Micro economics unit 2
Which of the following would most likely result in a decrease in the equilibrium price of oranges?
New studies suggest that oranges contain traces of cancer-causing substances due to pesticide residue.
Assume that the market demand for a good is perfectly inelastic, the market supply for the good is perfectly elastic, and the market is in equilibrium. If there is a decrease in the price of a key input used in the production of the good, which of the following will occur?
There will be a decrease in the consumer surplus.
Which of the following best describes the law of demand?
When the price of a good decreases, the quantity demanded of the good decreases.
Which of the following statements relating to income elasticity is true?
With an income elasticity coefficient of 5, a 10 percent increase in income will lead to a 50 percent increase in the quantity demanded of the good.
If the demand for good Y increases as the price of good X decreases, it can be concluded that
X and Y are substitute goods
The supply curve for automobiles will shift to the left in response to
a decrease in the interest rates for automobile loans
Suppose that the demand for vegetables is price elastic. If the price of vegetables increases by 5 percent, the quantity of vegetables demanded would
decrease by more than 5 percent
If the demand for a good is perfectly price inelastic in the short run and the supply curve is upward sloping, imposing a sales tax on the good will
not change the after-tax revenues received by suppliers
An effective minimum wage policy in a competitive market will increase unemployment and increase the total earnings of labor only if the demand for labor is
relatively inelastic
Consumer surplus in a market for a good exists because
some consumers would be willing to pay more than the equilibrium price of the good
Which of the following will cause the demand for a normal good to increase?
A decrease in the price of the good
Assume that the demand for a certain good is perfectly inelastic and the supply curve of the good is upward sloping. Which of the following occurs in the market for the good if the price of an input used to produce the good increases?
A decrease in the supply and an increase in the equilibrium price
Assume that the market for tomatoes is in equilibrium at a price of $35 per bushel. If the demand for tomatoes decreases, which of the following will occur?
A surplus at $35, leading to a decrease in price and in quantity supplied
Which of the following statements relating to supply is true?
An increase in an input price will lead to an increase in supply.
Which of the following is most likely to occur when a competitive market adjusts from one equilibrium to another?
An increase in demand will cause the equilibrium price, equilibrium quantity, and producer surplus to increase.
Assume the income elasticity of demand for good Z equals −5.0. Which of the following is true?
An increase in income will lead to a decrease in demand.
Which of the following statements about the market supply curve is true?
An increase in input prices will shift the market supply curve to the right.
Which of the following will decrease the demand for beef?
An increase in the price of pork, if pork and beef are substitute goods
Which of the following provides a possible explanation for a simultaneous increase in the equilibrium price and the quantity of blueberries in a market?
An increase in the price of strawberries, a substitute
Which of the following would cause the supply curve for notebook computers to shift to the right?
An increase in the wages of workers in the notebook-computer industry
Which of the following describes how a market will respond when the scarcity of a good increases?
Consumers will increase their demand for the good
Suppose that the market for low-wage labor is perfectly competitive and initially in equilibrium. If the government establishes an effective minimum wage, which of the following will occur?
Employment of low-wage workers will decrease and unemployment will increase.
A city transit authority increases the price of sub- way and bus tickets from $1.25 to $1.50. If the demand for these tickets is price inelastic, the number of people riding buses and subways and the city's revenues will most likely change in which of the following ways?
Number of People Riding :Decrease City's Revenues :Increase
Assume that in a competitive equilibrium, 1,000 units are sold at $20 per unit. Following the imposition of a $4.00 per unit tax, the new consumer price is $23, and the new equilibrium quantity is 950 units. What are the values of the tax revenue collected and the deadweight loss?
Tax revenue $3,800; Deadweight loss $100
The graph above 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.
Assume a consumer finds that his total expenditure on compact discs stays the same after the price of compact discs declines. Which of the following is true for this price change?
The consumer's demand for compact discs is unit price elastic.
Which of the following occurs as a result of the substitution effect of an increase in the price of a normal good?
The demand for the good decreases.
Given an increase in the price of material K— which is an input used to produce good X— and an increase in the price of good Y— which is a substitute for good X— which of the following will definitely occur?
The equilibrium price of good X will increase.
Following the imposition of a $4 per-unit tax in a competitive market, the seller's after-tax price falls from the original equilibrium price of $12 to $11. Which of the following statements relating to the imposition of the tax is true?
The new equilibrium is set at 15$
If growing corn becomes more profitable than growing wheat, which of the following will occur?
The price of corn will decrease
The price elasticity of demand for a product is 0.5. 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 diagram above depicts demand and supply curves in a city's rental housing market. If a price ceiling of $1,000 is imposed on the market, which of the following will occur?(equilibrium before price control was $2000)
The quantity of rental housing demanded will increase.
Which of the following will most likely happen in the market for good X if the price of good X decreases?
The supply of good X will decrease.
If a government eliminated an effective price floor in a market, all of the following would occur EXCEPT:
The supply of the good would increase.
According to the law of demand, an increase in the price of grape juice will result in
a leftward shift in the demand curve for grape juice
Assume that the government imposes an excise tax on the consumption of a good. The tax will have the least impact on the market equilibrium quantity for which of the following combinations of the price elasticities of demand and supply?
absolute value of elasticity of demand: 0.50 elasticity of supply: 0.50
The absolute value of the price elasticity of demand for a good increases when
consumers spend greater portion of their budget on the good
Assume that the price of good X decreases from $10 to $9 per unit and that the quantity demanded of good X increases from 25 to 30 units. In this price range, the demand for good X is
elastic
Assume that the government imposes an effective minimum wage in a perfectly competitive labor market. What will happen to employment and total wage payments?
employment: increase Total wage payment: increase
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 demand curve for a normal good slopes down for which of the following reasons? An increase in the price of the good induces consumers to purchase substitute products. An increase in the price of the goods reduces consumers' purchasing power. An increase in the price of the good increases consumers' utility from consuming that good.
A. I only
If a 10 percent increase in the price of good X results in a 20 percent decrease in the quantity of good Y demanded, which of the following is true?
Good X and good Y are complementary goods, and the cross-price elasticity is −2 .
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 must be true of good X?
X is an inferior good and is a complement to Y.
Following a prolonged power outage, the price of flashlights normally increases significantly. If cities had passed laws prohibiting price increases for flashlights, during power outages such laws would most likely
create a shortage of flashlights
Which of the following changes in the demand for and the supply of a good will necessarily result in an increase in both the equilibrium price and quantity of the good in a market?
demand: increase supply: no change
Assume that the supply of corn is relatively price inelastic, while the demand for corn is relatively price elastic. If the government imposes a per-unit excise tax on the production of corn, the incidence of the tax will fall
more on sellers than on buyers
In the short run, a decrease in production costs of a product will shift
only the supply curve to the right
A decrease in raw material prices will change the equilibrium price and quantity in a market in which of the following ways?
price: decrease Quantity: increase
In a perfectly competitive market, which of the following shifts in the supply and demand curves will definitely cause both equilibrium price and quantity to decrease?
supply curve: shifts to the left demand curve : shifts to the left
One reason consumers typically increase the quantity of a good they purchase when the price of the good decreases is that
the demand for the good increases
