Macroeconomics Midterm questions

Figure 4-19, In this market, equilibrium price and quantity, respectively, are

$10 and 50 units.

How much tax revenue does this tax produce for the government?

$18

Figure 6-23, The price paid by buyers after the tax is imposed is..

$6

Table 4-11, The equilibrium price and quantity, respectively, are

$6 and 30 units.

Refer to Figure 5-17. Using the midpoint method, what is the price elasticity of supply between point A and point B?

1.67

Table 4-6, Which supply schedules obey the law of supply?

Firm B's and Firm D's only

Table 4-13, Suppose x=1. Then it must be true that...

Harry's demand curve is identical to Jake's demand curve.

Assume Leo buys coffee beans in a competitive market. It follows that

None of the above

Along which of the supply curves does quantity supplied move proportionately more than the price?

None. Quantity supplied moves proportionately less than the price along all of the three supply curves.

Figure 4-14, Which of the following would explain a movement from E1 to E2?

The cost of an input to the production of this good increases.

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

Refer to Figure 6-15. For a price ceiling to be binding in this market, it would have to be set at

any price below $3

Figure 6-16, in this market, a minimum wage of $7.25 is...

binding and creates unemployment

Suppose D1 represents the demand curve for paperback novels, D2 represents the demand curve for gasoline, and S1 represents the supply curve for paperback novels and gasoline. After the imposition of the $2 on paperback novels and on gasoline, the...

buyers of gasoline bear a higher burden of the $2 tax than buyers of paperback novels

Suppose Firm X and Firm Y are the only two sellers in the market. If the market price decreases from $12 to $9, quantity supplied will...

decrease by 6 units

Scenario 5-3, The equilibrium price will...

decrease in both aged cheddar cheese and bread markets

The equilibrium quantity will

decrease in both the milk and beef markets.

The movement from Db to Da in the market for potato chips could be caused by a(n)

decrease in income, assuming that potato chips are a normal good.

Total consumer spending on aged cheese will...

decrease, and total consumer spending on bread will decrease.

Refer to Table 5-2. Using the midpoint method, if the price falls from $200 to $150, the price elasticity of demand is

elastic

The change in equilibrium quantity will be

greater in the beef market than in the milk market.

The change in equilibrium price will be

greater in the milk market than in the beef market.

If, holding the supply curve fixed, there were an increase in demand that caused the equilibrium price to increase from $6 to $7, then sellers' total revenue would

increase

If, holding the supply curve fixed, there were an increase in demand that caused theequilibrium price to increase from $6 to $7, then sellers' total revenue would

increase

If the price decreased from $36 to $12, total revenue would

increase by $4,800, and demand is elastic between points X and Z.

Refer to Scenario 5-4. The equilibrium price will

increase in both the milk and beef markets.

Total consumer spending on milk will

increase, and total consumer spending on beef will decrease.

If these are the only four sellers in the market, then when the price increases from $6 to $8,the market quantity supplied

increases by 2 units

When the price of candy bars is $1.00, the quantity demanded is 500 per day. When the price falls to $0.80, thequantity demanded increases to 600. Given this information and using the midpoint method, we know that thedemand for candy bars is

inelastic.

Refer to Table 5-9. Which of the three supply curves represents the least elastic supply?

supply curve A

Which of the three supply curves represents the most elastic supply?

supply curve C

If the price were $8, a

surplus of 25 units would exist, and price would tend to fall.

In this market, a minimum wage of $7.25 creates a labor...

surplus of 4,500 workers

For a good that is a luxury, demand

tends to be elastic.

If buyers and sellers in a certain market are price takers, then individually

they have no influence on market price

Figure 4-18, Equilibrium price and quantity are, respectively,

$25 and 400 units.

Following the imposition of a price floor $3 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is...

$3

The effective price received by sellers after the tax is imposed is

$3

mid-point method

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

Figure 6-4, A government-imposed price of $16 in this market could be an example of a (i)binding price ceiling. (ii)non-binding price ceiling. (iii)binding price floor. (iv)non-binding price floor.

(ii) and (iii) only

Figure 4-3, If these are the only two consumers in the market, then the market quantity demanded ata price of $15 is

0 units

Following the imposition of a price floor $3 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting shortage is...

0 units

If a 40% change in price results in a 25% change in quantity supplied, then the price elasticity of supply is about...

0.63, and supply in inelastic

Suppose the price elasticity for minivans is 0.3in the short run and 1.2 in the long run. If an increase in the demand for minivans causes the price of minivans to increase by 5%, then the quantity supplied of minivans will increase by about...

