micro midterm

Assume that in order to help hay farmers, the government imposes a price floor on hay of $14 per bale and the price floor stays in place for the long run. Use the graph to show the price floor, then answer the questions. What is the surplus from this long‑run price floor? In the long run, the surplus caused by a price floor on hay is likely to a. increase because farmers will increase the amount of land used to grow hay. b. increase because the demand curve will become more inelastic. c. decrease because farmers will devote more of their land to other crops. d. decrease because the demand curve will become more inelastic.

move price floor to $14 5000; a

Classify each of the scenarios as an "either-or" decision or a "how much" decision. after graduation from law school, frank is offered one job in chicago and another in ny. where should frank work?

either-or decisions

Classify each of the scenarios as an "either-or" decision or a "how much" decision. bell is accepted to four graduate school programs. where should he go to school?

either-or decisions

if garden gnomes regained popularity

equilibrium price and quantity both rise and demand curve shifts right

Match the institution with the role it plays in the coordination of resources in decentralized economies. organizes resources in order to produce goods and services

firms

For complements, cross-price elasticity of demand is

negative An increase in the price of milk causes a decrease in demand for Oreos.

What is the biggest problem facing Command Economies (socialism)?

Coordination and incentives to direct output

which elasticity do we take absolute value for

Ed

For substitutes, cross-price elasticity of demand is

positive An increase in the price of one brand of cookies will increase the demand for other brands.

if cost of wood falls,

price falls and quantity rises so supply shifts right

how to calc income tax

tax rate = (tax paid/income) x 100

Amazon has a "Lightning Deal" where it slashes the price of one item. At 3:15 p.m. today, they announced that the item was a new tablet with a sales price of $150$150 which is less than half the original price. The table contains the maximum willingness to pay of five college students wanting to buy a tablet on Amazon. Student Willingness to pay Anthony $500 Amanda $400 Lily $300 Francisco $200 Max $100 What is total consumer surplus for the five students? If the price increases from $150150 to $350350, what is the change in total consumer surplus?

$800; -$600

Move the point, E, in the accompanying graph to reflect equilibrium in the competitive market for corn and answer the following questions. Calculate consumer surplus (CS). Calculate producer surplus (PS).

move E to intersection of S and D. $12500; $7500 area of a triangle is 1/2 b x h

general difference of movement and shift along curve

when there is a price change, there's a movement. when affected bc of any other change, shift in the curve itself

Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve. College students reduce how much detergent they use for each load of laundry in response to higher detergent prices.

movement along demand curve

how to know if normative or positive

normative are opinions and use "should," "ought to," or "it is better to." positive statements can be tested on the other hand ex. Society should take measures to end gun violence. ex. People who smoke pass on increased medical costs to the whole society.

For normal goods, income elasticity is ___. For inferior goods, income elasticity is ___.

positive; negative For income-elastic goods, income elasticity is greater than 1. For income-inelastic goods, income elasticity is positive but less than 1.

Match the institution with the role it plays in the coordination of resources in decentralized economies. established rules for ownership of resources and creates incentives for innovation

property rights

Suppose Governor Meridia's decides to initiate a state tax of 5% on all sales. This tax will be Proportional Regressive Structural Progressive

regressive

Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve. Students eat out more often as the federal government increases how much grant money it provides students.

shift in the demand curve

Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve. College students purchase many more energy drinks during finals week than during the rest of the semester.

shift in the demand curve

Choose the answer that best describes the impact this tax would have on a household's economic income and whether it would cause a large change in the household's consumption of soda. This sort of change in behavior is called tax shifting. The tax would affect a household's... uses side, but tax shifting is likely to occur. sources side, but tax shifting is likely to occur. uses side, but tax shifting is not likely to occur. sources side, but tax shifting is not likely to occur.

