ECON 315

If a price increase of $5 to $7 causes quantity demanded to fall from 150 to 100, what is the absolute value of the own price elasticity at a price of $7?

-1.75 Px/ Qx = 100-150/ 7-5 x 7/100 = -1.75

Which of the following events will definitely cause equilibrium quantity to fall ?

Demand and supply both decrease

Equilibrium price will unambiguously 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

Suppose there is a simultaneous increase in demand and decrease in supply, what effect will this have in the equilibrium price?

It will rise

The inverse demand and supply functions are: Px = 10-2Qx and Px= 2+ 2Qx . What is the equilibrium price and quantity?

Q*x =2; P* =6

The market the man is QD=60-6P and the market supply is Qs= 4P. A price ceiling of $3 is imposed. What is the shortage/surplus? What is the full economic price ?

Quantity shortage of 30 units; Full economic price =8

A tax on a good causes the size of the market to shrink

TRUE

If a firm is facing elastic demand, then the firm should decrease price to increase revenue.

TRUE

What will happen to the equilibrium price of new textbooks if more students attend college, paper becomes cheaper, textbook authors except lower royalties, and if you were used textbooks are sold?

The price change will be ambiguous

The demand for good x is given by: QDX= 100-3Px + 2.5Py + 2I where I is Income, Px is the price of the good, y is a related good and Py is the price of this related good. From the expression above you can say that?

X and Y are substitutes and X is an normal good

Given a linear demand function of the form QDX= 100-0.5 Px, find the inverse linear demand function ? a. Px=200-2Qx b. Px=100-0.5Qx c. Px=100-2Qx d.Px=100Qx-0.5Px

a. Px=200-2Qx

Good X and Y are complements. Demand for good x is given by QDX=a0 + a1Px + a2Py + a3I. Then we know that ?

a2 < 0

Good X is a normal good and it's demand is given by QDX=a0+a1Px+a2Py+a3I. Then we know that?

a3 > 0

A percentage tax (sales tax) causes supply curve to?

become steeper

Which of the following would not shift the demand for good A ?

drop in price of good A

Suppose the demand for good X is given by QDX= 10+ aPx + BPy+ yI. If B is positive, then ?

goods y and x are substitutes

Suppose the market demand for good X is given by QDX= 20-2Px . If the equilibrium price is $5 per unit then consumer surplus is A: $100 B: $75 C: $50 D: $25

$25

If the income elasticity for lobster is 0.4, a 40% increase in income will lead to a?

16% increase in demand for lobster

The demand curve for a good is horizontal when it is?

A perfectly elastic good

Beer and pretzels are complement. Suppose that higher minimum wage in breweries has reduced the amount of beer in the market. What impact does this have on the equilibrium price and quantity for pretzels ?

Price decreases, quantity decreases

Supposed supply increases and demand decreases (both curves shift). What effect will this have an equilibrium price and quantity?

Price decreases, quantity is ambiguous

Wine and cheese or substitutes. Suppose that great weather in CA has produced a bountiful harvest for grapes. What impact does this have on the equilibrium price and quantity for cheese?

Price increases, quantity increases

The own price elasticity of demand for apples is -1.5. If the price of apples falls by 6% what will happen to the quantity of apples demanded ?

It will increase 9%

If A and B are substitutes, a decrease in the price of good A would?

Lead to a decrease in demand for B

The market demand is QD=88-6P and the market supply is Qs=4P . If a price ceiling of $4 is imposed, what is the full economic price ?

Pf = 12

Suppose both supply and demand decrease (both curves shift). What effect will this have on equilibrium price and quantity ?

Price is ambiguous , quantity decreases

Suppose market demand and supply are given by QDX= 100-2Px and Qsx= 5+3Px . If the government sets a price floor of $30 and agrees to purchase all surplus at $30 per unit, what is the total cost to the government? A: $1,650 B: $1,375 C: $900 D: $1,125

$1,650 QDX= 100 - 2Px = 100 - 2 x 30 =40 QSX= 5 + 3Px = 5 +3 x 30 = 95 Qsx-Qdx= 90-45 = 55 Cost = 30 x 55 = $1,650

Assume demand increases, which increases the equilibrium price from $70 to $90. The increase in producer surplus to producers already already in the market is: A: $50 B: $100 C: $150 D: $200

$100 (90-70)x5 =100

Assume demand increases, which increases the equilibrium price from $70 to $90. The increase in producer surplus due to new producers entering the market is: A: 50 B: 100 C: 150 D: 200

$50

Suppose the market demand for good X is given by QDX= 20-2Px . If the equilibrium price is $5 per unit, what is consumer expenditure on good X? A: $100 B: $75 C:$50 D: $25

$50

Suppose the market demand for good X is given by QDX= 20-2Px . If the equilibrium price is $5 per unit, what is the total consumer value ? A: $100 B: $75 C: $50 D: $25

$75 25+50= 75

In which a tax imposed. As a result of the tax, consumer surplus decreases by?

