, which creates a surplus of aluminum​, causing the price of aluminum to decrease.

Suppose that the cross price elasticity of demand between ski lift tickets and ski rentals is negative 0.20. What would you expect to happen to the sales of ski rentals if the price of ski lift tickets rises by 15 ​percent?

The demand for ski rentals would fall . The demand for ski rentals would fall by 3.0 percent.

Refer to the figure at right. A unit tax of​ $2 has been placed on the good. Which of the following statements is true about the vertical distance between s1 and s2

The distance is​ $2.

Which of the following is not an example of a transaction​ cost?

The enjoyment of using the good.

What if the increase in demand were larger than the increase in​ supply?

The equilibrium price and quantity increase.

How do the taxes that are levied on goods and services affect market prices and​ quantities?

The equilibrium quantity will decrease and the market price will increase by less than the amount of the tax.

Which of the following is the most important source of revenue for the federal​ budget?

The federal personal income tax.

In a market​ system, how are the terms of exchange​ established?

The forces underlying supply and demand interact to set a price.

Which of the following statements is​ true?

The larger the share of a​ person's total budget that is spent on a​ commodity, the greater that​ person's price elasticity of demand is for that commodity.

which of the statements is true

The larger the share of a​ person's total budget that is spent on a​ commodity, the greater that​ person's price elasticity of demand is for that commodity.

The price of milk increases. Which of the following is not part of the likely chain of events that follows from this price​ change

The manufacturers of milking machines lay off some workers

The price of orange juice increases. Which of the following is not part of the likely chain of events that follows from this price​ change?

The manufacturers of orange minus picking machines lay off some workers.

The concept of consumer surplus is best described by the following situation.

The maximum price that Jackie was willing to pay for an iphone was​ $400, but she bought it for​ $250 on black Friday.

Suppose that at first the price of a pair of shoes is ​$15 and the price of a t minus shirt is ​$9. ​Then, the price of a pair of shoes changes to ​$30 and the price of a t minus shirt changes to ​$21. What has happened the money prices and relative prices of these two​ goods?

The money price of a pair of shoes and a t minus shirt have risen and the relative price of a pair of shoes has fallen while relative price of a t minus shirt has risen.

Suppose that at first the price of a pair of shoes is ​$5 and the price of a t minus shirt is ​$3. ​Then, the price of a pair of shoes changes to ​$10 and the price of a t minus shirt changes to ​$7. What has happened the money prices and relative prices of these two​ goods?

The money price of a pair of shoes and a t minus shirt have risen and the relative price of a pair of shoes has fallen while relative price of a t minus shirt has risen.

Money Prices 2003 2004 Hospital Room​ (1 day) ​$200 ​$225 Hotel Suite​ (1 night) ​$300 ​$325 Based on the table​ above, which of the following is​ true?

The money prices of both goods​ increased, the relative price of hospital rooms​ increased, and the relative price of hotel suites decreased.

The market for corn is initially in equilibrium. Suppose the production of​ biofuels, which use corn as an​ input, increases​, and at the same​ time, increases in the price of oil cause farm production costs to rise. Which of the following explains the effect on equilibrium price and quantity in the corn​ market?

The price of corn will rise​, but the effect on equilibrium quantity cannot be determined without more information.

In advance of the recent increase in the U.S. minimum wage​ rate, the government of the state of Arizona decided to boost its own minimum wage by​ $1.60 per hour. This pushed the wage rate earned by Arizona teenagers above the equilibrium wage rate in the teen labor market. What is the predicted effect of this action by​ Arizona's government on each of the​ following?

The quantity of labor supplied by Arizona teenagers will increase . The quantity of labor demanded by employers of Arizona teenagers will decrease . The number of unemployed Arizona teenagers in this city will increase .

Suppose that a country band called Only Here has released its first CD with Wanted Records at an intended list price of​ $14.99. Music stores have discovered that they can markup the price to​ $17.99 with continued strong sales. What information does this higher price convey to the recording​ label?

The recording label should expand the production and distribution of Only Here​'s first CD.

Suppose that a rap group called RG 2 has released its first CD with Live Records at an intended list price of​ $14.99. Music stores have discovered that they can markup the price to​ $17.99 with continued strong sales. What information does this higher price convey to the recording​ label?

The recording label should expand the production and distribution of RG 2​'s first CD.

