ap micro unit 2 test review

A demand schedule 1/1 shows the quantity demanded at one price. is a graph showing a relationship between the quantity demanded and the price of a good. is a list of the quantities demanded at each different price when all other influences on buying plans remain the same. shows that demand is on schedule. shows how the demand changes when the supply changes.

is a list of the quantities demanded at each different price when all other influences on buying plans remain the same

4. The current binding minimum wage for all workers is W1. If Congress introduced a sub-minimum wage, W2 that applies only to teenagers, what is the most likely effect on teenage employment? 1/1 teenage employment will increase because firms will want to hire more teenagers at W2 than W1 teenage employment will increase because more teenagers will want to work at W2 than at W1. teenage employment will decrease because fewer teenagers will want to work at W2 than at W1. teenage employment will decrease because firms will want to hire fewer teenagers at W2 than at W1. teenage employment will stay the same because the market-clearing wage is lower than W1 and W2.

teenage employment will increase because firms will want to hire more teenagers at W2 than W1

2. Which of the following will occur if the government imposes a price ceiling below the equilibrium price of a good? 1/1 the quantity sold will exceed the equilibrium quantity firm's total revenues will increase if the demand is price elastic there will be a shortage in the market all firms will shut down, since price is below the equilibrium price price will exceed the marginal cost of producing the last unit sold

there will be a shortage in the market

10. The consumer surplus after the tax is:

$3,000

12. The tax revenue is:

$3,000

13. The tax revenue is:

$3,000

11. The deadweight loss after the tax is:

$600

9. Refer to the graph below: Which number refers to the deadweight loss that results from this price ceiling?

1

8. Refer to the graph below: Which number refers to the consumer surplus that results from this price floor? 1/1

3

7. Refer to the graph below: Which number refers to the surplus/shortage that results from this price floor?

4

1. In the market depicted in the diagram, if the government imposes a price ceiling of $1.00 per gallon on gasoline, which of the following will result? 1/1 A surplus of 6 billion gallons A shortage of 6 billion gallons A surplus of 12 billion gallons A shortage of 12 billion gallons Neither a surplus nor a shortage, because the price ceiling would not be effective

A shortage of 6 billion gallons

5. Suppose the price elasticity coefficients of demand are 1.43, 0.67, 1.11, and 0.29 for products W, X, Y, and Z respectively. A 1 percent decrease in price will increase total revenue in the case(s) of: 1/1 A) W and Y. B) Y and Z. C) X and Z. D) Z and W.

A) W and Y.

3. Suppose the income elasticity of demand for toys is +2.00. This means that: 1/1 A) a 10 percent increase in income will increase the purchase of toys by 20 percent. B) a 10 percent increase in income will increase the purchase of toys by 2 percent. C) a 10 percent increase in income will decrease the purchase of toys by 2 percent. D) toys are an inferior good.

A) a 10 percent increase in income will increase the purchase of toys by 20 percent.

5. Studies of the minimum wage suggest that the price elasticity of demand for teenage workers is relatively inelastic. This means that: 1/1 A) an increase in the minimum wage would increase the total incomes of teenage workers as a group. B) an increase in the minimum wage would decrease the total incomes of teenage workers as a group. C) the unemployment effect of an increase in the minimum wage would be relatively large. D) the cross elasticity of demand between teenage and adult workers is positive and very large.

A) an increase in the minimum wage would increase the total incomes of teenage workers as a group.

1. The price elasticity of demand coefficient measures: 1/1 A) buyer responsiveness to price changes. B) the extent to which a demand curve shifts as incomes change. C) the slope of the demand curve. D) how far business executives can stretch their fixed costs.

A) buyer responsiveness to price changes.

6. If the market demand for a good is inelastic and the supply is elastic, which of the following is true when there is an increase in taxes on the good? 1/1 A) consumers will bear most of the burden of the tax B) producers will bear all of the burden of the tax C) producers will bear most of the burden of the tax or risk losing sales D) both consumers and producers will share the burden of the tax equally

A) consumers will bear most of the burden of the tax

10. If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then: 1/1 A) demand is elastic. B) demand is inelastic. C) demand is unit elastic. D) none of the above.

A) demand is elastic.

11. An antidrug policy which reduces the supply of heroin might: 1/1 A) increase street crime because the addict's demand for heroin is highly inelastic. B) reduce street crime because the addict's demand for heroin is highly elastic. C) reduce street crime because the addict's demand for heroin is highly inelastic. D) increase street crime because the addict's demand for heroin is highly elastic.

A) increase street crime because the addict's demand for heroin is highly inelastic.

8. To alleviate a financial crisis, a university increases student fees. This action will increase university revenues if the price elasticity of demand for university education is 1/1 A) inelastic B) unit elastic C) elastic D) equal to the price elasticity of supply

A) inelastic

1. The main determinant of elasticity of supply is the: 1/1 A) number of close substitutes for the product available to consumers. B) amount of time the producer has to adjust inputs in response to a price change. C) urgency of consumer wants for the product. D )number of uses for the product.

B) amount of time the producer has to adjust inputs in response to a price change.

