MicroEconomics Exam 2 Up
The price elasticity of supply measures how much
the quantity supplied responds to changes in the price of the good.
When the government imposes a binding price floor, it causes
A surplus of the good to develop
increase, and the quantity sold in the market will increase
If the government removes a binding price ceiling from a market, then the price paid by buyers will
Which of the following increases quantity supplied, decreases quantity demanded, and increases the price that consumers pay?
Imposing a binding price floor
Which of the following increases quantity supplied, increases quantity demanded, and decreases the price consumers pay?
The repeal of a tax on a good
A good will have a more inelastic demand, the
broader the definition of the market.
In a market with a binding price ceiling, increasing the ceiling price will
decrease the shortage
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.
The case of perfectly elastic demand is illustrated by a demand curve that is
horizontal.
If sellers respond to very small changes in price by adjusting their quantity supplied by extremely large amounts, the price elasticity of supply approaches
infinity, and the supply curve is horizontal.
Rent control causes larger shortages in the _____ run because over that time horizon, supply and demand are ______ elastic
long; more
When a good is taxed, the burden of the tax falls mainly on consumers if
supply is elastic and demand is inelastic
When a supply curve is relatively flat, the
supply is relatively elastic.
You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that
the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.
If the price elasticity of supply is zero, then
the quantity supplied is the same, regardless of price.
Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling,
there is a shortage of physicals, the quantity of physicals supplied decreases, the quantity of physicals demanded increases
When demand is unit elastic, price elasticity of demand equals
1, and total revenue does not change when price changes
If the price elasticity of demand for a good is 0.5, then a 5 percent increase in price results in a
2.5 percent decrease in the quantity demanded.
A $1 per unit tax levied on consumers of a good is equivalent to
A $1 per unit tax levied on producers of the good
would lobby for a price ceiling, whereas sellers would lobby for a price floor.
Consider the market for gasoline. Buyers
less than 1.
Demand is inelastic if the price elasticity of demand is
An increase in the minimum wage reduces the total amount paid to the affected workers if the price elasticity of ____ is ______ than one.
Demand; greater
a surplus of video games will develop.
If a binding price floor is imposed on the video game market, then
quantity sold in the market will stay the same.
If a nonbinding price floor is imposed on a market, then the
the equilibrium price is above the price floor.
If a price floor is not binding, then
Equilibrium with tax
Shifts supply curve up and to the left
This tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quantity.
Suppose buyers of fountain drinks are required to send $0.50 to the government for every fountain drink they buy. Further, suppose this tax causes the effective price received by sellers of fountain drinks to fall by $0.20 per drink. Which of the following statements is correct?
The effective price received by sellers is $0.40 per bottle less than it was before the tax.
Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle. Which of the following statements is correct?
demand is more inelastic than the supply.
Suppose that a tax is placed on books. If the buyers pay the majority of the tax, then we know that the
supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially sweetened beverages.
Suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages. The tax would shift
a shortage of treadmills will develop.
Suppose the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. As a result,
For a particular good, an 8 percent increase in price causes a 4 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?
The market for the good is broadly defined.
Taxes levied on sellers and taxes levied on buyers are not equivalent.
Which of the following is not correct?
Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then
wheat farmers would experience an increase in their total revenue.