MicroEconomics 5, 6, 7

Ch. 5 How does the concepts of elasticity allows us to improve upon understanding of supply and demand

Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept

Ch 7. Which would not be considered a negative externality

You have an adverse reaction to a medication your doctor prescribed for you.

Ch 6. A legal minimum price which a good can be sold is

called a floor price

Ch6. A legal maximum price at which a good can be sold is a price

ceiling

E2: A legal maximum price at which a good can be sold is a price

ceiling

E2: The price elasticity demand for a good measures how willing

consumers are to move away from the good as price rises

Ch 5. A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

inelastic

E2: If a good is a necessity, demand for the good would tend to be

inelastic

E2: According to the graph the section of the demand curve labeled C represents

inelastic section of the demand curve

E2: What would probably have the most inelastic demand

insulin

E2: A price floor

is a legal minimum on the price at which a good can be sold

Ch7. When a negative externality exists in a market, the cost to producers

is greater than the cost to society

Ch 7. One advantage market economists have over other types of economies is that market economies

is more efficient

E2: How does total revenue change as one moves down a linear demand curve

it first increases, then decreases

Ch 6. A price floor is binding if it

leads to a surplus

E2: Demand is inelastic if elasticity is

less than 1

E2: Willingness to pay measure the

maximum amount that a buyer will pay for a good

E2: On a downward sloping linear demand curve, total revenue would be a maximum at the

midpoint of the demand curve

Ch 5. Other things equal, the demand for a good tends to be more inelastic, the

more narrowly defined is the market for the good

E2: In any market, total revenue is price

multiplied by quantity

Ch 7. An externality is the impact of

one person's actions on the well being of a bystander

E2: In the figure shown, a binding price ceiling is shown in

panel b

E2: Which of the panels represent a binding price floor

panel b

E2: in the figure shown would there eve a shortage for CDs at the ceiling price

panel b

E2: Economists compute the price elasticity of demand as the

percentage change in the quantity demanded divided by the percentage change in price

Ch 6. The presence price controls in a market usually is an indication that

policymakers believe that the price that prevails in that market in the absence of price controls was unfair to buyers or sellers

Ch 7. Since restored historic buildings convey a positive externality, local government may choose to

provide a tax break to owners who restore them

Ch 7. Research into new technologies

provides a positive externalities because it creates knowledge others can use

Ch 5. The price elasticity of demand measures how much

quantity demanded responds to a change in price

E2: The local pizza restaurant makes such great bread sticks that consumers do not respond much to change in the price. If the owner is only interested in increasing revenue, he should

raise the price of the bread sticks

E2: In panel b, at the actual price there will be

surplus of wheat

E2: What is not a determinate of the price elasticity of demand for a product

technology

E2: In the 1970s, long lines at the gas station in the Unites States were primarily a result of the fact that

the US government imposed a price ceiling on gasoline

E2: Most economists report the elasticity of demand as

the absolute value of the actual number

E2: If a price ceiling is not binding

the equilibrium price is above the ceiling

Ch 6. An example of a price floor is

the minimum wage

E2: Income elasticity of demand measures how

the quantity demanded changes as consumers income changes

Ch 5. Demand is said to be inelastic if

the quantity demanded changes only slightly when the price of the good changes

E2: Demand is said to be inelastic if

the quantity demanded changes only slightly when the price of the good changes

E2:Demand is said to be elastic if

the quantity demanded responds substantially to changes in the price of the good

E2: According to the graph, the point on the demand curve labeled B represents the

unit elastic section of the demand curve

E2: Price controls

usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers

E2: A perfect inelastic demand curve will be

vertical

Ch 6. Price controls are usually enacted

when policy makers detect inefficiencies in a market

Ch 7. In a market economy, government intervention

will always improve market outcomes

Ch 5. When quantity demanded responds strongly to changes in price, demand is said to be

elastic

E2: When quantity demanded responds substantially to change in price, demand is said to be

elastic

E2: According to the graph the section of the demand curve labeled A represents the

elastic section of the demand curve

E2: Demand is unit elastic if elasticity is

equal to 1

E2: The midpoint method is used to compute elasticity because it

gives the same answer regardless of the direction of change

E2:Demand is elastic if elasticity is

greater than 1

E2: The greater the price elasticity of demand the

greater the responsiveness of quantity demanded to price

E2: A price floor is binding if it is

higher than the equilibrium market price

E2: A perfectly elastic demand curve will be

horizontal

Ch. 5 In general, elasticity is a measure of

how much buyers and sellers respond to changes in market conditions

E2: Welfare economists is the study of

how the allocation of resources affects economic well being

E2: In the graph, total revenue at P2 would be represented by areas

A+B

Ch 7. What is an example of externality

All of the above are correct

E2: In the graph, the total revenue at P1 is represented by area

B+D

Ch 7. Which of the following represents a way that a government can help private market to internalize an externality

Both a and b are correct

Ch7. The term market failure refers to

a market that fails to allocate resources efficiently

E2: In general elasticity is

a measure of how much buyers and sellers respond to changes in market conditions

E2: Food and clothing tend to be

a small income elasticities because consumers, regardless of their incomes choose to buy these goods

Ch 6. A price ceiling will be binding only if it is set

above equilibrium price

E2: The concept of elasticity is used to

analyze supply and demand with greater precision

E2: A price ceiling will only be binding if it is set

below equilibrium price

Ch 6. A price ceiling is binding when it is set

below the equilibrium price, causing a shortage

E2: The price elasticity of demand measures how responsive

buyers are to a change in price e

Ch 5. Demand is said to be elastic if

buyers respond substantially to changes in the price of the good

Ch5. Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over ten year period

buyers tend to be much less sensitive to a change in price when given more time to react.

E2: Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because

buyers tend to be much more sensitive to change in price when given more to react

Ch 5. For a good that is a necessity

demand tends to be inelastic

E2: Which would you expect to have the higher income elasticity or demand

diamonds