Last​ year, the price of chicken was ​$6 per pound and the price of fish was ​$7 per pound. This​ year, the price of chicken is ​$10 per pound and the price of fish is ​$11 per pound. All other things​ equal, and assuming that Brian purchased both items​ before, what would you expect to happen to his purchases of chicken ​(relative to fish​) this​ year?

The relative price of chicken has​ increased, so Brian would be expected to purchase less.

What does the price elasticity of demand​ measure?

The responsiveness of quantity demanded to a change in the price of a good.

Consider the market for laptop computers. Click on the graph to the right to determine how the following event will impact this market. Do this by illustrating the event on the graph and then assess its impact on the equilibrium quantity and the market price. Event​: The number of manufacturers of laptop computers increases.

The supply​ increases, causing the equilibrium quantity to rise and the market price to fall.

Consider the market for laptop computers. Click on the graph to the right to determine how the following event will impact this market. Do this by illustrating the event on the graph and then assess its impact on the equilibrium quantity and the market price. Event​: The price of machinery used to produce laptop computers decreases.

The supply​ increases, causing the equilibrium quantity to rise and the market price to fall.

Which one of the following statements is​ FALSE?

There is an inverse​ (negative) relationship between product price and quantity supplied.

In a​ market-based economy, what is the role of a system of​ prices?

To address the problem of scarcity.

What is the difference between total utility and marginal​ utility?

Total utility is the total amount of satisfaction derived from consuming a certain amount of a good while marginal utility is the additional satisfaction gained from consuming an additional unit of the good.

A black market is a market in which a​ price-controlled good is sold at an illegally high price.

True

A consumer maximizes personal satisfaction when allocating money income in such a way that the last dollars spent on each good or service yields equal amounts of marginal utility.

True

A market supply curve is derived by summing the individual​ producers' supply curves.

True

A positive difference between the purchase price and the sale price of an asset is called a capital gain.

True

Behavioral economists suggest that consumers do not behave as if they are​ rational, and if the rationality assumption does not apply to actual​ behavior, they​ argue, it follows that​ utility-based consumer choice theory​ cannot, either.

True

Consumer surplus is the difference between the total amount that consumers would have been willing to pay for an item and the total amount that they actually pay.

True

Cross price elasticity of demand measures the responsiveness of the amount of an item demanded to the prices of related goods.

True

Middlemen specialize in lowering transaction costs.

True

Rationing by the price system leads to the most efficient use of available resources.

True

The economic system in which individuals and families own all of the scarce resources used in​ production, decide how and what to​ produce, and how many products to​ produce, is best described as a price system.

True

Which of the following statements is true concerning the consequences of rent​ controls?

Upper income earners are big winners due to the fact that they can better exploit nonprice rationing devices.

Which of the following is NOT true of​ utility?

Utility can be measured objectively.

Which of the following describes an inferior​ good?

When consumer income​ increases, the demand for eggs decreases.

Which of the following examples are used as evidence favoring the bounded rationality​ assumption?

When purchasing electric appliances such as​ refrigerators, people sometimes buy the​ lowest-priced, energy-inefficient models even though the price savings often fail to compensate for higher future energy costs.

Which of the following is not one of the three fundamental questions of​ economics?

Where will items be​ produced?

The common element of the​ nation's answers to those key economic questions has​ been:

a centralized authority assuming responsibility for addressing them.

Which of the following will cause the demand curve to​ shift?

a change in consumer income

All of the following determine the price elasticity of demand except

a change in the price of resources used to produce the good.

Based on only the information​ provided, characterize the demand for the following goods as being more elastic or more inelastic.

a. A​ 45-cent box of salt that you buy once a​ year: more inelastic . b. A type of​ high-powered ski boat that you can rent from any one of a number of rental​ agencies: more elastic . c. A specific brand of bottled​ water: more elastic . d. Automobile insurance in a state that requires autos to be insured but has few insurance​ companies: more inelastic . e. A​ 75-cent guitar pick for the lead guitarist of a major rock​ band: more inelastic .

A rightward shift in the supply curve for a good may be caused by any of the following except

an increase in average consumer income

As long as a price floor is​ ________ the market clearing​ price, imposing a price floor creates a​ ________.

above surplus

Economists assume that when there is a change in demand​ and/or supply, that prices reach a new equilibrium

after an adjustment period that varies.

In the United​ States, government-imposed price supports are most often associated with

agricultural products.

When personal income in the country​ rises, so do alcohol consumption and traffic fatalities. It can be said that

alcohol is a normal good and has a positive income elasticity of demand.

