Microeconomics Exam 2

Bill created a new software program he is willing to sell for $200. He sells his first copy and enjoys a producer surplus of $150. What is the price paid for the software

$350

Refer to Figure 1. When the price is $15, total revenue is

$4500

Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, 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

If the price elasticity of demand for a good is 4, then a 12 percent decrease in price results in a

48 percent increase in the quantity demanded

Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to new buyers entering th emarket

ABC

Refer to Figure 7-4. Which area represents consumer surplus at a price of P2

AFG

Table 1. Buyer and Willingness to Pay

Calvin-$150 Sam-$135 Andrew-$120 Lori-$100

Which of the following is the most likely explanation for the imposition of a price ceiling on the market for milk

buyers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling

If the price elasticity of supply is 1.2, and price increased by 55%, quantity supplied would

increase by 6%

Refer to Scenario 1. The equilibrium price will

increase in both the milk and the beef markets

If the price floor is not binding, then

the equilibrium price is above the price floor

Demand is said to be inelastic if

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

A key determinant of the price elasticity of supply is the

time horizon

Refer to Table 1. If the price of the product is $135, then the total consumer surplus is

$15

Refer to Table 1. If the price of the product is $122, then the total consumer surplus is

$41

At price of $1.20, a local pencil manufacturer is willing to supply 150 boxes per day. At a price of $1.40, the manufacturer is willing to supply 170 boxes per day. Using the midpoint method, the price of elasticity of supply is about

0.81

If the price elasticity of demand for apples is 0.8, then a 2.4% increase in the price of apples will decrease the quantity demanded of apples by

1.92%, and apples sellers' total revenue will increase as a result

Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run. If an increase in the demand for cheese causes the price of cheese to increase by 15%, then the quantity of supplies of cheese will increase by

9% in the short run and 21% in the long run

Refer to Figure 7-4. Which area represents the increase in consumer surplus when the price falls from P1 to P2

ABDG

Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers

BCGD

Refer to Figure 7-4. Which area represents consumer surplus at a price of P1

BDF

Refer to Table 1. If the price of the product is $130, then who would be willing to purchase the product?

Calvin and Sam

Refer to Table 1. If the price of the produce is $110, then who will be willing to purchase the product?

Calvin, Sam and Andrew

Refer to Table 1. If the price of the product is $90, then who would be willing to purchase the product?

Calvin, Sam, Andrew and Lori

Figure 7-4 Price vs. Quantity (Demand)

P1//Q1 intersects at point B, P2/Q2 intersects at Point A, they both intersect at point C, F is the top of the slope, slope is decreasing in a straight line

Table 2. Seller and Cost

Quentin-10 Ruby-30 Sandra-60 Thomas-100 Ursula-150

Refer to Table 1. If the market price is $105

Sam's consumer surplus is $30 and total consumer surplus is $90

Graph of Price vs. Quantity (Demand)

Slope going down, 25/100 20/200 15/300 10/400

Consumer surplus is equal to the

Value to buyers-amount paid by buyers

Rent control laws dictate

a maximum rent that landlords may charge tenants

Minimum wage laws dictate

a minimum wage that firms may pay workers

Midpoint method

dQ/dP

Refer to Scenario 1. The equilibrium quantity will

decrease in both the milk and the beef markets

If the government removes a binding price floor from a market, then the price paid by buyers will

decrease the the quantity sold in the market will increase

Refer to Figure 1. An increase in price from $15 to $20 would

decrease total revenue by $500

When studying how some event or policy affects a market, elasticity provides information on the

direction and magnitude of the effect

Refer to Figure 1. When the price falls from $25 to $20, demand is

elastic, since total revenue increases from $2500 to $4000

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

flatter the demand curve will be

Refer to Scenario 1. The change in equilibrium quantity will be

greater in the beef market than in the milk market

Refer to Scenario 1. The change in equilibrium price will be

greater in the milk market than in the beef market

Refer to Figure 1. An increase in price from $10 to $15 would

increase total revenue by $500

Refer to Scenario 1. Total consumer spending on milk will

increase, and total consumer spending on beef will increase

The price elasticity of demand measures how much

quantity demanded responds to a change in price

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 a demand