CH 5 chiang

A tax in which the percentage of income tax rises as income falls is known as a: A. regressive tax. B. flat tax. C. progressive tax. D. lump-sum tax.

A.

If a firm sells a product that has a perfectly inelastic demand curve, then, if price doubles, it can be expected that: A. total revenue will double. B. supply will decrease. C. total revenue will remain unchanged. D. total revenue will decrease.

A.

If a store sells a good that has a unitary elastic demand, what would be the net result on their total revenue from an increase in price? A. There would be no change in total revenue. B. There is not enough information to answer this question. C. There would be an increase in total revenue. D. There would be a decrease in total revenue.

A.

In which period can firms decide to leave an industry? A. long run B. market period C. present time period D. short run

A.

The primary determinant of the elasticity of supply is: A. time. B. income. C. the availability of substitutes. D. the prices of substitutes.

A.

When moving down along a straight-line demand curve: A. the elasticity of demand changes from elastic to inelastic. B. the elasticity of demand stays the same. C. total revenue always stays the same. D. the elasticity of demand changes from inelastic to elastic.

A.

A gas station owner in a large city learned in his microeconomics class that buyers are relatively unresponsive to changes in the price of gasoline. If, based on that assumption, he increases the price of gas at his station: A. the sale of complementary goods at his station will increase. B. total revenue will increase. C. total revenue will not change. D. total revenue will decrease.

B.

Alvaro pays $40 in tax on a $120 item. Nurul pays $80 in tax on a $240 item. We can conclude that this tax is a: A. lump-sum tax. B. progressive tax. C. flat tax. D. regressive tax.

C.

If a product's price rises by 6% and its quantity demanded falls by 8%, then its elasticity is equal to: A. 0.75. B. 2.00. C. 1.33. D. 6.00.

C.

In general, the flatter the supply curve is, the: A. less elastic is supply. B. fewer the adjustments to price changes that firms can make. C. more elastic is supply. D. shorter the period.

C.

5. Suppose the demand for toxic waste disposal is very elastic. The government imposes an excise tax on waste disposal. The deadweight loss associated with the production of toxic waste disposal will be: A. relatively small. B. a deadweight gain. C. zero. D. relatively large.

D.

If demand is inelastic, the tax burden falls primarily on the _____ and deadweight loss is _____. A. buyer; large B. seller; small C. seller; large D. buyer; small

D.

If price increases by 100% and quantity demanded decreases by 50%, then the price elasticity of demand will equal _____. A. 22.0 B. 2.0 C. 0.4 D. 0.5

D.

If the cross elasticity of demand for good A with respect to good B is 2.3, then good A is a(n): A. complement for good B. B. normal good. C. inferior good. D. substitute for good B.

D.

Home heating gas tends to have _____ demand because _____. a. inelastic; people do not have time to adjust their consumption patterns b. elastic; it is a necessity c. inelastic; people spend a large share of their incomes on heat d. elastic; it has many close substitutes

a.

How would you describe supply as shown in the graph? a. perfectly elastic b. elastic at high prices and inelastic at low prices c. perfectly inelastic d. unitary for all prices

a.

The price of gold increases by 200%. If the price elasticity of demand for gold is 0.4, what will happen in the market? a. Gold sales will decrease by 5%. b. Gold sales will decrease by 80%. c. Gold sales will decrease by 40%. d. Gold sales will increase by 1,000%.

b.

If the price of a product falls by 15% and the quantity supplied falls by 25%, we can say that the elasticity of supply is: a. inelastic. b. perfectly elastic. c. unitary elastic. d. elastic

d.