Review 3

Calculate the income elasticity if an 8 percent increase in income leads to a 4 percent increase in quantity demanded for organic produce

0.5

If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the absolute value of the price elasticity of demand?

1.62

Government intervention in agricultural markets in the U.S. began in the

1930's

Suppose a hurricane decreased supply of oranges so that the price of oranges rose from $120 to $180 a ton and quantity sold decreased from 800 tons to 240 tons. What is the absolute value of the price elasticity of demand?

2.69

A(n) ______ is represented by a leftward shift of the demand curve while a(n) ___________ is represented by a movement along a given demand curve.

A decrease in demand; increase in quantity demanded

Which of the following will shift the demand curve for a good?

A decrease in the price of a complementary good

If the current market price is $10, the market will achieve equilibrium through

A price increase, increasing the quantity supplied and decreasing the quantity demanded.

What is the difference between an "increase in demand" and an "increase in quantity demanded?"

An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve.

What is the difference between an "increase in supply" and an 'increase in quantity supplied?"

An "increase in supply" means the supply curve has shifted to the right while an "increase in quantity supplied" refers to a movement along a given supply curve in response to an increase in price.

Which of the following statements is true?

An increase in demand causes a change in equilibrium price; the change in price does not cause a further charge in demand or supply

Which of the following statements is true

An increase in supply causes a change in equilibrium price; the change in price does not cause a further change in demand or supply

Assume that the demand curve for mp3 players shifts to the right and the supply curve for mp3 players shift to the left, but the supply curve shifts less than the demand curve. As a result.

Both the equilibrium price and quantity of mp3 players will increase.

Let D = demand, S = supply, P = equilibrium price, and Q = equilibrium quantity. What happens in the market for walnuts if the centers for disease control and prevention announces that consuming a half cup of walnuts each week helps to lower bad levels of cholesterol.

D increases, S no change, P and Q increase

______ is maximized in a competitive market when marginal benefit equals marginal cost

Economic surplus

Which of the following could explain why the demand for table salt is inelastic

Households devote a very small portion of their income to salt purchases

the difference between the _____ and the _____ from the sale of a product is called producer surplus

Lowest price a firm would have been willing to accept; price is actually receives

In a competitive market, the demand curve shows the _____ received by consumers and the supply curve shows the _____________

Marginal benefit; marginal cost

Studies show that the income elasticity of demand for wine is approximately five. What does this mean?

One percent increase in income leads to a five percent increase in wine consumption

Technological advances have resulted in lower prices for smart watches. What is the impact of this on the market for traditional watches?

The demand curve for traditional watches shifts to the left.

Assume that both the demand curve and the supply curve for mp3 players shift to the right but the supply curve shifts more than the demand curve as a result-

The equilibrium price of mp3 players will decrease; the equilibrium quantity will increase.

At a products equilibrium price

The product's demand curve crosses the product's supply curve.

The law of demand implies, holding everything else constant, that as the price of bagels increases

The quantity of bagels demanded will decrease

The income elasticity of demand measures

The responsiveness of quantity demanded to changes in income

Economic efficiencey is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production, and in which

The sum of consumer surplus and producer surplus is at a maximum

In october, Market analysts predict that the price of platinum will fall in November. What happens in the platinum market in October, holding everything else constant?

The supply curve shifts to the right

Economists refer to a market where buying and selling take place at prices that violate government price regulations as

a black market

Which of the following would shift the supply curve for mp3 players to the right

a decrease in the price of an input used to produce mp3 players

Rent control is an example of

a price ceiling

Which term refers to a legally established minimum price that firms may charge

a price floor

Economists estimated that the price elasticity of beer is -0.30 and the income elasticity of beer is 0.09. This means that

an increase in the price of beer will lead to an increase in revenue for beer sellers and beer is a normal good

If a 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a product, this product is

an inferior good

If an increase in income leads to a decrease in the demand for popcorn, then popcorn is

an inferior good

Assume that both the demand curve and the supply curve for mp3 players shift to the right byt the demand curve shifts more than the supply curve. As a result-

both the equilibrium price and quantity of mp3 players will increase

If the Cross-price elasticity of demand for goods x and y is negative, this means the two goods are

complements

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called

consumer surplus

If there is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and consumer surplus plus producer surplus is maximized, then

economic efficiency is achieved

If the quantity demanded for a good rises as income rises then the income elasticity of demand for this good is ______ than 0, and the good is ______ good.

greater; a normal

A demand curve that is horizontal indicates that the commodity

has a large number of substitutes

price elasticity of demand measures

how responsive quantity demanded is to a change in price

The demand for gasoline in the short run is

inelastic because there are no good substitutes for gasoline

If a good has a negative income elasticity of demand, this indicates that the good is

inferior

Economic surplus

is equal to the sum of consumer surplus and producer surplus

If demand is inelastic, the absolute value of the price elasticity of demand is

less than one

The inelastic segment of the demand curve

lies below the midpoint of the curve

To affect the market outcome a price ceiling

must be set below the equilibrium price

In order to be binding, a price ceiling

must lie below the free market equilibrium price

Cross-price elasticity of demand is calculated as

percentage change in quantity demanded of one good divided by percentage change in price of a different good

Suppose that when the price of raspberries increases, Lonnie increases his purchases of papyas. To Lonnie,

raspberries and papayas are substitutes.

marginal cost is

the additional cost to a firm of producing one more unit of a good or service

the total amount of producer surplus in a market is equal to

the area above the market supply curve and below the market price

consumer surplus in a market for a product would be equal to _____ if the market price was zero

the area under the demand curve

Suppose a decrease in the supply of bottled water resulted in a decrease in revenue. This indicates that

the demand for bottled water is price elastic in the price range considered

Willingness to pay measures

the maximum price that a buyer is willing to pay for a good

At the midpoint of the demand curve, in absolute value,

the price elasticity coefficient is one.

Total revenue is equal to

the price of a product multiplied by the number of units the product sold

Suppliers will be willing to supply a product only if

the price recieved is at least equal to the additional cost of producing the product

If the market for a product is broadly defined, then

there are few substitutes for the product and the demand for the product is relatively inelastic

When the price of pistachio nuts is $7.50 per lb, the quantity demanded is 48 lbs. When the price of pistachio nuts is $9.00 per lb, the quantity demanded is 40 lbs. When the midpoint formula is used to measure the price elasticity of demand we can say that the demand for pistachio nuts is

unit elastic

A demand curve which is ______ represents perfectly inelastic demand, and a demand curve which is _______ represents inelastic demand

vertical; downward sloping

Along a downward sloping, linear demand curve, total revenue is the greatest

where demand is unit elastic

If demand is perfectly inelastic, the absolute value of the price elasticity of demand is

zero