1.5% in the short run and 6% in the long run.

Figure 5-17, using the midpoint method, what is the price elasticity of supply between point A and point B?

1.67

Table 4-4, Suppose the market consists of Adam, Barb, and Carl. If the price falls by $2, the quantitydemanded in the market increases by

10 units

If these are the only two consumers in the market, then the market quantity demanded ata price of $6 is

19 units

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is

2.33

Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is

2.5

Table 4-8, if these are the only three sellers in the market, then an increase in the market price from $6-$12 will increase quantity supplied by...

24 units

Table 6-4, How many units of the goods are sold after the imposition of the price floor?

3

Table 5-4, Using the mid-point method, what is the price elasticity of demand when price rises from $12-$16?

4

Suppose the market consists of Adam and Barb only. If the price rises by $2, the quantitydemanded in the market falls by

6 units

Suppose the market consists of Barb and Carl only. If the price falls by $2, the quantitydemanded in the market increases by

8 units

If these are the only two consumers in the market, then the market quantity demanded ata price of $10 is

8.33 units

Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1?

A is a luxury and B is a necessity.

Suppose the figure shows the market demand for coffee. Suppose the price of tea, a substitute good, increases. Which of the following changes would occur?

A shift from D2 to D1

Suppose the figure shows the market demand for laptop computers. Suppose the price of wireless printers, a complementary good, decreases. Which of the following changes would occur?

A shift from D2-D1

Total revenue when the price is P2 is represented by the area(s)

A+B

Sellers' total revenue would increase if the price

All of the above are correct.

Regarding Harry and Darby, whose demand for sandwiches conforms to the law of demand?

Both Harry and Darbys

The buyers and sellers will bear an equal share of the tax burden if the demand is...

D1, and the supply is S1

Figure 6-29, The buyers will bear a higher share of the tax burden than the sellers if the demand is...

D2, and the supple is S2

Which of the following is incorrect?

One-third of the burden of the tax falls on buyers, and two-thirds of the burden of the tax falls on the sellers

Which of the following movements would illustrate the effect in the market for chocolate chops cookies of an improved high-speed mixer that allows bakers to produce cookies in less time?

Point A to Point B

Figure 4-6, Suppose that the federal government is concerned about obesity in the United States.Congress is considering two plans. One would require "junk food" producers to include warning labels on all junkfood. The other would impose a tax on all products considered to be junk food. If the warning labels aresuccessful, we could illustrate the plan as producing a movement from

Point A to Point B in Panel 1.

Suppose that the federal government is concerned about obesity in the United States.Congress is considering two plans. One would require "junk food" producers to include warning labels on all junkfood. The other would impose a tax on all products considered to be junk food. We could illustrate the tax asproducing a movement from

Point A to Point C in Panel 2.

Which of following movements would illustrate the effect in the market for swimming lessons of an increase in the incomes of parents with school-aged children?

Point A to Point D

Which of the following movements would illustrate the effect in the market for convertible automobiles of an increase in the price of steel?

Point C to D

Figure 4-26, which of the following movements would illustrate the effect in the market for golf balls of an increase in green fees?

Point C to Point B

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

Price elasticity of demand = (Q1+Q2)/[(Q2-Q1)-2]/(P1+P2)/[(P2-P1)/2]

Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose the following: • x = 2. • The current price of a sandwich is $3.00. • The market quantity supplied of sandwiches is 4. • The slope of the supply curve is 2. Then there is currently a...

Shortage of 6 sandwiches, and the equilibrium price of a sandwich is $5.00

Figure 5-19, Which of the following statements is correct?

Supply curve C is more inelastic than supply curve D

Table 5-10, Using the mid-point method, which of the three supply curves has the most inelastic price elasticity of supply

Supply curve Z

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

The market for the good is broadly defined.

A key determinant of the price elasticity of supply is the time period under consideration. Which of the following statements best explains this fact?

The number of firms in a market tends to be more variable over long periods of time then over short periods of time.

Which of the following price changes would result in no change in sellers' total revenue?

The price decreases from $24 to $18.

Using the midpoint method, the price of demand for a good is computed to be approximately 2. Which of the following events is consistent with a 0.1 percent increase in the price of the good?

The quantity of the good demanded decreases by 0.2 percent.

Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose x=2. Then...

The slope of Jake's demand curve is -2, and the slope of the market demand curve is -2/5

Table 4-13, Regarding Harry and Darby, for whole are sandwiches a normal good?

This cannot be determined from the given information.

Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75.Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?

a 13.33 percent increase in the price of the good

The movement from Da to Db could be caused by

a decrease in income, assuming the good is inferior.

Suppose that Jane enjoys Diet Coke so much that she consumes one can every day. Although she enjoysgourmet cheese, she consumes it sporadically. If the price of Diet Coke rises, Jane decreases her consumptionby only a very small amount. But if the price of gourmet cheese rises, Jane decreases her consumption by a lot.These examples illustrate the importance of

a necessity versus a luxury in determining the price elasticity of demand.

A government-imposed price ceiling of $6 in this market results in...

a shortage of 8 units

A government-imposed price floor of $12 in this market results in...

a surplus of 4 units

Figure 5-10, If rectangle D is larger than rectangle A, then...

all of the above are correct

The movement from Db to Da could be caused by

an increase in the price of a complement.

Figure 4-16, The shift from S' to S in the market for chocolate cake could be caused by a(n)

decrease in the number of commercial bakers

If the supply curves that are drawn represent supply curves for single family residential houses, then the movement from S to S' could be caused by a(n)

decrease in the price of lumber

If these are the only four sellers in the market, then when the price decreases from $4 to$2, the market quantity supplied

decreases by 10 units.

Suppose that 50 ice cream cones are demanded at a particular price. If the price of ice cream cones rises fromthat price by 4 percent, the number of ice cream cones demanded falls to 46. Using the midpoint approach tocalculate the price elasticity of demand, it follows that the

demand for ice cream cones in this price range is elastic.

When the price of chai tea lattés is $5, Maxine buys 20 per month. When the price is $4, she buys 30 per month. Maxine's demand for chai tea lattés is

elastic, and her demand curve would be relatively flat

If price in this market is currently $14, then there would be a(n)

excess supply of 40 units. The law of supply and demand predicts that the price will fall from $14 to alower price.

Other things equal, the demand for a good tends to be more inelastic, the

fewer the available substitutes.

The change in equilibrium quantity will be...

greater in the bread market than in the aged cheddar market

Suppose Harry, Darby and Jake are the only demanders of sandwiches and that the market demand violates the law of demand. Then, in the table, the value of x must be...

greater than or equal to 7

The movement from Da to Db in the market for potato chips could be caused by a(n)

increase in the price of a pretzels.

Goods with many close substitutes tend to have

more elastic demands.

In this market, a minimum wage of $2.75 creates a labor...

neither labor shortage or labor surplus

In this market, a minimum wage of $2.75 is

nonbinding and creates neither a labor shortage nor unemployment.

Figure 4-7, If the demand curve for Good X shifts from Db to Da, then...

people are willing to buy less of Good X than before at each possible price.

If the demand curve for Good X shifts from Da to Db, then

people are willing to buy more of Good X than before at each possible price.

In 1990, congress passed a new luxury tax on items such as yachts, private airplanes, furs, jewelry, and expensive cars. The goal of the tax was to...

raise revenue from the wealthy

Suppose D1 represents the demand curve for gasoline in both the short run and long run, S1 represents the supply curve for gasoline in the short run, and S2 represents the supply curve for gasoline in the long run. After the imposition of the $2,

sellers bear a higher burden of the tac in the short run than in the long run

If the price were $4, a

shortage of 25 units would exist, and price would tend to rise.

Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose the following: • x = 2. • The current price of a sandwich is $3.00. • The market quantity supplied of sandwiches is 5. • The slope of the supply curve is 1. Then there is currently a...

shortage of 5 sandwiches, and the equilibrium price of a sandwich is between $3.00 and $5.00.

If there is currently a shortage of 20 units of the good, then the law of

supply and demand predicts that the price will rise by $2 to eliminate the shortage.

Suppose Harry, Darby, and Jake are the only demanders of sandwiches. Also suppose the following: • x = 2. • The current price of a sandwich is $5.00. • The market quantity supplied of sandwiches is 10. • The law of supply applies to the supply of sandwiches. Then there is a...

surplus of 5 sandwiches, and the price would be expected to fall from its current level of $5.00.

The value of the price elasticity of demand for a good will be relatively large when

the good is a luxury rather than a necessity

Suppose that gasoline prices increase dramatically this month. Lola commutes 100 miles to work each weekday. Over the next few months, Lola drives less on the weekends to try to save money. Within the year, she sells her home and purchases one only 10 miles from her place of employment. These examples illustrate the importance of

the time horizon in determining the price elasticity of demand

For every unit of the good that is sold, sellers are required to send...

three dollars to the government, and buyers are required to send nothing to the government