Econ Exam 2

Which of the following expressions is valid for the price elasticity of demand

(Q2-Q1)/((Q1+Q2)/2) / (P2-P1)/((P1+P2)/2)

Which of the following statements is correct

All of the above (the demand for flat screen computer monitors is more elastic than the demand for monitors in general, the demand for grandfather clocks is more elastic than the demand for clocks in general, and the demand for cardboard is more elastic over a long period of time than over a short period of time)

When a tax is placed on the buyers of a product, the

All of the above are correct (size of the market decreases, effective price received by sellers decreases and the price paid by buyers increases, demand for the product decreases)

Which of the following is the most likely explanation for the imposition of a price ceiling on the market for milk

Buyers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling.

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because

Buyers tend to be much more sensitive to a change in price when given more time to react

The line the relates the price of a good and the quantity demanded of that good is called the

Demand curve, and it usually slopes downward

Assume Diana buys computers in a competitive market. It follows that

None of the above is correct.

For which pairs of goods is the cross-price elasticity most likely to be positive?

Pens and pencils

In a free, competitive market, what is the rationing mechanism

Price

Buyers and sellers who have no influence on market price are referred to as

Price takers

Each of the following is a determinate if demand except

Production technology (all the correct answers: tastes, expectations, and the prices of related goods)

The price elasticity if demand measures how much

Quantity demanded responds to a change in price

The forces that make economies work

Supply and Demand

Which of the following is not correct

Taxes levied on sellers and taxes levied on buyers are not equivalent.

Suppose the government has imposed a price ceiling on laptop computers. Which of the following events could transform the price ceiling from one that is not binding into one that is binding

The number of firms selling laptop computers decreases.

A university's football stadium is never more than half-full during football games. This indicates

The ticket price is above the equilibrium price

For a market for a good or service to exist, there must be a

a group of buyers and sellers

If a surplus exists in a market, then we know that the actual price is

above equilibrium price and quantity supplied is greater than quantity demanded.

Demand is said to be price elastic if

buyers respond substantially to changes in the price of the good

If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the

demand for the good is said to be inelastic

Demand is elastic if the price elasticity of demand is

greater than 1

Exceptionally favorable growing conditions in the vineyards of Napa Valley would cause a(n)

increase in the supply of wine, decreasing price.

In a competitive market, the price of a product

none of the above (not determined by just buyers or just sellers; both price and quantity are produced by both)

If Max experiences a decrease in his income, then we would expect Max's demand for

normal goods to decrease

If the quantity supplied is the same regardless of price, then the supply is

perfectly inelastic

When supply and demand both increase, equilibrium

price may increase, decrease, or remain unchanged (it's ambiguous)

When a binding price ceiling is imposed on a market

price no longer serves as a rationing device

A tax imposed on the sellers of a good will

raise the price buyers pay and lower the effective price sellers receive.

When a supply curve is relatively flat,

supply is relatively elastic

Workers at a bicycle assembly plant currently earn the mandatory minimum wage. If the federal government increases the minimum wage by $1.00 per hour, then it is likely that the

supply of bicycles will shift to the left.

For a good that is a necessity, demand

tends to be inelastic

In a given market, how are the equilibrium price and the market-clearing price related

they are the same price

A $2.00 tax levied on the sellers of birdhouses will shift the supply curve

upward by exactly $2.00