Microeconomics Test 2

Using the midpoint method, if the price falls from $100 to $50, the price elasticity of demand is

inelastic

Both the demand curve and the supply curve are straight lines. At equilibrium, producer surplus is

$24.

At Nick's Bakery, the cost to make a cheese danish is $1.50 per danish. As a result of selling 10 danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his danishes for

$3.50 each.

If the market price is $1,000, the producer surplus in the market is

$300.

The equilibrium market price for 10 piano lessons is $400. What is the total producer surplus in the market?

$400

Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is

$500.

If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by

$600.

Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book?

$8

At the equilibrium price, consumer surplus is

$800.

Using the midpoint method, if the price falls from $100 to $50, the absolute value of the price elasticity of demand is

0.46

At a priceof $1.20, a local manufacturer is willing to supply 150 boxes per day. At a price of $1.40, the manufacturer is willing to supply 170 boxes per day. Using the midpoint methode, the price elasticity is about

0.81

Suppose the cost to run the ferry for each roundtrip is $1,000. How many ferry trips should there be to maximize the total surplus of the four business owners?

1

Using the midpoint method, if the price falls from $150 to $100, the absolute value of the price elasticity of demand is

1.1

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross-price elasticity of demand is about

1.2, and X and Y are substitutes.

If a 15% increase in price for a good results in a 20 percent decrease in quantity demanded, the price elasticity of demand is

1.33

Using the midpoint method, what is the price elasticity of supply between point B and point C?

1.44

Suppose the cost to plant each tree is $300. How many trees should be planted to maximize the total surplus of the four homeowners?

2

Suppose the cost to run the ferry for each roundtrip is $750. How many ferry trips should there be to maximize the total surplus of the four business owners?

2

Suppose the cost to install each streetlight is $900. How many streetlights should the town install to maximize total surplus from the streetlights?

2 streetlights

Using the midpoint method, what is the price elasticity of supply between points A and B?

2.33

Using the midpoint method, the price elasticity of demand between point X and point Y is

2.5

A t-shirt maker would be willing to supply 75 t-shirts per day at a price of $18.00 each. At a price of $20.00, the t-shirt maker would be willilng to supply 100 t-shirts. Using the midpoint method, the price elasticity of supply for t-shirts is

2.71 and supply is elastic

Using the midpoint method, if the price falls from $200 to $150, the absolute value of the price elasticity of demand is

2.8

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

20 percent decrease in the quantity demanded.

Suppose the cost to build the park is $24 per acre. How many acres should the park be to maximize total surplus from the park in Springfield?

3 acres

Last year, Tess bought five handbags when her income was $54,000. This year, her income is $60,000, and she purchased seven handbags. Holding other factors constant and using the midpoint method, it follows that Tess's income elasticity of demand is about

3.17, and Tess regards handbags as normal goods.

Suppose the cost to plant each tree is $90. How many trees should be planted to maximize the total surplus of the four homeowners?

4

Suppose the cost to install each streetlight is $360. How many streetlights should the town install to maximize total surplus from the streetlights?

4 streetlights

If the market price of an orange is $0.90, then the market quantity of oranges demanded per day is

4.

Suppose the cost to build the park is $9 per acre. How large should the park be to maximize total surplus from the park in Springfield?

5 acres

Kristi and Rebecca sell lemonade on the corner for $0.50 per cup. It costs them $0.10 to make each cup. On a certain day, their producer surplus is $20. How many cups did Kristi and Rebecca sell?

50

Which of the following is consistent with the elasticities given in Table 5-1?

A is a luxury and B is a necessity.

At equilibrium, total surplus is represented by the area

A+B+C+D+H+F.

When the price is P1, consumer surplus is

A+B+C.

When the price is P2, producer surplus is

A+B+C.

Suppose the cost to run the ferry for each roundtrip is $750. Then total surplus for the 4 business owners is

All of the above are correct.

Who experiences the largest loss of consumer surplus when the price of an orange increases from $0.70 to $1.40?

Allison

Which area represents producer surplus when the price is P1?

