Microeconomics Midterm #1

In the after-tax equilibrium, government collects

$1,680 in tax revenue; of this amount, $1,260 represents a burden on buyers and $420 represents a burden on sellers

The vertical distance between points A and B represents the tax in the market

$24

Equilibrium price and quantity are, respectively,

$25 and 400 units

The price paid by buyers in a market will increase if the government (i) increases a binding price floor in that market. (ii) increases a binding price ceiling in that market. (iii) decreases a tax on the good sold in that market

(i) and (ii) only

A binding price ceiling (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price.

(ii) and (iv) only

Suppose there is a line with two points on it, given in the from (X, Y). The points are (10, 10) and (2, 6). What is the slope of the line?

+ 0.5

Using the midpoint method, demand is unit elastic when quantity demanded changes from

400 to 300

If price is $25, then quantity demanded and quantity supplied, respectively, are

500 units and 800 units

Which demand curve is perfectly inelastic?

A

In which of the following situations will total revenue increase?

All of the above are correct

If consumers view cappuccinos and lattés as substitutes, what would happen to the equilibrium price and quantity of lattés if the price of cappuccinos falls?

Both the equilibrium price and quantity would decrease

What term refers to the property that society has limited resources and therefore cannot produce all the goods and services people wish to have?

Government policies are the primary forces that guide the decisions of firms and households.

Which of the following is not an example of a positive, as opposed to normative, statement?

Higher gasoline prices will reduce gasoline consumption

Which of the following events could shift the demand curve for gasoline to the left?

Public service announcements run on television encourage people to walk or ride bicycles instead of driving cars.

Which of the following is not correct?

The U.S. minimum wage is significantly higher than the minimum wages in France and the United Kingdom.

What will happen in the gasoline market now if buyers expect higher gasoline prices in the near future?

The demand for gasoline will increase

When demand is inelastic, a decrease in price will cause

a decrease in total revenue

For which of the following individuals would the opportunity cost of going to college be highest?

a famous, highly-paid actor who wants to take time away from show business to finish college and earn a degree

Economists disagree because of

all of the differences mentioned in other answers

One of the problems contributing to the surplus in the market for processed cheese is

an excess supply of milk.

A supply curve slopes upward because

an increase in price gives producers an incentive to supply a larger quantity

Suppose that demand is inelastic within a certain price range. For that price range

an increase in price would increase total revenue because the decrease in quantity demanded is proportionately less than the increase in price

For a price floor to be binding in this market, it would have to be set at

any price above $3

A perfectly elastic demand implies that

any rise in price above that represented by the demand curve will result in a quantity demanded of zero

For which of the following goods is the income elasticity of demand likely highest?

boats

If a seller in a competitive market chooses to charge more than the going price, then

buyers will make purchases from other sellers

A legal maximum on the price at which a good can be sold is called a price

ceiling

Lead is an important input in the production of crystal. If the price of lead decreases, then we would expect the supply of

crystal to increase

Almost all economists agree that local and state governments should

eliminate subsidies to professional sports franchises

In conducting their research, economists often substitute historical events and historical episodes for

laboratory experiments

A tradeoff exists between a clean environment and a higher level of income in that

laws that reduce pollution raise costs of production and reduce incomes.

A rational decision maker takes an action only if the

marginal benefit is greater than the marginal cost

The field of economics is traditionally divided into two broad subfields

microeconomics and macroeconomics

In this market, a minimum wage of $2.75 is

nonbinding and creates neither a labor shortage nor unemployment

Which of the following expressions represents a cross-price elasticity of demand?

percentage change in quantity demanded of bread divided by percentage change in price of butter

Your friend John created the graph above to illustrate that snowstorms are caused by more snowblowers being sold. You inform him that his interpretation is incorrect due to

reverse causality

Which of the following words and phrases best captures the notion of equality?

sameness

If the price were $4, a

shortage of 25 units would exist, and price would tend to rise

You go to the movieplex where movies ordinarily cost $9. You are intending to see a movie for which you have a $3 off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost?

the amount you value the first movie + $3

You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer you should make your choice by comparing

the benefits from eating one more bowl of ice cream to how much one more bowl of ice cream costs.

When a relevant variable that is not named on either axis changes

the curve will shift

In the posted article on the early evidence on the effect of the minimum wage hike in Seattle, the researchers found that

the higher minimum wage benefitted experienced low-wage workers but not inexperienced low-skilled workers

An example of a price floor is

the minimum wage

When two variables have a negative correlation

they tend to move in opposite directions

Max and Maddy charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, seven people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have seven or five cars parked on their lawn does not affect their costs. From this information it follows that

they would do better charging $15 than $10

For which of the following goods is the income elasticity of demand likely lowest?

water