Exam 2 ECON 2023 Test Review

The burden of the tax on sellers is

$1 per unit.

The burden of the tax on buyers is

$2 per unit.

The price paid by buyers after the tax is imposed is

$24.

Which of the following price ceilings would be binding in this market?

$4

The per-unit burden of the tax on buyers of the good is

$6.

What is the amount of the tax per unit?

$8

A shortage is eliminated when

a binding price ceiling is removed.

An advance in farm technology that results in an increased market supply is

bad for farmers because total revenue will fall but good for consumers because prices for food will fall.

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that

the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.

If the cross-price elasticity of demand for two goods is -4.5, then

the two goods are complements.

In a market with a binding price control,

there is an imbalance between the quantity supplied by sellers and the quantity demanded by buyers.

In which of these instances is demand said to be perfectly inelastic?

A decrease in price of 2% causes an increase in quantity demanded of 0%.

In which of the following situations will total revenue increase?

All of the above are correct.

Which of the following statements is correct concerning the burden of a tax imposed on take-out food?

Buyers and sellers share the burden of the tax.

Consider the US market for chocolate, a market in which the government has imposed a price ceiling. Which of the following events could convert the price ceiling from a nonbinding to a binding price ceiling?

South American cocoa bean producers refuse to ship to chocolate producers in the US.

Which of the following is not correct?

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

For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

The good is a luxury.

For a particular good, a 12 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

The good is a necessity.

For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

The market for the good is broadly defined.

For a particular good, an 8 percent increase in price causes a 4 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

The market for the good is broadly defined.

For a particular good, an 8 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

The relevant time horizon is long.

For a particular good, a 10 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

The relevant time horizon is short.

Which of the following statements is correct?

The tax is levied on buyers of the good, rather than on sellers.

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

There are many close substitutes for this good.

For a particular good, a 5 percent increase in price causes a 15 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

There are many substitutes for this good.

Which of the following statements is correct?

Who actually pays a tax depends on the price elasticities of supply and demand.

A manufacturer produces 1,000 units, regardless of the market price. For this firm, the price elasticity of supply is

Zero

Rent controls can cause

all of these are possible results of rent controls.

The incidence of a tax is

always determined by the interaction of the demand and supply side of the market..

When a tax is placed on the buyers of cell phones, the size of the cell phone market

and the effective price received by sellers both decrease.

A perfectly elastic demand implies that

any rise in price above that represented by the demand curve will result in a quantity demanded of zero.

Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is

assuming that the demand for university education is inelastic.

When a tax is levied on buyers of tea,

buyers of tea and sellers of tea both are made worse off.

In the long run, the quantity supplied of most goods

can respond substantially to a change in price.

Because the demand for wheat tends to be inelastic, the development of a new, more productive hybrid wheat would tend to

decrease the total revenue of wheat farmers.

When a tax is placed on the buyers of tennis racquets, the size of the tennis racquet market

decreases, but the price paid by buyers increases.

There are very few, if any, good substitutes for motor oil. Therefore, the

demand for motor oil would tend to be inelastic.

You have just been hired as a business consultant to determine what pricing policy would be appropriate to increase the total revenue of a therapeutic massage spa. The first step you would take would be to

determine the price elasticity of demand for massages.

For which of the following goods is the income elasticity of demand likely highest?

diamonds

Which of the following is correct? A tax burden

falls more heavily on the side of the market that is less elastic.

In general, elasticity is a measure of

how much buyers and sellers respond to changes in market conditions.

A tax levied on the sellers of blueberries

increases sellers' costs, reduces profits, and shifts the supply curve up.

The supply of oil is likely to be

inelastic in the short run and elastic in the long run.

Drug-interdiction policies that reduce the supply of illegal drugs

may increase drug-related crimes.

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

peanut butter and jelly

A perfectly inelastic demand implies that buyers

purchase the same amount as before when the price rises or falls.

Demand is said to be inelastic if the

quantity demanded changes proportionately less than price

A tax imposed on the buyers of a good will

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

If soybean farmers know that the demand for soybeans is inelastic, in order to increase their total revenues they should

reduce the number of acres they plant to decrease their output.

Food and clothing tend to have

small income elasticities because consumers, regardless of their incomes, choose to buy relatively constant quantities of these goods.

Elasticity of demand is closely related to the slope of the demand curve. The less responsive buyers are to a change in price, the

steeper the demand curve will be.

If a change in the price of a good results in no change in total revenue, then

the demand for the good must be unit elastic.

Based upon the diagram

the incidence of the tax falls more heavily on sellers.

An outcome that can result from either a price ceiling or a price floor is

undesirable rationing mechanisms.

For which of the following goods is the income elasticity of demand likely lowest?

water