uses side, but tax shifting is likely to occur

how to know if progressive, regressive, or proportional

Progressive means tax rates and income move in the same direction. A regressive tax system is one where tax rates and income move in opposite directions. A proportional system is one where the tax rates across income groups are equal.

quota rent

(line where it says the wedge) the economic rent received by the owner of the imported good that is subject to the quota you find it by subtracting the two points that touch the quota line (A and B in picture)

how dyk which curve it is

-price and quantity moved together: demand change -moved in opposite directions: supply change

The table contains the willingness to pay for five students in the market for a new tablet. Student Willingness to Pay Francisco $200 Lily $300 Amanda $400 Julio $100 Anthony $500 Which students will purchase a tablet if the price of a tablet is $450?

Anthony

Classify each of the scenarios as an "either-or" decision or a "how much" decision. jake needs to stay awake while he studies for his midterm tomorrow. what quantity of coffee should jake drink?

marginal decision

price ceiling

a maximum price that can be legally charged for a good or service (line below E)

price floor

a minimum price for a good or service (line above E)

excise tax

a tax on the production or sale of a good if added to producers, makes supply curve shift up. if added to consumers, the demand curve shifts up

Classify each of the scenarios as an "either-or" decision or a "how much" decision. marvin arrives at his favorite buffet to eat chinese food. sometimes, he overeats and leaves the buffet w a stomachache.

marginal decision

difference of movement along demand curve and shift in demand curve

demand curve movement is change in price that affect the quantity demanded. demand curve shift is fundamental change in balance of supply and demand that alter the quantity demanded at the same price

Match the institution with the role it plays in the coordination of resources in decentralized economies. brings buyers and sellers together to carry out mutually beneficial exchanges

markets

income elasticity of demand

measures how sensitive the quantity demanded of a good is to changes in income

how to calc market supply curve

add quantities but $ stays the same

Rent controls are a typical example of a price ceiling. Please select all likely consequences of rent controls when the price ceiling is binding. inefficient allocation of apartments black markets more subletting of apartments reductions in apartment quality

all of them

how would i calculate how much money someone would owe if they filed under a progressive tax program or a proportional/flat tax

calc individual tax amounts in each bracket and get sum; just do total income times according tax rate

Determine how the equilibrium price and equilibrium quantity in the market for coffee changes if -the price of tea, a substitute for coffee, decreases, -and due to better weather, the price of coffee beans also decreases. equilibrium price ___. equilibrium quantity ___.

decreases; may increase, decrease, or stay the same

what is cross price elasticity

measures how sensitive the quantity demanded of good A is to the price of good B

With fewer substitutes, demand tends to be perfectly inelastic. more elastic. less elastic.

less elastic

For a number of reasons, governments set price floors for many agricultural products. Assume the government sets a price floor of $3.50 per bushel of corn. Assume a competitive market. Add and adjust the DWL triangle in the accompanying graph to show the deadweight loss due to the price floor. Without the price floor, what would the equilibrium price per bushel be? With the price floor in place, what is the amount of the surplus?

E is originally at $2.50, but after the price floor, we move up on the demand curve to get the minimum price of $3.50, so surplus is 1

difference of either-or decision and marginal decision

these are the 2 types of decisions. either-or is whether or not to do something. marginal decision is decision made at the margins of an activity about whether to do a bit more or a bit less of that activity

The graph shows the market for pizza cutters. Assuming $5 to be the equilibrium price for this market, please shade in consumer surplus (CS), producer surplus (PS), and total surplus (TS). Assume Fiona is willing to pay $8 for a pizza cutter. Tim also wants one, but is only willing to pay $6 for one. At a pizza baker's convention, Fiona buys the last pizza cutter at the market price just before Tim can buy it. Tim contacts the convention organizers and complains about missing out on the last pizza cutter. The organizers refund Fiona for the pizza cutter and allow Tim to buy it at the market price. What happens as a result of the organizers refunding Fiona, taking the pizza cutter from her, and letting Tim buy it at the market price?

