Macro- ch. 5-9
Demand is said to be inelastic if
the quantity demanded changes only slightly when the price of the good changes.
A price floor is
A legal minimum on the price at which a good can be sold
Which of the following events would increase producer surplus?
Sellers' costs stay the same and the price of the good increases.
When a country allows trade and becomes an exporter of silk, which of the following is not a consequence?
The price paid by domestic consumers of silk decreases.
When a country allows trade and becomes an importer of silk, which of the following is not a consequence?
The price received by domestic producers of silk increases.
In this market, a minimum wage of $6 is
binding and creates unemployment because it is higher than the equilibrium amount of $5
A government-imposed price of $24 in this market is an example of a
binding price floor that creates a surplus because it is above the equilibrium amount of $20
Demand is said to be price elastic if
buyers respond substantially to changes in the price of the good.
The price elasticity of demand measures
buyers' responsiveness to a change in the price of a good.
What is the fundamental basis for trade among nations?
comparative advantage
To fully understand how taxes affect economic well-being, we must
compare the reduced welfare of buyers and sellers to the amount of revenue the government raises.
If a consumer places a value of $14 on a particular good and if the price of the good is $12, then the
consumer enjoys consumer surplus if he or she buys the good.
On a graph, the area below a demand curve and above the price measures
consumer surplus
Suppose there is an early freeze in California that reduces the size of the lemon crop. As the price of lemons rises, what happens to consumer surplus in the market for lemons?
consumer surplus decreases
If the cost of producing tables increases causing the price of tables to increase, consumer surplus in the table market will
decrease
The imposition of the tax causes the price received by sellers to
decrease by $--
The imposition of the tax causes the quantity sold to
decrease by --- unit(s)
The price ceiling causes quantity
demanded to exceed quantity supplied by ---- units.
Renters of rent-controlled apartments will likely benefit from both lower rents and higher quality of apartments.
false
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.
The imposition of the tax causes the price paid by buyers to
increase by $--
If the demand for donuts is elastic, then a decrease in the price of donuts will
increase total revenue of donuts sellers.
Suppose the government increases the size of a tax by 20 percent. The deadweight loss from that tax
increases by more than 20 percent.
The deadweight loss from a tax per unit of good will be smallest in a market with
inelastic supply and inelastic demand.
A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it
maximizes the combined welfare of buyers and sellers.
Welfare economics implies that the equilibrium price of a product is considered to be the best price because it
maximizes the combined welfare of buyers and sellers.
If the size of a tax increases, tax revenue
may increase, decrease, or remain the same
Goods with many close substitutes tend to have
more elastic demands
In the housing market, supply and demand are
more elastic in the long run than in the short run, and so rent control leads to a larger shortage of apartments in the long run than in the short run.
The presence of a price control in a market for a good or service usually is an indication that
policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.
a tax on a good
raises the price buyers pay and lowers the price sellers receive
When a tax is levied on a good, the buyers and sellers of the good share the burden,
regardless of how the tax is levied
Cost is a measure of the
seller's willingness to sell.
A supply curve can be used to measure producer surplus because it reflects
sellers costs
A tax on an imported good is called a
tariff
Producer surplus is
the amount a seller is paid minus the cost of production.
Income elasticity of demand measures how
the quantity demanded changes as consumer income changes.
Cross-price elasticity of demand measures how
the quantity demanded of one good changes in response to a change in the price of another good.
The price elasticity of supply measures how much
the quantity supplied responds to changes in the price of the good
A key determinant of the price elasticity of supply is the
time horizon
What happens to the total surplus in a market when the government imposes a tax?
total surplus decreases
If a price ceiling is not binding, then it will have no effect on the market.
true
Price is the rationing mechanism in a free, competitive market.
true
Under rent control, landlords can cease to be responsive to tenants' concerns about the quality of the housing because
with shortages and waiting lists, they have no incentive to maintain and improve their property.