Econ unit 3 & 4

Refer to the below diagram. The area that identifies the maximum sum of consumer surplus and producer surplus is: a + b + c + d + e + f. c + d + f. a + b + e. a + b + c + d.

a + b + c + d.

Refer to the below diagram. Assuming equilibrium price P1, consumer surplus is represented by areas: a + b. a + b + c + d. c + d. a + c.

a + b.

Refer to the below diagram. Assuming equilibrium price P1, producer surplus is represented by areas: a + b. a + b + c + d. c + d. a + c.

c + d.

Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is a. $350. b. $150. c. $200. d. $550.

b. $150.

If a 30 percent change in price causes a 15 percent change in quantity supplied, then the price elasticity of supply is about 0.5, and supply is elastic. 0.5, and supply is inelastic. 2, and supply is inelastic. 2, and supply is elastic.

0.5, and supply is inelastic.

Suppose that the supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. Refer to the Scenario above. The price elasticity of supply for bread could be -1. 0. 0.5. 1.5.

1.5.

The price elasticity of demand for widgets is 0.80. Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a: 1 percent reduction in price. 12 percent reduction in price. 40 percent reduction in price. 20 percent reduction in price.

20 percent reduction in price.

Suppose the price elasticity of supply for soccer balls is 0.3 in the short run and 1.2 in the long run. If an increase in the demand for soccer balls causes the price of soccer balls to increase by 20%, then the quantity supplied of soccer balls will increase by about 0.67% in the short run and 0.17% in the long run. 3% in the short run and 1.2% in the long run. 6% in the short run and 24% in the long run. 66.7% in the short run and 16.7% in the long run.

6% in the short run and 24% in the long run.

Refer to the below diagram. Total revenue at price P1 is indicated by area(s): C + D. A + B. A + C. A.

A + B.

Refer to the below figure. If the price were P3, consumer surplus would be represented by the area: ___ A. A+B+C. D+H+F. A+B+C+D+H+F.

A.

Refer to the below figure. Jenna says she would buy 10 gallons of gas per week regardless of the price. If this is true, then Jenna's demand for gas is represented by demand curve A. B. C. D.

A.

Refer to the below diagram. If price falls from P1 to P2, total revenue will become area(s) B + D. C + D. A + C. C.

B + D.

Refer to the below figure. Which demand curve is perfectly elastic? A B C D

D

Refer to the below figure. At equilibrium, producer surplus is represented by the area: ___ F. F+G. D+H+F. D+H+F+G+I.

D+H+F.

Refer to the below diagram. If actual production and consumption occur at Q1: efficiency is achieved. consumer surplus is maximized. a welfare loss (or deadweight loss) of b + d occurs. a welfare loss (or deadweight loss) of e + d occurs.

a welfare loss (or deadweight loss) of b + d occurs.

If a consumer is willing and able to pay $20 for a particular good and if he pays $16 for the good, then for that consumer, consumer surplus amounts to a. $4. b. $36. c. $16. d. $20.

a. $4.

Refer to Figure 7-22. If 40 units of the good are bought and sold, then a. the marginal value to buyers is greater than the marginal cost to sellers. b. producer surplus would be greater than consumer surplus. c. the marginal cost to sellers is greater than the marginal value to buyers. d. the marginal cost to sellers is equal to the marginal value to buyers.

a. the marginal value to buyers is greater than the marginal cost to sellers.

Refer to the below diagram. If actual production and consumption occur at Q3: efficiency is achieved. an efficiency loss (or deadweight loss) of e + f occurs. an efficiency loss (or deadweight loss) of a + b + c + d occurs. an efficiency loss (or deadweight loss) of a + c occurs.

an efficiency loss (or deadweight loss) of e + f occurs.

In the market for oil in the short run, demand and supply are both elastic. and supply are both inelastic. is elastic and supply is inelastic. is inelastic and supply is elastic.

and supply are both inelastic.

Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is ignoring the law of demand. assuming that the demand for university education is elastic. assuming that the demand for university education is inelastic. assuming that the supply of university education is elastic.

assuming that the demand for university education is inelastic.

Allen tutors in his spare time for extra income. Buyers of his service are willing to pay $40 per hour for as many hours Allen is willing to tutor. On a particular day, he is willing to tutor the first hour for $10, the second hour for $18, the third hour for $28, and the fourth hour for $40. Assume Allen is rational in deciding how many hours to tutor. His producer surplus is a. $56. b. $12. c. $64. d. $40.

c. $64

A perfectly inelastic demand schedule: rises upward and to the right, but has a constant slope. can be represented by a line parallel to the vertical axis. cannot be shown on a two-dimensional graph. can be represented by a line parallel to the horizontal axis.

can be represented by a line parallel to the vertical axis.

A seller's willingness to sell is a. measured by the seller's cost of production. b. related to her supply curve, just as a buyer's willingness to buy is related to his demand curve. c. less than the price received if producer surplus is a positive number. d. All of the above are correct.

d. All of the above are correct.

Refer to Figure 7-10. Which area represents producer surplus when the price is P1? a. ABGD b. DGH c. ACH d. BCG

d. BCG

Consumer surplus a. is the amount a buyer pays for a good minus the amount the buyer is willing to pay for it. b. measures the benefit sellers receive from participating in a market. c. is represented on a supply-demand graph by the area below the price and above the demand curve. d. measures the benefit buyers receive from participating in a market.

d. measures the benefit buyers receive from participating in a market.

Refer to Figure 7-22. If 110 units of the good are bought and sold, then a. the marginal cost to sellers is equal to the marginal value to buyers. b. producer surplus is greater than consumer surplus. c. the marginal cost to buyers is greater than marginal value to sellers. d. the marginal cost to sellers is greater than marginal value to buyers.

d. the marginal cost to sellers is greater than marginal value to buyers.

Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called a. consumer surplus. b. producer surplus. c. deadweight loss. d. willingness to pay.

d. willingness to pay.

If the demand for product X is inelastic, a 4 percent increase in the price of X will: decrease the quantity of X demanded by more than 4 percent. decrease the quantity of X demanded by less than 4 percent. increase the quantity of X demanded by more than 4 percent. increase the quantity of X demanded by less than 4 percent.

decrease the quantity of X demanded by less than 4 percent.

Refer to the below diagram. If actual production and consumption occur at Q2: efficiency is achieved. an efficiency loss (or deadweight loss) of a + b + c + d occurs. an efficiency loss (or deadweight loss) of a + c occurs. an efficiency loss (or deadweight loss) of e + f occurs.

efficiency is achieved.

If the supply of product X is perfectly elastic, an increase in the demand for it will increase: equilibrium quantity but reduce equilibrium price. equilibrium quantity but equilibrium price will be unchanged. equilibrium price but reduce equilibrium quantity. equilibrium price but equilibrium quantity will be unchanged.

equilibrium quantity but equilibrium price will be unchanged.

Refer to the below diagram. If price falls from $10 to $2, total revenue: rises from A + B to A+ B + D + C and demand is elastic. falls from A + D to B + C and demand is inelastic. rises from C + D to B + A and demand is elastic. falls from A + B to B + C and demand is inelastic.

falls from A + B to B + C and demand is inelastic.

The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. Refer to the Scenario above. The change in equilibrium price will be greater in the aged cheddar cheese market than in the bread market. greater in the bread market than in the aged cheddar cheese market. the same in the aged cheddar cheese and bread markets. Any of the above could be correct.

greater in the aged cheddar cheese market than in the bread market.

Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. Refer to the Scenario above. The change in equilibrium quantity will be greater in the milk market than in the beef market. greater in the beef market than in the milk market. the same in the milk and beef markets. Any of the above could be correct.

greater in the beef market than in the milk market.

PlayStations and PlayStation games are complementary goods. A technological advance in the production of PlayStations will increase consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games. increase consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. decrease consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. decrease consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games.

increase consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games.