consumer surplus decreases

Suppose the accompanying graph depicts a market for one pound bags of candy. Place the line labeled Excess Demand at a price that would generate an excess demand (shortage). Then, determine the size of the excess demand.

excess demand = difference of quantity demanded QD and the quantity supplied QS. so do 7-3 = 4 million bags

Four college friends all lost their computers in a dorm theft after Drew forgot to lock the door. Now they are each considering buying a netbook. The table contains the maximum prices each would be willing to pay. The lowest price they can find is $150. Student Willingness to pay Felix $500 Lauren $400 Drew $300 Oscar $100 On the graph, move the price line from $0 to the market price for netbooks. Then highlight each person's consumer surplus (CS) by moving the line segments assigned to each buyer. Place one segment at the top of the consumer surplus region for that person, and the other segment at the bottom. If a buyer does not have a consumer surplus at all, leave that person's line segments where they are. What is the total consumer surplus?

for the graph, we put the price line to $150. we move felix, lauren, and drew to the $150 line and their according willingness to apy. we don't touch oscar's line bc he doesn't have consumer surplus. cs = willingness to pay - target price cs = ... - $150 when we add all of them, we get $750

how to use percentage change in quantity to determine relationship between each pair of goods

if cross price elasticity is negative is complement, positive is substitute, zero is no relationship

if price raised by 10%, what happens to total revenue

increases bc 0.1 is inelastic and in inelastic price and revenue increase together

if more substitutes, is it more or less elastic?

more

The accompanying diagram represents the market for violins. Suppose that a new technology allows beginner-level violin producers to make violins at a substantially lower (marginal) cost while retaining the same quality. a. Use the graph to illustrate the effect that this will have on the supply and demand of beginner-level violins and then answer the following three questions. b. How much does this new technology increase consumer surplus? c. How much does this new technology increase producer surplus? d. How much does this new technology increase total (or social) surplus?

move S down $105000; $1050000; 2100000

Crabby Island has imposed a production quota of 4,000 crabs per month, use the graph to show this product quota, then answer the question. Use the line segment to show a production quota of 4,000 crabs per month. What is the price of crab after the introduction of the quota?

move production quota so that it's a vertical line going from $8 at 4,000 crabs per month $7

Categorize each scenario as describing a movement along a demand curve or a shift of the demand curve. College students rush and buy discount furniture to take advantage of an unexpected price drop.

movement along demand curve

how would adding a tax to a graph look like

parallel to demand curve. if $1 tax added, demand curve moves down by equal size of tax

how do you know if equilibrium quantity increases?

If demand increases, equilibrium price and quantity both increase. If demand decreases, equilibrium price and quantity both decrease. If supply increases, equilibrium price decreases, and quantity increases.

The U.S. government has subsidized ethanol production since 1978. With the advent of affordable electric cars, policymakers are considering whether to allow the subsidy to expire. The accompanying graph represents the market for ethanol. Move the supply and/or demand curves to show how reducing the subsidy will affect the ethanol market. Market for EthanolPrice ($ per gallon)QuantityDS equilibrium price ___. equilibrium quantity ___.

increases; decreases

Stone and brick are substitutes in home construction. Consider the market for bricks depicted in the graph. Suppose the price of stone increases due to new regulations for the stone quarrying industry. Illustrate the impact this will have on the market for bricks. equilibrium price ___. equilibrium quantity ___.

increases; increases

Match the institution with the role it plays in the coordination of resources in decentralized economies. allows for the exchange of goods and services using a common unit as a measure of value that is generally accepted as payment

money

Demand for a luxury item tends to be perfectly inelastic. more elastic. less elastic.

more elastic

Demand for an item that uses a large portion of your budget tends to be more elastic. perfectly inelastic. less elastic.

more elastic

Over longer periods of time, demand tends to be less elastic. perfectly inelastic. more elastic.

more elastic