microeconomics can smd
Sandra purchases 5 pounds of coffee and 10 gallons of milk per month when the price of coffee is $10 per pound. She purchases 6 pounds of coffee and 12 gallons of milk per month when the price of coffee is $8 per pound. Sandra's cross-price elasticity of demand for coffee and milk is
0.82, and they are substitutes.
If the price elasticity of demand for a good is 10.0, then a 4 percent increase in price results in a
40 percent decrease in the quantity demanded.
Which of the following changes would not shift the supply curve for a good or service? - a change in expectations about the future price of the good or service - a change in production technology - a change in input prices - a change in the price of the good or service
a change in the price of the good or service
Economists tend to see ticket scalping as
a way of increasing the efficiency of ticket distribution.
Last year, Shelley bought 6 pairs of designer jeans when her income was $40,000. This year, her income is $50,000, and she purchased 10 pairs of designer jeans. Holding other factors constant, it follows that Shelley
considers designer jeans to be a normal good.
Which of the following is not equal to total surplus? - consumer surplus - producer surplus - value to buyers - cost to sellers - buyers' willingness to pay - sellers' costs
consumer surplus - producer surplus
There are very few, if any, good substitutes for automotive tires. Therefore, the demand for automotive tires would tend to be
inelastic
Market power and externalities are examples of
market failure.
Suppose televisions are a normal good and buyers of televisions experience a decrease in income. As a result, consumer surplus in the television market
may increase, decrease, or remain unchanged.
Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is
positive, and the good is a normal good.
New cars are normal goods. What will happen to the equilibrium price of new cars if the price of gasoline rises, the price of steel falls, public transportation becomes cheaper and more comfortable, auto-workers accept lower wages, and automobile insurance becomes more expensive?
price will fall
Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25). If there are five buyers in the market, then
the marginal buyer's willingness to pay for the 100th unit of the good is $25.
If the current allocation of resources in the market for wallpaper is efficient, then it must be the case that
the market for wallpaper is in equilibrium.
Congress intended that
half the FICA tax be paid by workers, and half be paid by firms
The price elasticity of supply along a typical supply curve is
higher at low levels of quantity supplied and lower at high levels of quantity supplied.
a market supply curve is determined by
horizontally summing individual supply curves
In the short run, rent control causes the quantity supplied
to fall and quantity demanded to rise
When quantity moves proportionately the same amount as price, demand is
unit elastic, and the price elasticity of demand is 1.
When a tax is imposed on the sellers of a good, the supply curve shifts
upward by the amount of the tax
The signals that guide the allocation of resources in a market economy are
prices
Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the
quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases
If a nonbinding price ceiling is imposed on a market, then the
quantity sold in the market will stay the same
The price elasticity of supply measures how responsive
sellers are to a change in price
The supply curve for portable charcoal grills shifts
when a determinant of the supply of portable charcoal grills other than the price of portable charcoal grills changes
In competitive markets, buyers
and sellers are price takers
When a tax is placed on the sellers of a product, the
size of the market decreases, supply of the product decreases, and effective price received by sellers decreases, and the price paid by buyers increases
The smaller the price elasticity of demand, the
steeper the demand curve will be through a given point.
The two words most often used by economists are
supply and demand
Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the
supply curve will shift downward by $20, and the price paid by buyers will decrease by less than $20
If the demand for leather decreases, producer surplus in the leather market
decreases
If the demand for light bulbs increases, producer surplus in the market for light bulbs
increases
If the cross-price elasticity of two goods is positive, then the two goods are
substitutes
Another way to think of the marginal seller is the seller who
would leave the market first if the price were any lower.
Suppose that when the price of good X falls from $10 to $8, the quantity demanded of good Y rises from 20 units to 25 units. Using the midpoint method, the cross-price elasticity of demand is
-1.0, and X and Y are complements.
Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000. Charles's income elasticity of demand for basketball ticket is
1.22, and basketball tickets are a normal good.
If the price of oak lumber increases, what happens to consumer surplus in the market for oak cabinets?
Consumer surplus decreases.
Which of the following statements is valid when the market supply curve is vertical? - An increase in market demand will not increase the equilibrium price - Market quantity supplied does not change when the price changes. - supply is perfectly elastic - An increase in market demand will increase the equilibrium quantity
Market quantity supplied does not change when the price changes
Two goods are substitutes when a decrease in the price of one good
increases the demand for the other good
which of the following is the most likely explanation for the imposition of a price floor on the market for corn? -Policymakers have studied the effects of the price floor carefully, and they recognize that the price floor is advantageous for society as a whole -Sellers of corn, recognizing that the price floor is good for them, have pressured policymakers into imposing the price floor -Buyers and sellers of corn have agreed that the price floor is good for both of them and have therefore pressured policy makers into imposing the price floor -Buyers of corn, recognizing that the price floor is good for them, have pressured policymakers into imposing the price floor
Sellers of corn, recognizing that the price floor is good for them, have pressured policymakers into imposing the price floor
The tax burden will fall most heavily on sellers of the good when the demand curve
is relatively flat, and the supply curve is relatively steep
In the United States, before OPEC increased the price of crude oil in 1973, there was
a nonbinding price ceiling on gasoline
A price floor will be binding only if it is set
above the equilibrium price
If an allocation of resources is efficient, then
all potential gains from trade among buyers are sellers are being realized.
A binding minimum wage
alters both the quantity demanded and quantity supplied of labor
Suppose good X has a negative income elasticity of demand. This implies that good X is
an inferior good
A shortage results when a
binding price ceiling is imposed on a market
For which of the following goods is the income elasticity of demand likely highest? -natural gas -boats -hamburgers -doctor's visits
boats
Willingness to pay
measures the value that a buyer places on a good.
If two goods are complements, their cross-price elasticity will be
negative
The midpoint method for calculating elasticities is convenient in that it allows us to
calculate the same value for the elasticity, regardless of whether the price increases or decreases.
Once the supply curve for a product or service is drawn, it
can shift either rightward or leftward
If the demand for a good falls when income falls, then the good is called a
normal good
Frequently, in the short run, the quantity supplied of a good is
not very responsive to price channges
The minimum wage, if it is binding, lowers the incomes of
only those workers who become unemployed
The quantity sold in a market will increase if the government
decreases a binding price floor in that market
Economists compute the price elasticity of demand as the
percentage change in quantity demanded divided by the percentage change in price.
Which of the following will cause a decrease in producer surplus? - the price of a complement decreases - an increase in the number of buyers of the good - the imposition of a binding price ceiling in the market - income increases and buyers consider the good to be normal
the imposition of a binding price ceiling in the market
An alternative to rent-control laws that would not reduce the quantity of housing supplied is
the payment by government of a fraction of a poor family's rent
If the minimum wage exceeds the equilibrium wage, then
the quantity supplied of labor will exceed the quantity demanded
There are very few, if any, good substitutes for motor oil. Therefore, the
demand for motor oil would tend to be inelastic.
If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the
demand for the good is said to be inelastic.
What will happen in the artichoke market now if buyers expect higher artichoke prices in the near future?
demand will increase
Opponents of cigarette taxes often argue that tobacco and marijuana are substitutes so that high cigarette prices
encourage marijuana use, but the evidence does not support this argument