Static tax analysis assumes that

an increase in a tax rate will leave the tax base unchanged.

Ryan is deciding between attending Western State University and Eastern State University. He cannot attend both universities simultaneously. Both are fine​ universities, but the reputation of Western is slightly​ higher, as is the tuition. Let MU Subscript Upper E and MU Subscript Upper W be​ Ryan's marginal utilities from attending Eastern and Western State Universities respectively and Upper P Subscript Upper E and Upper P Subscript Upper W be the prices of attending Eastern and Western State Universities. Using the rule of consumer​ optimum, Ryan will decide to

attend Eastern State​ University, if StartFraction MU Subscript Upper E Over Upper P Subscript Upper E EndFraction exceeds StartFraction MU Subscript Upper W Over Upper P Subscript Upper W EndFraction .

The price elasticity of demand for a particular commodity depends upon all of the following except

availability of complementary goods.

The tax rate is the total tax payment divided by total​ income, and the tax rate is the change in the tax payment divided by the change in income.

average marginal

An​ above-equilibrium minimum wage will result in​ ________ in the quantity of labor demanded and​ ________ in the quantity of labor supplied.

a​ decrease; an increase

A price ceiling is

a​ government-imposed maximum price that may be charged for a good or​ service, which can lead to shortages.

As long as a price ceiling is​ ________ the market clearing​ price, imposing a price ceiling creates a​ ________.

below; shortage

In the figure at​ right, the range of unit elasticity occurs

between point c and point d.

Suppose that paper is necessary to produce books. If the price of paper rises​, the supply curve of

books shifts to the left

Identify which of the following would generate an increase in the market demand for tablet​ devices, which are a normal good. I. A decrease in the incomes of consumers of tablet devices. II. An increase in the price of ultrathin​ computers, which are substitutes. III. An increase in the price of online​ apps, which are complements. IV. An increase in the number of consumers in the market for tablet devices. A. Only I. B. Both II and IV. This is the correct answer.C. Both II and III. Your answer is not correct.D. Only II.

both II and IV

The price of a video is ​$5 and the price of a dinner is ​$25. From this we know that a consumer who is maximizing utility will

buy enough of the two goods such that the marginal utility from the last dinner consumed is five times greater than the marginal utility from the last video.

The price of a video is ​$4 and the price of a dinner is ​$16. From this we know that a consumer who is maximizing utility will

buy enough of the two goods such that the marginal utility from the last dinner consumed is four times greater than the marginal utility from the last video.

The publication Car and Driver reduces transactions costs for​ high-performance car buyers

by providing reliable information so that car buyers do not have to spend as much time doing their own research.

If the demand and supply curves increase​ (shift outward) by identical proportions then

equilibrium price stays the same and quantity rises.

There are simultaneous changes in the demand for and supply of​ global-positioning-system (GPS)​ devices, with the consequences being an unambiguous decrease in the market clearing price of these devices but no change in the equilibrium quantity. What changes in the demand for and supply of GPS devices could have generated these​ outcomes?

demand decreases and supply increases

A leftward shift in the supply curve for a good may be caused by any of the following except

consumer expectation of an increase in their future income

If fitness trackers and potato chips are unrelated ​goods, we can conclude that the

cross price elasticity is zero

If one wanted to know the impact of the falling price of using the Internet on the demand for library​ services, one would need to compute the

cross price elasticity of demand for library services and price of using the Internet.

The percentage change in the demand for one good divided by the percentage change in the price of a related good is the

cross price elasticity of demand.

A product has perfectly inelastic demand when the price elasticity of demand is

equal to 0.

Consider the chewing gum market shown in the graph at right. Upper A decrease in the demand for chewing gum will​ ________ the equilibrium price and​ _________ the equilibrium quantity.

decrease decrease

Consider the coffee market shown in the graph at right. An increase in the supply of coffee will​ ________ the equilibrium price and​ _________ the equilibrium quantity.

decrease, increase

If a firm increases the price of their product in the elastic portion of the demand​ curve, total revenues will

decrease.

According to the law of diminishing marginal​ utility, as more of any good or service is​ consumed, the satisfaction received from the consumption of those extra units

decreases.

