Econ exam 2

A tax on the buyers of cereal will increase the price of cereal paid by buyers, a. decrease the effective price of cereal received by sellers, and decrease the equilibrium quantity of cereal. b. decrease the effective price of cereal received by sellers, and increase the equilibrium quantity of cereal. c. increase the effective price of cereal received by sellers, and decrease the equilibrium quantity of cereal. d. increase the effective price of cereal received by sellers, and increase the equilibrium quantity of cereal.

A

Equilibrium quantity must increase when demand a. increases and supply does not change, when demand does not change and supply increases, and when both demand and supply increase. b. increases and supply does not change, when demand does not change and supply increases, and when both demand and supply decrease. c. decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply increase. d. decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease.

A

Goods with many close substitutes tend to have a. more elastic demands. b. less elastic demands. c. price elasticities of demand that are unit elastic. d. income elasticities of demand that are negative.

A

If the demand for donuts is elastic, then a decrease in the price of donuts will a. increase total revenue of donut sellers. b. decrease total revenue of donut sellers. c. not change total revenue of donut sellers. d. There is not enough information to answer this question.

A

In markets, prices move toward equilibrium because of a. the actions of buyers and sellers. b. government regulations placed on market participants. c. increased competition among sellers. d. buyers' ability to affect market outcomes.

A

Which of the following causes a surplus of a good? a. a binding price floor b. a binding price ceiling c. a tax on the good d. More than one of the above is correct.

A

Which of the following observations would be consistent with the imposition of abinding price ceiling on a market? After the price ceiling becomes effective, a. a smaller quantity of the good is bought and sold. b. a smaller quantity of the good is demanded. c. a larger quantity of the good is supplied. d. the price rises above the previous equilibrium.

A

A key determinant of the price elasticity of supply is a. the ability of sellers to change the price of the good they produce. b. the ability of sellers to change the amount of the good they produce. c. how responsive buyers are to changes in sellers' prices. d. the slope of the demand curve.

B

A tax imposed on the sellers of a good will a. raise both the price buyers pay and the effective price sellers receive. b. raise the price buyers pay and lower the effective price sellers receive. c. lower the price buyers pay and raise the effective price sellers receive. d. lower both the price buyers pay and the effective price sellers receive.

B

If the supply of a product increases, then we would expect equilibrium price a. to increase and equilibrium quantity to decrease. b. to decrease and equilibrium quantity to increase. c. and equilibrium quantity to both increase. d. and equilibrium quantity to both decrease.

B

Which of the following causes a shortage of a good? a. a binding price floor b. a binding price ceiling c. a tax on the good d. None of the above is correct..

B

A market includes a. buyers only. b. sellers only. c. both buyers and sellers. d. the place where transactions occur but not the people involved.

C

Demand is said to be inelastic if the a. quantity demanded changes proportionately more than price. b. price changes proportionately more than income. c. quantity demanded changes proportionately less than price. d. quantity demanded changes proportionately the same as price.

C

If a binding price floor is imposed on the video game market, then a. the demand for video games will decrease. b. the supply of video games will increase. c. a surplus of video games will develop. d. All of the above are correct.

C

If soybean farmers know that the demand for soybeans is inelastic, in order to in-crease their total revenues they should a. use more fertilizers and weed killers to increase their yields. b. plant additional acres to increase their output. c. reduce the number of acres they plant to decrease their output. d. Both a and b are correct.

C

If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase inquantity supplied, then the price increase is about a. 0.67%. b. 0.83%. c. 1.20%. d. 2.70%.

C

a market in which there are many buyers and many sellers so that each has a negligible impact on the market price.

Competitive Market

a measure of how much the quantity demanded of one good responds to a change in the price of another good, computed as the percentage change in quantity demanded of the first good divided by the percentage change in price of the second good

Cross-price elasticity of demand

Buyers are able to buy all they want to buy and sellers are able to sell all they want to sell at a. prices at and above the equilibrium price. b. prices at and below the equilibrium price. c. prices above and below the equilibrium price, but not at the equilibrium price. d. the equilibrium price but not above or below the equilibrium price.

D

In a market economy, supply and demand are important because they a. play a critical role in the allocation of the economy's scarce resources. b. determine how much of each good gets produced. c. can be used to predict the impact on the economy of various events and policies. d. All of the above are correct.

D

When a tax is placed on the sellers of energy drinks, the a. sellers bear the entire burden of the tax. b. buyers bear the entire burden of the tax. c. burden of the tax will be always be equally divided between the buyers and the sellers. d. burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal

D

Which of the following statements about the consumers responses to rising gasoline prices is correct? a. Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run. b. Consumers react to a 10% increase in price with about a 10% decrease in quantity demanded in both the short run and long run. c. Consumers decrease their quantity demanded more in the short run than in the long tun d. Consumers decrease their quantity demanded more in the long run than in the short run.

D

a measure of how much the quantity demanded of a good responds to a change in consumers' income, computed as the percentage change in quantity demanded divided by the percentage change in income.

Income elasticity of demand

the claim that, other things being equal, the quantity demanded of a good falls when the price of the good rises.

Law of demand

a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price.

Price elasticity of demand

a measure of how much the quantity supplied of a good responds to a change in the price of that good, computed as the percentage change in quantity supplied divided by the percentage change in price.

Price elasticity of supply

the manner in which the burden of a tax is shared among participants in a market

Tax incidence

A measure of the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants.

elasticity