econ 101 exam 2

price ceiling

A legal maximum on the price at which a good can be sold

price floor

A legal minimum on the price at which a good can be sold

Inelastic

Describes demand that is not very sensitive to a change in price

For which pairs of goods is the cross-price elasticity most likely to be negative? a. peanut butter and jelly b. celery and coffee c. iPods and iPads d. pens and pencils

a

If demand is price inelastic, then when price rises, total revenue a. will rise. b. will fall. c. will remain unchanged. d. may rise, fall, or remain unchanged. More information is need to determine the change in total revenue with certainty.

a

If the price of a good is low, a. the quantity supplied of the good could be zero. b. the supply curve for the good will shift to the left. c. firms would increase profit by increasing output. d. firms can and should raise the price of the product.

a

Which of the following is likely to have the most price inelastic demand? a. milk b. filet mignon c. Grey Goose® vodka d. lattés

a

If toast and butter are complements, then which of the following would increase the demand for toast? a. a decrease in the price of toast b. a decrease in the price of butter c. an increase in the price of butter d. Both a and b are correct.

b

The presence of a price control in a market for a good or service usually is an indication that a. an insufficient quantity of the good or service was being produced in that market to meet the public's need. b. policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers. c. the usual forces of supply and demand were not able to establish an equilibrium price in that market. d. policymakers correctly believed that price controls would generate no inequities of their own once imposed.

b

When a tax is placed on the buyers of lemonade, the a. sellers bear the entire burden of the tax. b. burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal. c. buyers bear the entire burden of the tax. d. burden of the tax will be always be equally divided between the buyers and the sellers.

b

Which of the following causes a shortage of a good? a. a binding price floor b. a binding price ceiling c. a tax on the good d. None of the above is correct.

b

Suppose that when the price of ginger ale is $2 per bottle, firms can sell 4 million bottles. When the price of ginger ale is $3 per bottle, firms can sell 2 million bottles. Which of the following statements is true? a. The demand for ginger ale is income inelastic, so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. b. The demand for ginger ale is income elastic, so an increase in the price of ginger ale will increase the total revenue of ginger ale producers. c. The demand for ginger ale is price elastic, so an increase in the price of ginger ale will decrease the total revenue of ginger ale producers. d. The demand for ginger ale is price inelastic, so an increase in the price of ginger ale will increase the total revenue of ginger ale producers

c

Suppose the government has imposed a price ceiling on sliced sandwich bread. Which of the following events could transform the price ceiling from one that is binding to one that is not binding? a. A decrease in the price of lunch meat. b. An decrease in the price of peanut butter and jelly. c. A decrease in the price of unsliced bread, which people consider a substitute for sliced bread. d. An increase in the price of flour, which is used to make bread.

c

The University of Iowa was voted the #1 "party school" in 2013. The University of Iowa is located in Iowa City. At the end of August each year, the market demand for beer in Iowa City a. decreases. b. remains constant, but we observe a movement downward and to the right along the demand curve. c. increases. d. remains constant, but we observe a movement upward and to the left along the demand curve

c

Demand

consumer

14. When a tax is levied on buyers of tea, a. buyers of tea are made worse off, and sellers of tea are made better off. b. buyers of tea are made worse off, and the well-being of sellers is unaffected. c. the well-being of both buyers of tea and sellers of tea is unaffected. d. buyers of tea and sellers of tea both are made worse off.

d

Assume the market for tennis balls is perfectly competitive. When one tennis ball producer exits the market, a. the price of tennis balls increases. b. there is no longer a market for tennis balls. c. the price of tennis balls decreases. d. the price of tennis balls does not change.

d

Currently you purchase ten frozen pizza per month. You will graduate from college in December, and you will start a new job in January. You have no plans to purchase frozen pizzas in January. For you, frozen pizzas are a(n) a. normal good. b. complementary good. c. substitute good. d. inferior good.

d

When a tax is placed on the sellers of a product, the a. effective price received by sellers decreases, and the price paid by buyers increases. b. size of the market decreases. c. supply of the product decreases. d. All of the above are correct.

d

if a government levies a $500 tax per car on sellers of cars, then the price received by sellers of cars would?

decrease by less than 500$

a .10 tax levied on the consumers of chocolate bars will cause?

demand curve goes up

elastic

describes demand that is very sensitive to a change in price

supply

producer

which of the following is likely to have the most price inelastic demand? a. hardback novels b.white chocolatechip with macadamia nut cookies c.salt d.box seats at a major league baseball league

salt

A .10 $ tax levied on the sellers of chocolate bars will cause?

supply curve goes up