When there is an inferior good​, an increase in consumer income will result in the

demand curve shifting to the left

When there is a normal good​, an increase in consumer income will result in the

demand curve shifting to the right

During her years of​ college, Dominique discovered that her three favorite subjects were​ astronomy, chemistry, and political science. She chose to major in astronomy because she had seen data indicating that science majors earn​ higher-than-average wages and because she liked astronomy better than both chemistry and political science. Upon​ graduation, however, she learned that average wages in chemistry fields were 20 percent higher than average wages earned by astronomers. Did​ Dominique's behavior violate the rationality​ assumption? ​Dominique's decision to major in astronomy

did not violate the rationality assumption because she preferred ​astronomy, and​ because, at the time she made her​ decision, data showed science majors earn​ higher-than-average wages.

According to the law of​ supply, the quantity supplied of any commodity is​ ________ related to its​ price, other things being equal.

directly

According to the​ text, firms encounter rising costs when they attempt to produce more in the same time period. As a​ consequence, they must be offered a higher price to be willing to incur these higher costs. The resulting relationship between price and quantity supplied is

direct​ (or positive) and is called the law of supply.

​Government-enforced prices such as price ceilings

disrupt the rationing function performed by prices in a market system.

If an analyst has concluded that tax revenues may eventually decline if the tax rate is raised​ sufficiently, this analyst is using

dynamic tax analysis.

A​ society's institutional mechanism for determining the way in which scarce resources are used to satisfy human desires refers to its

economic system.

The price elasticity of demand for gizmos is known to be 5.0 ​(in absolute​ value). ​Therefore, the demand for gizmos can be described as

elastic

When the price of cell phones decreased from ​$16 to ​$14​, production decreased from 2 comma 000 to 1 comma 200 per month. You can conclude that the supply of cell phones is price ...... .

elastic

If a 1 percent increase in price elicits a greater than 1 percent increase in the quantity​ supplied, we say that at the particular price in question on the supply​ schedule, supply is

elastic.

If total revenue falls when the market price​ increases, demand is

elastic.

Other things remaining​ equal, a decrease in the world oil supply like those that occurred in​ 1973-74 and 1979 would

increase the price of airline travel and decrease its equilibrium quantity.

Consider the coffee market shown in the graph at right. Upper A decrease in the supply of coffee will​ ________ the equilibrium price and​ _________ the equilibrium quantity.

increase, decrease

Opponents of minimum wage legislation argue that higher minimum wages serve to

increase​ unemployment, particularly among unskilled minority teenagers.

The concept of marginality is important in economics because

individuals make decisions at the margin.

When total revenue and price are directly​ related, demand is

inelastic

A firm sells 2 million units of a good when price is ​$4.00 and 1.8 million units when price is ​$4.50. The price elasticity of demand is

inelastic.

In the figure at​ right, over the price range Upper P 5 Upper P 6​, demand is

inelastic.

When total revenue and price are directly​ related, demand is

inelastic.

The supply curve is drawn with other things held constant. If these ceteris paribus conditions of supply​ change, the supply curve will shift. The major ceteris paribus conditions are​ (1) input prices ​, ​(2) technology and productivity ​, ​(3) taxes and subsidies ​, ​(4) expectations of future relative prices ​, and​ (5) the number of firms in the industry .

input prices technology and productivity taxes and subsidies expectations of future relative prices the number of firms in the industry

According to the law of​ demand, the quantity demanded of any commodity is​ ________ related to its​ price, other things being equal.

inversely

The first slice of pizza yields Jeffrey 12 units of utility and the second slice yields him an additional 8 units of utility. His total utility from three slices of pizza is 24 units of utility. The marginal utility of the third slice of pizza

is 4 units of utility.

The first slice of pizza yields Jeffrey 18 units of utility and the second slice yields him an additional 12 units of utility. His total utility from three slices of pizza is 36 units of utility. The marginal utility of the third slice of pizza

is 6 units of utility.

The price of a piece of pizza is​ $1 and the price of a movie is​ $4 and the consumer has​ $10. A consumer has purchased 2 pieces of pizza and 2​ movies, receiving 25 units of utility for the second pizza and 100 units of utility for the second movie. The set of goods

is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good.

The price of one piece of pizza is​ $2 and the price of movies is​ $4. The consumer has​ $14 of income. The consumer is purchasing 3 pieces of pizza and receiving 20 utils for the last piece. He is also purchasing 2 movies and receiving 40 utils for the last movie. This set of goods

is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good.

