ECON 201 Exam 2
Which of the following changes would not shift the supply curve for a good or service?
a change in the price of the good or service
When demand is inelastic, a decrease in price will cause
a decrease in total revenue
If a surplus exists in a market, then we know that the actual price is
above the eq price and QS is greater than QD
When a tax is levied on sellers of tea
both sellers and buyers of tea are made worse off
Under rent control, bribery is a mechanism to
bring the total price of the apartment (including the bribe) closer to the eq price
Price of potato chips decreases from $1.45 to $1.25 and quantity demanded increases from 2000 to 2200. Price elasticity of demand?
0.64
Hotel packages in Las Vegas: When the price is $250, the QD is 2000 packages/week. When the price is $280, the QD is 1700 packages/week. Price elasticity of demand?
1.43 and an increase in the price will cause hotels' TR to decrease
If consumers often purchase muffins to eat while they drink their lattes, what would happen to the eq price and Q of lattes if the price of muffins rises?
Both the eq price and Q would decrease
What would happen to the eq price and quantity of lattes if consumers' incomes rise and lattes are a normal good?
Both the eq price and quantity would increase
One economist argued that rent control is "the best way to destroy a city, other than bombing". Why would an economist say this?
He fears that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city
What would happen to the eq price and quantity for coffee if the wages of the coffee-bean pickers fell and the price of tea fell?
Price would fall and the effect on quantity would be ambiguous
Suppose the eq price of a physical is $200 and the gov imposes a price ceiling of $150. As a result of the price ceiling the
QD of physicals increases and the QS of physicals decreases
A city wants to raise revenues. The mayor suggests that the city raise price of admission at the pool to raise revenues. The city manager suggests that the city lower the price of admission. Who is correct?
The mayor would be correct if demand were price inelastic, the city manager would be correct if demand were price elastic
A price ceiling will be binding only if it is set
below the eq price
Price ceilings and price floors that are binding
cause surpluses and shortages to persist bc price cannot adjust to the market eq price
A decrease in the price of a good will
decrease quantity supplied
A tax on sellers of coffeewill increase the price of coffee paid by buyers
decrease the effective price of coffee received by sellers, and decrease the eq quantity of coffee
Equilibrium price must decrease when demand
decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously
A tax on the buyers of sofas
decreases the size of the sofa market
Which of the following events must cause eq quantity to fall?
demand and supply both decrease
At the eq price, the quantity of the good that buyers are willing and able to buy
exactly equals the quantity that sellers are willing and able to sell
If an increase in income results in a decrease in the QD of a good, then for that good, the
income elasticity of demand is negative
Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be
positive
In a competitive market free of gov regulation
price adjusts until QD equals QS
The local bakery makes such good cinnamon rolls that consumers dont respond much to change in price. If the owner wants to increase revenue, they should
raise the price of cinnamon rolls
Suppose roses are selling $20/dozen but the eq price is $30/dozen. We would expect a
shortage to exist and the market price of roses to increase
When a binding price ceiling is imposed ona market to benefit buyers
some buyers benefit and some buyers are harmed
A minimum wage that is set above the markets eq wage will result in excess
supply of labor, that is, unemployment
Suppose roses are selling $40/dozen but the eq price is $30/dozen/ We would expect a
surplus to exist and the market price of roses to decrease
If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of
the availability of close substitutes in determining the price elasticity of demand
An alternative to rent-control laws that would not reduce the quantity of housing supplied is
the payment by government of a fraction of a poor family's rent