Corn chips and potato chips are substitutes. Good weather that sharply increases the corn harvest would increase consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips. increase consumer surplus in the market for corn chips and increase producer surplus in the market for potato chips. decrease consumer surplus in the market for corn chips and increase producer surplus in the market for potato chips. decrease consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips.

increase consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips.

Refer to the below diagram. The decline in price from P1 to P2will: increase total revenue by D. increase total revenue by B + D. decrease total revenue by A. increase total revenue by D - A.

increase total revenue by D - A.

If the demand for textbooks is inelastic, then an increase in the price of textbooks will increase total revenue of textbook sellers. decrease total revenue of textbook sellers. not change total revenue of textbook sellers. There is not enough information to answer this question.

increase total revenue of textbook sellers.

An increase in price causes an increase in total revenue when demand is elastic. inelastic. unit elastic. All of the above are possible.

inelastic.

Refer to the below figure. At the quantity Q2, the marginal benefit to buyers and the marginal cost to sellers are both P2. is P2, and the marginal cost to sellers is P3. and the marginal cost to sellers are both P3. is P3, and the marginal cost to sellers is P2.

is P2, and the marginal cost to sellers is P3.

Refer to the below diagram. At quantity Q1: maximum willingness to pay exceeds minimum acceptable price. the sum of consumer and producer surplus is maximized. minimum acceptable price exceeds maximum willingness to pay. an efficiency loss (or deadweight loss) of a + b occurs.

maximum willingness to pay exceeds minimum acceptable price.

Refer to the below diagram. At quantity Q3: maximum willingness to pay exceeds minimum acceptable price. the sum of consumer and producer surplus is maximized. minimum acceptable price exceeds maximum willingness to pay. an efficiency loss (or deadweight loss) of a + b occurs.

minimum acceptable price exceeds maximum willingness to pay.

If two goods are complements, their cross-price elasticity will be: positive. negative. zero. equal to the difference between the income elasticities of demand for the two goods.

negative.

For which pairs of goods is the cross-price elasticity most likely to be positive? peanut butter and jelly bicycle frames and bicycle tires pens and pencils college textbooks and iPods

pens and pencils

Total surplus in a market will increase when the government imposes a tax on that market. imposes a binding price floor on that market. removes a binding price ceiling from that market.

removes a binding price ceiling from that market.

The larger the coefficient of price elasticity of demand for a product, the: larger the resulting price change for an increase in supply. more rapid the rate at which the marginal utility of that product diminishes. less competitive will be the industry supplying that product. smaller the resulting price change for an increase in supply.

smaller the resulting price change for an increase in supply.

Refer to the below diagram. In the P1 to P2 price range, we can say: that consumer purchases are relatively insensitive to price changes. nothing concerning price elasticity of demand. that demand is inelastic with respect to price. that demand is elastic with respect to price.

that demand is elastic with respect to price

A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to raise revenues. Who is correct? the mayor the city manager the answer depends on the price elasticity of demand. the answer depends on the costs of construction of the new municipal swimming pool.

the answer depends on the price elasticity of demand.

If marijuana were legalized, it is likely that there would be an increase in the demand for marijuana. If demand for marijuana is inelastic and the supply of marijuana is perfectly elastic, this will result in higher prices and higher total revenue from marijuana sales. higher prices but lower total revenue from marijuana sales. the same price and higher total revenue from marijuana sales. the same price but lower total revenue from marijuana sales.

the same price and higher total revenue from marijuana sales.

Refer to the below diagram. At quantity Q2: maximum willingness to pay exceeds minimum acceptable price. the sum of consumer and producer surplus is maximized. minimum acceptable price exceeds maximum willingness to pay. an efficiency loss (or deadweight loss) of b + d occurs.

the sum of consumer and producer surplus is maximized.

Refer to the below figure. When the price is P1, area B+C represents ________________ . total surplus. producer surplus. consumer surplus.

total surplus.