Based on the recommendation of a​ friend, you buy a ticket and attend a movie with high expectations. After seeing the​ movie, you think that it is the worst film ever made and that it was a complete waste of money. This situation

is consistent with rational behavior because you had thought that you were going to like the movie.

The price of a piece of pizza is​ $1 and the price of a movie is​ $6 and the consumer has​ $14. A consumer has purchased 2 pieces of pizza and 2​ movies, receiving 20 units of utility for the second piece of pizza and 100 units of utility for the second movie. When the consumer spends all her​ income, the set of goods

is not an optimum because the marginal utility per dollar spent is greater for pizza than for movies.

The price of a hotdog is​ $1, the price of a movie ticket is​ $5, and the consumer has​ $13. A consumer has purchased 3 hotdogs and two movie​ tickets, receiving 10 units of utility for the last hotdog and 10 units of utility for the last movie. The set of goods

is not an optimum because the marginal utility per dollar spent is greater for the hotdog than for the movie.

If demand increases while supply simultaneously​ decreases, then the equilibrium quantity

none of the above

Tania spends her income on donuts and coffee. If Tania is at her consumer optimum and the price of donuts​ decreases, she will spend​ ________ on​ donuts, which will cause the marginal utility from consuming donuts to​ ________.

more; fall

If the price​ changes, we move along a curvelong dashthere is a change in quantity demanded or supplied. If some other determinant​ changes, we shift a curvelong dashthere is a change in demand or supply.

move along shift

The law of supply then implies that a the supply curve occurs due to a change in market price.

movement along

A fundamental principle in demand analysis is that a change in price leads to

movement along the demand curve.

One would expect that the cross price elasticity of ski poles and skis would be

negative since they are complements.

If milk and cookies are​ complements, then their cross price elasticity of demand will be

negative.

A price ceiling set above the equilibrium price will cause which of the​ following?

no effect on either the price or quantity

A price floor set below the equilibrium price will cause which of the​ following?

none of the above

If a government wants to obtain the maximum tax revenue it should

not assess the highest possible tax rate.

A consumer has spent all of his income on pizza and movies. The price of a pizza is​ $1 and the price of a movie is​ $6. The marginal utility of the last pizza is 5 and the marginal utility of the last movie is 24. The consumer has

not maximized utility. He should cut back on movies and buy more pizza.

A consumer has spent all of his funds on hamburgers and movies. The price of a hamburger is​ $1 and the price of a movie is​ $5. The marginal utility of the last hamburger is 5 and the marginal utility of the last movie is 40. This consumer has

not maximized utility. To maximize​ utility, he should cut back on movies and buy more hamburgers.

An​ individual's demand curve slopes down because

of the law of diminishing marginal utility and the rule of equal marginal utilities per dollar.

Because the behavioral economics approach suggests many alternative behaviors that people might exhibit if they fail to behave as if they are​ rational, this approach

often fails to provide clearly testable behavioral predictions.

Refer to the figure at right. A unit tax has been placed on the good. The consumer pays what amount of the​ tax?

p2-p1

A​ good's price elasticity of demand can be calculated by using the formula of

percentage change in quantity demanded divided by percentage change in price.

Price elasticity of demand is defined as the

percentage change in quantity demanded divided by the percentage change in price.

The price elasticity of demand is the

percentage change in quantity demanded divided by the percentage change in price.

Tickets for the Super Bowl are an example of supply that is

perfectly inelastic.

The most important tax in the U.S. economy is the

personal income​ tax, which accounts for 49 percent of all federal revenues.

We should expect the cross price elasticity of butter and margarine to be

positive since they are substitutes.

For most​ items, we find the price elasticity of supply will be

positive.

When two goods are​ substitutes, the cross price elasticity of demand will be

positive.

For purposes of assessing income​ taxes, there are three official income levels for workers in a small​ country: high,​ medium, and low. The table to the right gives the marginal tax rate for the last hour on the job during a​ 40-hour workweek for each of these three worker types. Based only on this​ information, this​ nation's income tax system appears to be . Worker type Marginal tax rate ​Low-income worker 15 percent ​Medium-income worker 20 percent ​High-income worker 25 percent Worker type Marginal tax rate ​Low-income worker 25 percent ​Medium-income worker 20 percent ​High-income worker 15 percent

progressive regressive

A tax system in​ which, as income​ increases, a higher percentage of the income is paid as taxes is known as

progressive taxation

Tax systems can be ​, depending on whether the marginal tax rate is the same​ as, greater​ than, or less than the average tax rate as income​ rises, respectively.

proportional progressive regressive

Some Internet companies like Amazon reduce the transaction costs of many purchases by

providing information about products and firms that supply those products.

