Econ Homework 5

A good will have a more elastic demand a. the greater the availability of close substitutes b. the more broad the definition of the market c. the shorter the period of time d. the more it is regarded as a necessity

a.

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is a. inelastic b. unit elastic c. elastic d. highly responsive to changes in income

a.

Alice says that she would buy one banana split a day regardless of the price. If she is telling the truth, a. Alice's demand for banana splits is perfectly inelastic. b. Alice's price elasticity of demand for banana splits is 1. c. Alice's income elasticity of demand for banana splits is 0. d. None of the above answers is correct.

a.

Goods with many close substitutes tend to have a. more elastic demands. b. less elastic demands. c. price elasticities of demand that are unit elastic. d. income elasticities of demand that are negative.

a.

If a price floor is not binding, then a. the equilibrium price is above the price floor. b. the equilibrium price is below the price floor. c. it has no legal enforcement mechanism. d. More than one of the above is correct.

a.

If a tax is imposed on a market with inelastic demand and elastic supply, then a. buyers will bear most of the burden of the tax. b. sellers will bear most of the burden of the tax. c. the burden of the tax will be shared equally between buyers and sellers. d. it is impossible to determine how the burden of the tax will be shared.

a.

If the demand for textbooks is inelastic, then an increase in the price of textbooks will a. increase total revenue of textbook sellers. b. decrease total revenue of textbook sellers. c. not change total revenue of textbook sellers. d. There is not enough information to answer this question.

a.

In which of these cases will the tax burden fall most heavily on buyers of the good? a. The demand curve is relatively steep and the supply curve is relatively flat. b. The demand curve is relatively flat and the supply curve is relatively steep. c. The demand curve and the supply curve are both relatively flat. d. The demand curve and the supply curve are both relatively steep.

a.

The price elasticity of demand for a good measures the willingness of a. consumers to buy less of the good as price rises. b. consumers to avoid monopolistic markets in favor of competitive markets. c. firms to produce more of a good as price rises. d. firms to cater to the tastes of consumers.

a.

Under rent control, tenants can expect a. lower rent and lower quality housing. b. lower rent and higher quality housing. c. higher rent and a shortage of rental housing. d. higher rent and a surplus of rental housing.

a.

When consumers face rising gasoline prices, they typically a. reduce their quantity demanded more in the long run than in the short run. b. reduce their quantity demanded more in the short run than in the long run. c. do not reduce their quantity demanded in the short run or the long run. d. increase their quantity demanded in the short run but reduce their quantity demanded in the long run.

a.

When demand is elastic, a decrease in price will cause a. an increase in total revenue. b. a decrease in total revenue. c. no change in total revenue, but an increase in quantity demanded. d. no change in total revenue, but a decrease in quantity demanded.

a.

A tax imposed on the buyers of a good will a. raise both the price buyers pay and the effective price sellers receive. b. raise the price buyers pay and lower the effective price sellers receive. c. lower the price buyers pay and raise the effective price sellers receive. d. lower both the price buyers pay and the effective price sellers receive.

b.

For a good that is a necessity, a. quantity demanded tends to respond substantially to a change in price. b. demand tends to be inelastic. c. the law of demand does not apply. d. All of the above are correct.

b.

Policymakers use taxes a. to raise revenue for public purposes, but not to influence market outcomes. b. both to raise revenue for public purposes and to influence market outcomes. c. when they realize that price controls alone are insufficient to correct market inequities. d. only in those markets in which the burden of the tax falls clearly on the sellers.

b.

Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is a. 0 b. 1 c. 6 d. 36

b.

Demand is said to have unit elasticity if elasticity is a. less than 1. b. greater than 1. c. equal to 1. d. equal to 0.

c.

Minimum-wage laws dictate the a. average price employers must pay for labor. b. highest price employers may pay for labor. c. lowest price employers may pay for labor. d. the highest and lowest prices employers may pay for labor.

c.

The price elasticity of supply measures how responsive a. equilibrium price is to equilibrium quantity b. sellers are to a change in buyers' income c. sellers are to a change in price d. consumers are to the number of substitutes

c.

Using the midpoint method, at a price of $16, what is the income elasticity of demand when income rises from $5,000 to $10,000? a. 0.00 b. 0.50 c. 1.00 d. 1.50

c.

a surplus results when a. a nonbinding price floor is imposed on a market. b. a nonbinding price floor is removed from a market. c. a binding price floor is imposed on a market. d. a binding price floor is removed from a market.

c.

price QD QS $0 250 0 $5 200 75 $10 150 150 $15 100 225 $20 50 300 $25 0 375 Which of the following statements is correct? a. A price ceiling set at $5 will be binding and will result in a shortage of 50 units. b. A price ceiling set at $5 will be binding and will result in a shortage of 75 units. c. A price ceiling set at $5 will be binding and will result in a shortage of 125 units. d. A price ceiling set at $5 will not be binding.

c.

price QD QS $0 250 0 $5 200 75 $10 150 150 $15 100 225 $20 50 300 $25 0 375 Which of the following statements is correct? a. A price floor set at $20 will be binding and will result in a surplus of 50 units. b. A price floor set at $20 will be binding and will result in a surplus of 100 units. c. A price floor set at $20 will be binding and will result in a surplus of 250 units. d. A price floor set at $20 will not be binding.

c.

If a price ceiling is not binding, then a. the equilibrium price is above the price ceiling. b. the equilibrium price is below the price ceiling. c. it has no legal enforcement mechanism. d. More than one of the above is correct.

d.

The price elasticity of demand for bread a. is computed as the percentage change in quantity demanded of bread divided by the percentage change in price of bread. b. depends, in part, on the availability of close substitutes for bread. c. reflects the many economic, social, and psychological forces that influence consumers' tastes for bread d. All of the above are correct

d.

Unlike minimum wage laws, wage subsidies a. discourage firms from hiring the working poor. b. cause unemployment c. help only wealthy workers. d. raise the living standards of the working poor without creating unemployment.

d.

Using the midpoint method, when income equals $7,500, what is the price elasticity of demand between $16 and $20? a. 0.56 b. 0.75 c. 1.33 d. 1.80

d.

a price floor is a. a legal minimum on the price at which a good can be sold. b. often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price floor. c. a source of inefficiency in a market. d. All of the above are correct.

d.

price QD QS $0 250 0 $5 200 75 $10 150 150 $15 100 225 $20 50 300 $25 0 375 Which of the following statements is correct? a. A price ceiling set at $15 will be binding and will result in a shortage of 50 units. b. price ceiling set at $15 will be binding and will result in a shortage of 100 units. c. A price ceiling set at $15 will be binding and will result in a shortage of 125 units. d. A price ceiling set at $15 will not be binding.

d.

price QD QS $0 250 0 $5 200 75 $10 150 150 $15 100 225 $20 50 300 $25 0 375 Which of the following statements is correct? a. A price floor set at $5 will be binding and will result in a surplus of 50 units. b. A price floor set at $5 will be binding and will result in a surplus of 75 units. c. A price floor set at $5 will be binding and will result in a surplus of 125 units. d. A price floor set at $5 will not be binding.

d.