MICROECON EXAM #2

product B

(Figure: Demand Curves) The figure shows four different demand curves for four products: A, B, C and D. Which of the products has a perfectly elastic demand curve?

$45

(Figure: Market 2) Use the market graph for pairs of socks to answer the question

$9,000

(Figure: Market for Child Care) Refer to the market for child care that is shown in the figure. The original equilibrium price is $10,000. A subsidy is now introduced for parents who pay for child care. After the subsidy is implemented, the amount that parents pay is

10

(Figure: Market for Plastic Bags) In the market for plastic bags shown here, the original equilibrium price is 50 cents per bag. In an effort to reduce plastics usage, a tax is then placed on the buyers of plastic bags. The economic burden of this tax on the seller is _____ cents

6

(Figure: Market) In the market shown, the original equilibrium price is 60 cents. A tax is then implemented on the buyer. The amount of the tax is _____ cents

figure D is a binding price floor

(Figure: Markets) In the set of figures shown

2.4 loads of laundry will not be sorted and folded

(Table: Four persons) The table lists the minutes that it will take four persons to wash a car and to sort and fold a load of laundry. Use the data to answer the question

always below the equilibrium price

A binding price ceiling is

price elasticity of demand

A measure of how responsive buyers are to price changes is the:

(i) and (iii)

A subsidy is (i) a negative tax. (ii) a tax rebate given to those who make a specific choice. (iii) a payment made by the government to those who make a specific choice.

demand curve to the left

A tax on buyers shifts the

supply curve to the left

A tax on sellers shifts the

Ang has an absolute advantage over Bill in mowing the lawn.

Ang can mow the lawn in two hours. Bill takes three hours to mow the same lawn. What can you conclude from this information?

$90

Bae is willing to pay up to $160 for a particular pair of boots. She is able to buy the boots for $120. The marginal cost of producing the boots is $70. How large is the economic surplus associated with her purchase of the boots? (hint: ES=CS+PS)

specialize and trade

Comparative advantage explains why people

marginal benefit minus price

Consumer surplus equals

relatively steep

If an item is a necessity rather than a luxury, its demand curve will be:

2

If income rises by 10% and the quantity demanded of an item rises by 20%, the income elasticity of demand for this item is:

quantity demanded of a good is to changes in income.

Income elasticity of demand measures how responsive the:

remove the ability to tell whether the two products are substitutes or complements.

Taking the absolute value of the cross-price elasticity of demand is incorrect because it would:

producer surplus

The area on a market graph that lies below the price and above the supply curve is equal to

fairness

The concept of equity focuses on

vertical; perfectly inelastic

The percent change in insulin demanded for any price change is zero. The demand curve for insulin is _____, and the price elasticity of demand is _____.

$70

The price of a carton of eggs is $2, and 100 cartons are sold. The consumer surplus is $80, and total economic surplus equals $150. What is the producer surplus

1.25; elastic

The price of chicken breast rises from $3.00 to $3.60 per pound. In response to the price change, the demand for chicken breast falls by 25%. The absolute value of the price elasticity of demand for chicken breast is _____, and the price elasticity of demand is _____.

0.4

The price of milk at the local grocery store is cut by 25%. In response to this price cut, the quantity of milk demanded increases by 10%. What is the absolute value of the price elasticity of demand for milk?

-1; complements

The price of product A is cut by 50%. As a result, the quantity demanded of product B rises by 50%. The cross-price elasticity of demand between product A and product B is _____, and they are _____.

It describes what is happening, explains why it is happening, or predicts what will happen

What is positive analysis?

large; a smaller share

When the price elasticity of demand is _____ relative to the price elasticity of supply, then buyers bear _____ of the economic burden of a tax

both trading partners end up better off

When trade is based on comparative advantage

c. The person with the lowest opportunity cost at a task should perform it.

Which of the following is a TRUE statement about work assignments based on comparative advantage? a. The person who is fastest at a task should be assigned to perform it. b. Absolute advantage in the task should be the basis for making task assignments. c. The person with the lowest opportunity cost at a task should perform it.

at a lower opportunity cost than anyone else

You have a comparative advantage if you can complete a task

58

[Start of Chapter 6](Figure: Market) In the market shown, the original equilibrium price is 60 cents. A tax is then implemented on the buyer. After the implementation of the tax, the seller receives _____ cents per unit of the product.

The minimum wage should be higher so that workers earn a living wage

[Start of Chapter 7]Which of the following claims reflects normative analysis