A decrease in the price of a good causes

purchasing power of a​ person's income to increase.

At the market equilibrium​ price,

quantity demanded equals quantity supplied.

An increase in​ supply, all other factors held​ constant, will cause which of the following to​ occur?

quantity demanded to increase.

The law of demand states that

quantity demanded will fall as price rises, other things being equal

Suppose that Norma is disappointed in the revenue her custom dress shop is bringing in. She is thinking of raising the price of each​ dress, but she asks you for advice. you decide she should

raise the price if demand is inelastic

Governments collect taxes by applying a tax to a tax ​, which refers to the value of​ goods, services,​ wealth, or incomes.

rate base

People often complain about price gouging after a natural disaster. Suppose the government imposed limitations on price increases in the aftermath of a disaster. One would expect

reconstruction to take longer because the quantity supplied of new materials would increase more slowly.

Imposing a tax on sales of an item reduces the equilibrium quantity produced and consumed and raises the market price.

reduces raises

The​ "incidence of a​ tax"

refers to those who bear the final burden of taxation.

The Social Security tax is considered to be a

regressive tax.

The supply curve shown on the right is

relatively elastic

For Kelly comma there is no substitute for Diet Coke. It is the only thing that she likes to drink. Based only on this​ information, Kelly's demand for diet coke would be expected to be

relatively inelastic

The corporate income tax in the United States

results in​ individuals' being doubly taxed on corporate earnings.

When the amount supplied is greater at each​ price, there is​ a(n)

rightward shift in the supply curve.

State and local governments receive most of their revenue from

sales and excise​ taxes, revenue from the federal​ government, and property taxes.

Key taxes at the federal level do not include​:

sales taxes

In a price​ system, changes in prices

signal to everyone in the system what goods are relatively more or less scarce.

For most​ goods, the​ real-income effect of a price change is

small because the good accounts for a small part of the​ consumer's budget.

Other things remaining​ equal, the law of demand says that higher prices will lead to a

smaller quantity demanded and lower prices to a larger quantity demanded.

Key taxes at the state and local level do not include​:

social security tax

Key taxes at the state and local level do not include​:

social security taxes

The rationality assumption as used in economics

states that people respond to incentives.

The federal corporate income tax structure results in double taxation because

stockholders pay taxes on dividends that were already taxed as profits of the corporation.

Consider the following cases. a. If the price of bacon​ rises, and as a result the demand for sausage​ increases, this implies that these two goods are substitutes . b. If the price of tennis racquets​ falls, and as a result the demand for tennis balls increases ​, this implies that these two goods are complements c. If the price of coffee​ rises, and as a result the demand for sugar​ falls, this implies that these two goods are complements . d. If the price of automobiles falls ​, and as a result the demand for motorbikes​ falls, this implies that these two goods are substitutes

substitutes increases compliments falls

Regarding the figure at​ right, at a price of four​ cents, a(n)​ ________ of bubble gum will exist in the market.

surplus

A proportional​ tax, or​ flat-rate tax

takes the same percentage of a​ person's taxable income in tax regardless of their level of income.

The marginal income tax rate is equal to

the change in the tax payment divided by the change in income.

Determinants of the price elasticity of demand include all of the following except

the cost to produce the product.

The fundamental limitation on public expenditures during a specific time interval is expressed by

the government budget constraint.

Under progressive​ taxation, as a​ person's taxable income​ increases,

the marginal tax rate is always above the average tax rate.

Consider the figure to the right. At a price of ​$5

the market has reached equilibrium price

Price elasticity of demand is defined as

the percentage change in quantity demanded divided by the percentage change in price.

Total revenue will remain the same when

the price elasticity of demand equals 1.00 and price rises

A consumer was at an optimum. She then discovers that the marginal utility per dollar spent on food is more than the marginal utility per dollar spent on movies. She knows then that

the price of movies must have increased or the price of food must have decreased.

The only variable considered when we move along the demand curve is

the price of the good itself.

All of the following are methods of rationing goods EXCEPT

the profit motive.

The law of demand states that

the quantity demanded is inversely related to price.

