Micro Unit 2: Test

The table above shows the demand schedules for Jill and for all other consumers, as well as the market supply schedule for the same good. Find the market quantity demanded at each price, and then determine the equilibrium price in this market. What is it?

$7

Moving from left to right along a downward-sloping linear demand curve, price elasticity varies in which of the following ways?

First elastic, then unit elastic, and finally inelastic

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.

Assuming a downward-sloping demand curve and an upward-sloping supply curve, which of the following will occur as a result of an increase in the sales tax on a good?

Quantity demanded will decrease.

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

Assume that people like onions on their hamburgers. If the supply of hamburgers decreases, the demand for onions will most likely

decrease because hamburgers and onions are complements

Assume that mustard and ketchup are considered substitutes by consumers. If the price of mustard increases, which of the following graphs represents the most likely response in the ketchup market?

demand increases

For consumers, assume that hamburgers and tacos are substitutes. Which of the following graphs illustrates the effect on the taco market if the price of hamburgers increases?

demand increases

If cotton is used to produce towels, an increase in the price of cotton will result in which of the following changes in the towel market?

eA decrease in the supply of towels, which leads to a shortage of towels followed by upward pressure on the price of towels

The quantity of peanuts supplied increased from 40 tons per week to 60 tons per week when the price of peanuts increased from $4 per ton to $5 per ton. The price elasticity of supply for peanuts over this price range is

elastic

According to the diagram, what is the dollar amount of the per-unit tax?

$1

Assume that demand for bottled water is relatively price elastic. An increase in supply of bottled water will result in which of the following?

A decrease in price, leading to an increase in total revenue

In the market depicted in the diagram above, if the government imposes a price ceiling of $1.00 per gallon on gasoline, which of the following will result?

A shortage of 6 billion gallons

Refer to the graph above. Which of the following statements best describes the situation in this market after the imposition of the tax?

CS has decreased, PS has decreased, TS has decreased, Tax Revenue equals BCFH, DWL equals DE.

Suppose that the market supply curve for shoes is upward sloping and the market demand curve is downward sloping. How will the imposition of a sales tax on shoes affect the consumer surplus, the producer surplus, and the total surplus?

Consumer Surplus--Decrease Producer Surplus--Decrease Total Surplus--Decrease

Which of the following changes in the demand for and the supply of a good would necessarily lead to a decrease in the equilibrium quantity of the good in the market in the short run?

Demand--Decrease Supply--Decrease

Which of the following will tend to make the demand for a product more elastic?

New firms which produce similar products enter the industry.

If the market depicted in the diagram above is initially in equilibrium, which of the following will result from the government's setting a price ceiling at P3

Market price will be unaffected.

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 revenue - Increase

The diagram above shows the demand curve for a good. If the price increases from P1 to P2, and quantity consumed decreases from Q2 to Q1, consumer surplus decreases by the area

P1P2BC

What is the price paid by consumers and the net price received by producers after the tax is paid?

Paid By Consumers--$10.45 Received By Producers--$9.45

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

If the government imposes a tariff on imports of cheese, the price and quantity of imported cheese will most likely change in which of the following ways?

Price--Increase Quantity--Decrease

If a severe drought destroys a significant portion of the peanut crop and peanut farmers' revenues increase, which of the following is true over the observed range of prices?

The demand for peanuts must be price inelastic.

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?

The quantity of rental housing demanded will increase.

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.

Assume that the price elasticity of demand for good X is constant and equal to 0.5 and the price elasticity of demand for good Y is constant and equal to 2. Assume that goods X and Y have identical upward-sloping elastic supply curves. If a per-unit excise tax of the same amount is levied on good X and on good Y, which of the following would be true?

The tax (incidence) share paid by consumers of good X would be relatively higher than that paid by consumers of good Y.

Promoters of a rock group know that if they charged $80 a ticket, 4,000 people would buy tickets for a concert, and if they charged $40 a ticket, 8,000 people would buy tickets. Over this price range, the demand for the concert tickets for the rock group is which of the following? Use the Total Revenue Test to determine your answer.

Unit Elastic

An increase in the supply of coffee could be caused by...?

a decrease in the cost of labor used to produce coffee

The market for goldfish is perfectly competitive. From year 1 to year 2, both the equilibrium price and the quantity of goldfish sold increase. This is most likely caused by

an increase in the demand

Assume that consumers consider popcorn and pretzels to be substitutes. A significant decrease in the supply of popcorn will affect the pretzel market by

increasing the demand for pretzels and therefore the price of pretzels

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

Refer to the graph shown. At a price of $15

quantity demanded > quantity supplied.

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

If the price is $25, then...

there would be a surplus of 300.