$80, producer surplus decreased by $80 tax revenue is $120 and deadweight loss is $40

Suppose of the man function is QDX= 100-8Px+6Py-M . If Px=$4 , Py= $2 and M= $10 what is the cross price elasticity of good x with respect to the price of good y? A: 0.17 B: 0.38 C: 0.21 D: 0.04

0.17

The inverse demand and supply functions are: Px= 10-2Qx and Px= 2 + 2Qx . Compute the quantity and the price at which this quantity will be exchanged when there is an $8 per unit price floor.

1 unit and $8 per unit

A tax of $10 per unit is imposed on good X. The tax reduces the equilibrium quantity in the market by 200 units. The deadweight loss from the tax is? A 2000 B 1000 C 500 D 250

1,000

Supposed tax of three dollars per unit is imposed on a good. The text decreases consumer surplus by 3900 and decreases producer surplus by 3000. The text generates tax revenue of 6000. The text decreased the equilibrium quantity of the good from

2,600 to 2000

Bagels and cream cheese are complements. You notice that the equilibrium Price of cream cheese and the equilibrium quantity of bagels has increased. This is due to the following event?

A decrease in the price of flour

Suppose the government imposes a text as shown in the figure below. What is the final producer and consumer surplus?

CS= A; PS= F

If the cross price elasticity between good A & B is negative, we know the goods are?

Complements

Cold weather in Florida has destroyed the majority of orange groves. Also, a new study shows that eating one orange per day makes you lose 4 pounds per month. This means?

Equilibrium price increases, equilibrium quantity is ambitious

Suppose that Demand for good decreases and, at the same time, supply for the good decreases. What would happen in the market for the good?

Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous

A tax of $1 on sellers always increases the equilibrium price by $1?

FALSE

Demand is an elastic if the price elasticity of demand is greater than one

FALSE

The flutter the demand curve that passes through a given point, the more inelastic the demand.

FALSE

A tax on the sellers of coffee will ?

Increase the price of coffee paid by buyers, decreased affective price of coffee received by sellers, and decreased equilibrium quantity of coffee

As we move down along a linear demand curve, the price elasticity of demand becomes more

Inelastic

The demand for good X is QDX= 10,000-4Px+5Py+2I+A . Suppose that P=50, P=$100 I=$25,000 and Ax= 1,000 units. Based on this information, we know that the demand for good X is:

Inelastic

New cars are normal goods. What will happen to the equilibrium price of new cars if the price of gasoline rises, the the piece of steel falls, public transportation becomes cheaper and more comfortable, auto workers accept lower wages, and automobile insurance becomes more expensive ?

Price will fall

Suppose the man is given by Q=32-P and supply by Q= P + 2. A 50% sales tax is imposed. What is the equilibrium price and quantity after tax ? A: Q* =17;P*=15 B: Q* =15; P*= 17 C: Q* =18; P*= 14 D: Q* =14; P*= 18

Q* =14; P* =18

The market demand is Qd= 60-6P and the market supply is Qs= 4P. If a price Floor of $7 is imposed, how many units of output (Q) are traded in the market? What is the size of shortage/ surplus ?

Q= 18; surplus = 10units

What is the total revenue the government gets from imposing taxes?

TR= B+D

Goods with clothes substitutes tend to have more elastic demand than two goods without clothes substitutes

TRUE

A per-unit tax of $1.00 per gallon of gasoline placed on the suppliers of gasoline, would shift the supply curve ?

Up to $1.00

A price elasticity of zero corresponds to a demand curve that is?

Vertical

A change in income will NOT lead to?

a movement along the demand curve

Assume that the price elasticity of demand is -2 for a certain firms product. If the firm raises the price, the firms managers can expect total revenue to?

decrease