According to the accompanying​ graph, when the government imposes a price ceiling of​ $25 A. the quantity of goods that will be traded is 100. This is the correct answer.B. the quantity of goods that will be traded is 0. C. the quantity of goods that will be traded is 200. Your answer is not correct.D. the quantity of goods that will be traded is 150.

the quantity of goods that will be traded is 100.

When the price of gasoline decreases​, Michael buys more gasoline and more of all other goods. This information describes

the real income effect of a price decrease.

When the price of gasoline increases​, Jonathan buys less gasoline and less of all other goods. This information describes

the real income effect of a price increase.

The change in​ people's purchasing power that occurs when the price of a good they purchase​ changes, assuming all else is held constant is known as

the real income effect.

Other things being​ equal, demand is less elastic

the smaller the percentage of a total budget that a family spends on a good.

According to the static tax analysis approach to evaluating how changes in tax rates affect government tax​ collections,

the tax rate will have no effect on the tax base.

The average tax rate is the

total tax paid divided by total income.

At​ equilibrium, there is neither excess quantity supplied nor excess quantity demanded.

true

The limit on government spending and transfers imposed by the fact that every dollar the government​ spends, transfers, or uses to repay borrowed funds must ultimately be provided by the user charges and taxes it collects is known as the government budget constraint.

true

The price elasticity of demand for gizmos is known to be 1.0 ​(in absolute​ value). ​Therefore, the demand for gizmos can be described as

unitary

The analysis of consumer decision making based on utility maximization is known as

utility analysis.

A demand schedule shows

various quantities of a good or service demanded at various prices.

When the government levies a tax on sales of a particular​ product, firms must receive a higher price to continue supplying the same quantity as​ before, so the supply curve shifts vertically . If the tax is a unit excise​ tax, the supply curve shifts vertically by the amount of the tax.

vertically vertically

Centralized command and control prevails throughout a certain​ nation's economy. What three key economic questions have been addressed in this​ nation, and what has been the common element of the​ nation's answers to those​ questions?

what and how many items to​ produce, how scarce resources are used in producing the​ items, and who can obtain the items produced.

To reach consumer​ optimum, a​ consumer's income should be allocated so that the last dollar spent on each good purchased​ ________ when all income is spent.

yields the same amount of marginal utility

The Social Security tax is imposed on earnings up to roughly

​$120,000 at a rate of 6.2 percent on employers and 6.2 percent on employees.

In the figure at​ right, a surplus exists in the gasoline market when the price is

​$4 per gallon.

Consider Figure​ 4B-3, that represents the market for​ long-stemmed roses. If the market clearing price is​ $15, what is the total value of gains from​ trade?

​$400.

The maximum sales tax rates for selected​ states, including county and municipal​ taxes, occur in

​Arkansas, Louisiana, and Arizona.

Which of the following would have the most elastic​ demand?

​Coca-Cola.

Identify which of the following would generate a decrease in the market demand for​ e-book readers, which are a normal good. I. An increase in the price of downloadable apps utilized to enhance the​ e-book reading​ experience, which are complements. II. An increase in the number of consumers in the market for​ e-book readers. III. A decrease in the price of tablet​ devices, which are substitutes. IV. A reduction in the income of consumers of​ e-book readers. A. Both III and IV. .B. ​I, III and IV. .C. Only IV. D. Both I and IV.

​I, III and IV.

One of your​ classmates, Sally, is a hardworking​ student, serious about her​ classes, and conscientious about her grades. Sally is also​ involved, however, in volunteer activities and an extracurricular sport. Is Sally displaying rational

​Yes, she is using her time allocated among​ school, studying, sports and volunteer work in a manner she deems best.

A supply schedule gives a schedule of​ ________ quantities supplied per time dimension at​ ________.

​alternative; different possible prices

Suppose that when the price of root beer rises​ 1%, the quantity of pizza demanded falls​ 0.5%. This would mean that pizza and root beer are

​complements, with a cross price elasticity of -.5

A surplus occurs when quantity supplied is​ ________ than quantity demanded at a price​ ________ the market clearing price.

​greater; above

The imposition of an excise tax on a product will​ ________ the market price of the product and​ ________ the equilibrium quantity.

​increase; decrease

Price ceilings tend to​ ________ gains from​ trade, and price floors tend to​ ________ gains from trade.

​reduce; reduce

The imposition of an excise tax on a product will shift that​ product's ________ curve vertically by the exact amount of the tax. This represents​ ________.

​supply; a decrease in supply

Evidence indicates that a system of rent controls primarily benefits

​upper-income professionals.


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