BCG

If the price is $1,l50, who would be willing to supply the product?

Carlos, Dianne, and Evaline

All else equal, what happens to consumer surplus if the price of a good increases?

Consumer surplus decreases

The distinction between efficiency and equality can be described as follows:

Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society.

Total surplus in a market is consumer surplus minus producer surplus.

False

Which of the following is likely to have the most price elascity of demand?

Haagen-Daz vanilla bean ice cream

Total surplus can be measured as the area

JNL.

Which of the following events would increase producer surplus?

Sellers' costs stay the same and the price of the good increases.

If you have a ticket that you sell to the group in an auction, what will be the selling price?

Slightly more than $50

Using the midpoint method, which of the three supply curves represents the least elastic supply?

Supply curve A

Which of the following is not a determinant of the price elasticity of demand for a good?

The steepness or flatness of the supply curve for the good

Which of the following is likely to have the most price elasticity demand?

Tommy Hilfiger jeans

A government program that pays farmers not to plant corn on part of their land can help farmers not only through the subsidy payments to farmers who participate in the program but also by raising the market price of corn.

True

If a market is in equilibrium, then it is impossible for a social planner to raise economic welfare by increasing or decreasing the quantity of the good.

True

If the government removes a binding price ceiling in a market, then the producer surplus in that market will increase.

True

If an allocation of resources is efficient, then

all potential gains from trade among buyers are sellers are being realized.

On a graph, consumer surplus is represented by the area

below the demand curve and above price.

Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,

both Janine and Henry experience an increase in consumer surplus.

Bob owns 5 acres of land. Bob sells the land to a real estate developer who builds a subdivision with 10 houses. The land is an example of a good that is

both rival in consumption and excludable.

The price elasticity of demand measures

buyers' responsiveness to a change in the price of a good.

In the long run, the quantity supplied of most goods

can respond substantially to a change in price

Goods that are not rival in consumption include both

club goods and public goods.

A good that is rival in consumption and not excludable is called a

common resource.

If the cross-price elasticity of two goods is negative, then the two goods are

complements

Which of the following is likely to have the most price inelastic demand?

cookies

Which of the following is likely to have the most price elastic demand?

diamond earrings

Using the midpoint method, if the price falls from $200 to $150, the price elasticity of demand is

elastic

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply is (decimals to 4 places)

elastic, and the price elasticity fo supply is 1.74

A cable television broadcast of a movie is

excludable and not rival in consumption.

A pizza is

excludable and rival in consumption.

Suppose the cross-price elasticity of demand between peanut butter and jelly is −2.50. This implies that a 20 percent increase in the price of peanut butter will cause the quantity of jelly purchased to

fall by 50 percent.

Which of the following is likely to have the most price inelastic demand?

gasoline in the short run

If the price elasticity of supply is 1.2, and price increased by 5 percent, quantity supplied would

increase by 6 percent.

Which of the following is likelly to have the most price elasticity demand?

lattes

Which of the following is likely to have the most price inelasticity demand?

lightbulbs

Examples of goods that are excludable include

mobile phones and fire protection.

Because it is

neither excludable nor rival in consumption, a tornado siren is a public good.

A local park filled with picnickers is

not excludable and rival in consumption.

A cheeseburger is a

private good, because it is excludable and rival in consumption.

Moving production from a high-cost producer to a low-cost producer will

raise total surplus.

A vacation home in Malibu is

rival in consumption and excludable.

Which of the following is likely to have the most price inelastic demand?

salt

At a price of $2.00, total surplus is

smaller than it would be at the equilibrium price.

If the quantity supplied responds only slightly to changes in price, then

supply is said to be inelastic

Producer surplus is

the amount a seller is paid minus the cost of production.

Demand is said to be inelastic if

the quantity demanded changes only slightly when the price of the good 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 measurers how much

the quantity supplied responds to changes in the price of the good

Which of the following is likely to have the most price inelastic demand?

toothpaste

Jerome says that he will spend exactly $25 each month on new apps for his mobile device, regardless of the price of apps. Jerome's demand for apps is

unit elastic.