Economics Review
According to the diagram, what is the dollar amount of the unit tax?
$1.00
Which of the following will tend to make the demand for a product more elastic?
New firms which produce similar products enter the industry.
The graph shows the supply and demand curves for gasoline. Which of the following will occur if the government establishes a price ceiling of $1.20 per gallon?
Neither a surplus or a shortage.
Which of the following is true if consuming one unit of a good yields 100 utils and consuming the second unit of the good increases satisfaction by 20 utils?
The total utility of consuming two units is 120
Assume a 10% increase in price increased the market quantity supplied by 20%. Which of the following is true?
The value of the price elasticity of supply is 2.
Which of the following will occur if the government imposes a price ceiling below the equilibrium price of a good.
There will be a shortage in the market.
The cross-price elasticity of demand between good X and good Z measures the percentage change in the quantity demanded of good X in response to a percentage change in
the price of good Z
Following a decrease in the supply of oranges, the price of orange juice increased by 20%, which resulted in a 10% increase in the quantity of apple juice consumed. This implies that the cross elasticity of demand between orange juice and apple juice is
.5
Assume the following utility schedule for Aaliyah's ice cream consumption. If she consumes 6 units, what is the value of her total utility from consuming ice cream?
18
The table above shows the total cost and the total benefit of cleaning up pollution in a community. Which of the following cleanup levels is socially optimal?
2
Which of the following statements about the price elasticity of demand is true?
As more price substitutes become available, demand tends to be more price elastic.
If the price ceiling is set at P1, which of the following areas represent the resulting consumer surplus, producer surplus, and deadweight loss?
Consumer surplus: f + g + i Producer surplus: k Deadweight loss: h + j
After the government imposed a $0.20 per gallon tax on gasoline, the price of a gallon of gasoline increased from $1.00 to $1.15. Which of the following statements is true?
Consumers bear most, but not all, of the tax burden.
The demand curves X and Y are shown in the graph. Which of the following offers the most accurate comparison of the price elasticities of demand curves X and Y at a price of $4?
Demand curve X: relatively inelastic Demand curve Y: perfectly elastic
Assume that mustard and ketchup are considered substitutes by consumers. If the price of mustard increases, which of the following graphs represent the most likely response in the ketchup market?
Demand will increase.
City transit - bus tickets increase; if price in inelastic, how will the number of people riding and the revenue change?
Number of people will decrease, city revenues will increase
Marginal analysis suggests than an individual will consume one additional unit of a good if
additional benefit is greater than the additional cost
Following a prolonged power outage, the price of flashlights normally increases significantly. If the cities had passed laws prohibiting price increases for flashlights, during power outages such laws would most likely
create a shortage of flashlights
The diagram above shows Sally's utility function for chocolate. Her utility function illustrates the principle of
diminishing marginal utility
The marginal benefit of consuming a good is
the maximum amount a consumer is willing to pay for one more unit of a good
Promoters of a rock group know that if they charged $8 a ticket, 400 people would buy tickets for a concert, and if they charged $4 a ticket, 800 people would buy tickets. Over this price range, demand for the concert tickets for the rock group is
unit elastic
Consumer surplus exists because of the
willingness of some consumers to pay a price higher than the market price for some units of a good.
The table above shows the total benefit Tony gets from eating different quantities of apples. If apples cost $3 each, how many should he buy to maximize his consumer surplus?
4
If the price elasticity of supply for pickles is 2 and the price of pickles increases by 10%, then the quantity supplied of pickles will increase by
20%.
The information below shows the marginal utilities a student receives from the consumption of pizza and pens. Assume that the marginal utility of each good is independent of the quantity of the other good consumed. If the student purchases 2 units of pizza and 2 unites of pens, the student's total utility will be
53 utils
The cross-price elasticity of demand between goods J and K is -3. A 20% decrease in the price of good K will result in a
60% increase in the quantity demanded of good J
Demand for bottled water is price elastic, what effect will an increase in supply of bottled water lead to?
A decrease in price, leading to an increase in total revenue.
If an effective rent ceiling is eliminated, which of the following is most likely to occur in the rental housing market?
An increase in rents, resulting in an increase in the quantity of housing supplied.
Based on the graph, the producer surplus at the market equilibrium price and quantity is shown by which area?
GZN
The following chart shows the total utility that Juan receives from consuming various amounts of chocolate candy bars each day. Which of the following statements about Juan's marginal utility is correct?
His marginal utility from the first candy bar is greater than his marginal utility from the second candy bar.
Which of the following is true of the cross-price elasticity of demand?
It is greater than zero for two goods that are substitutes.
Assume that the current market equilibrium price for milk is $2.80 per gallon and that 5 million gallons are sold per day. If the government sets a price ceiling of $2.00 per gallon, which of the following is true?
Less than 5 million gallons of milk will be sold.
Which of the following relationships among the price elasticity of demand, change in price, and change in total revenue is consistent?
Price elasticity of demand: inelastic Change in price: decrease Change in total revenue: decrease
Assume that the government imposes a $4 per-unit tax on sellers of a good in the market described by the graph above. What are the price paid by buyers, the after-tax price received by sellers, and the deadweight loss?
Price paid by buyers: $8 Price received by sellers: $4 Deadweight loss: $200
Assume that the government increases the unit excise tax on gasoline suppliers and also that people commute longer distances to work as more houses are built in city suburbs. As a result, the equilibrium price and quantity of gasoline will most likely change in which of the following ways?
Price: Increase Quantity: Indeterminate
The graph illustrates the labor market for teenage workers. The current minimum wage for all workers is W1. If Congress introduces a sub-minimum wage, W2, that applies only to teenagers, what is the most likely effect on teenage employment?
Teenage employment will increase because firms will want to hire more teenagers at W2 than at W1.
According to the laws of diminishing marginal utility, which of the following is true?
The additional satisfaction received from consuming extra units decreases as consumption of the good increases
The price elasticity of demand for a product is .5. If the price of the product increases by 20 percent, which of the following will occur?
The quantity demanded of the good will decrease by 10%.
The economic concept of total consumer surplus refers to which of the following?
The sum of the differences between the prices that consumers are willing to pay for a good or service and the price they actually pay
In the absence of market failures, a perfectly competitive market equilibrium is efficient for which of the following reasons?
Total economic surplus is maximized and all mutually beneficial transactions are exhausted.
If a one-of-a-kind Etruscan vase is offered for sale at an auction, which, if any, of the following correctly shows the supply curve for the vase?
Vertical supply curve.
Which of the following statements relating to income elasticity is true?
With an income elasticity coefficient of 5, a 10% increase in income will lead to a 50% increase in the quantity demanded of the good.
If the income elasticity of demand for good X is negative and the cross-price elasticity of demand between good X and good Y is negative, which of the following much be true for X?
X is an inferior good and is a complement to Y.
Based on the graph, the consumer surplus at the market equilibrium price and quantity is shown by which area?
ZMN
The graph shows the market demand for good X. A movement from point A to point B would most likely be caused by
a decrease in production costs for good X
In the market shown in the graph, at the price of $5, there will be
a surplus and price will eventually fall
When total utility is at its maximum, marginal utility is
equal to zero.
When the market is in equilibrium, the total economic surplus is equal to area
f + g + h + i + j + k