13. If a 5 percent wage increase in a particular labor market results in a 10 percent decrease in employment, the demand for labor is 1/1 A) perfectly elastic B) relatively elastic C) unit elastic D) relatively inelastic

B) relatively elastic

9. We would expect: 1/1 A) the demand for Coca-Cola to be less elastic than the demand for soft drinks in general. B) the demand for Coca-Cola to be more elastic than the demand for soft drinks in general. C) no relationship between the elasticity of demand for Coca-Cola and the elasticity of demand for soft drinks in general. D) none of the above to hold true.

B) the demand for Coca-Cola to be more elastic than the demand for soft drinks in general.

14. If a severe drought destroys a significant portion of the peanut crop and peanut farmers' revenues increase, which of the following is true over the observed range of prices? 1/1 A) The demand for peanuts must be unit price elastic. B) The demand for peanuts must be price elastic. C) The demand for peanuts must be price inelastic. D) The supply of peanuts must be price inelastic.

C) The demand for peanuts must be price inelastic.

. If the income elasticity of demand for lard is -3.00, this means that: 1/1 A) lard is a substitute for butter. B) lard is a normal good. C) lard is an inferior good. D) more lard will be purchased when its price falls.

C) lard is an inferior good.

2. The price of an airline ticket is typically lower if a traveler buys the ticket several weeks before the flight's departure date rather than on the day of the departure. This pricing strategy is based on the assumption that 1/1 A) travelers are not aware of how airline prices change across time B) travelers do not have alternative modes of transportation C) travelers demand becomes less elastic as the departure date approaches D) the marginal cost of the last few seats on an airplane is higher than that for the first few seats

C) travelers demand becomes less elastic as the departure date approaches

6. Promoters of a rock group know that if they charged $8 a ticket, 400 people would buy tickets for a concert, and if they charged $4 a ticket, 800 people would buy tickets. Over this price range, the demand for the concert tickets for the rock group is 1/1 A) elastic B) inelastic C) unit elastic D) perfectly elastic

C) unit elastic

12. Assume a consumer finds that his total expenditure on compact disks stays the same after the price of compact disks declines, other things being equal. Which of the following is true for this price change? 1/1 A) Compact disks are inferior goods to this consumer. B) The consumer's demand for compact disks increased in response to the price change. C) The consumer's demand for compact disks is perfectly price elastic. D) The consumer's demand for compact disks is unit price elastic.

D) The consumer's demand for compact disks is unit price elastic.

3. Which of the following is not characteristic of the demand for a commodity that is elastic? 1/1 A) The relative change in quantity demanded is greater than the relative change in price. B) Buyers are relatively sensitive to price changes. C) Total revenue declines if price is increased. D) The elasticity coefficient is less than one.

D) The elasticity coefficient is less than one.

2. You are told that the cross-price elasticity between goods X and Y is +2.0. This means that 1/1 A) goods X and Y are normal goods. B) goods X and Y are inferior goods. C) goods X and Y are complementary goods. D) goods X and Y are substitute goods

D) goods X and Y are substitute goods.

7. An increase in the effective minimum wage will have less of an impact on employment if the demand for labor is 1/1 A) a derived demand B) decreasing C) relatively elastic D) relatively inelastic

D) relatively inelastic

4. The larger the coefficient of price elasticity of demand for a product, the: 1/1 A) larger the resulting price change if there's an increase in supply. B) more rapid the rate at which the marginal utility of that product diminishes. C) less competitive will be the industry supplying that product. D) smaller the resulting price change if there's an increase in supply.

D) smaller the resulting price change if there's an increase in supply.

14. Revenue from the tariff is:

H+I

15. Area G+J is:

The Deadweight Loss

3. Which of the following would cause the equilibrium price of good X to increase? 1/1 Producers of good X find a new technology that reduces the cost of producing X. The price of an essential input in the production of good X increases Goods X and Y are complements, and the government imposes a tax on good Y Good X is a normal good, and the government increases income taxes by 3% Good X is an inferior good, and the government decreases income taxes by 10%

The price of an essential input in the production of good X increases

1. Gasoline prices increase by 50 percent and other things remain the same. As a result, there is 1/1 an increase in the demand for gasoline. a decrease in the demand for gasoline. no change in the quantity of gasoline demanded. a decrease in the quantity of gasoline demanded. More information is needed to determine if the demand for gasoline increases or decreases.

a decrease in the quantity of gasoline demanded.

4. Which of the following increases the quantity supplied of compact discs but does NOT increase the supply of compact discs? 1/1 a decrease in the price of a compact disc an increase in the price of a compact disc a decrease in the number of suppliers of compact discs an increase in the price of the resources used to produce compact discs new technology that lowers the cost of producing compact discs

an increase in the price of a compact disc

3. The law of supply states that, other things remaining the same, 1/1 demand increases when supply increases. if the price of a good increases, firms buy less of it. if the price of a good increases, the quantity supplied increases. as people's income increase, the supply of goods increases. if the price of a good increases, the supply increases.

if the price of a good increases, the quantity supplied increases.