Microeconomics 2
A bakery would be willing to supply 500 bagels per day at a price of $0.50 each. At a price of $0.80, the bakery would be willing to supply 1,100 bagels. Using the midpoint method, the price elasticity of supply for bagels is about a. 1.63. b. 0.62. c. 0.77. d. 1.24.
a
A binding price floor (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price. a. (i) and (iii) only b. (ii) and (iv) only c. (i) only d. (iii) only
a
A decrease in the size of a tax is most likely to increase tax revenue in a market with a. elastic demand and elastic supply. b. elastic demand and inelastic supply. c. inelastic demand and inelastic supply. d. inelastic demand and elastic supply.
a
All else equal, what happens to consumer surplus if the price of a good decreases? a. Consumer surplus increases. b. Consumer surplus is unchanged. c. Consumer surplus decreases. d. Consumer surplus may increase, decrease, or remain unchanged.
a
As price elasticity of supply increases, the supply curve a. becomes flatter. b. becomes steeper. c. shifts to the right. d. becomes downward sloping.
a
If the price elasticity of supply for a window manufacturer is 1.5, a. a 10% increase in the price of windows results in a 15% increase in the quantity of windows supplied. b. supply is considered to be inelastic. c. the manufacturer is likely operating very near capacity. d. All of the above are correct.
a
If the tax on a good is doubled, the deadweight loss of the tax a. quadruples. b. triples. c. increases by 50 percent. d. doubles.
a
Jeff decides that he would pay as much as $3,000 for a new laptop computer. He buys the computer and realizes consumer surplus of $700. How much did Jeff pay for his computer? a. $2,300 b. $3,700 c. $3,000 d. $700
a
Refer to Figure 6-27. Suppose a tax of $3 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed? a. between $16 and $20 b. $22 c. $16 d. between $20 and $22
a
Refer to Figure 7-4. Which area represents the increase in consumer surplus when the price falls from P1 to P2? a. ABDG b. AFG c. BDF d. ABC
a
Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then the deadweight loss of the tax is a. $6. b. $8. c. $9. d. $12.
a
Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The amount of tax revenue collected by the government is a. $50. b. $30. c. $120. d. $80.
a
Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about a. 1.2, and X and Y are substitutes. b. 0.1, and X and Y are substitutes. c. -0.1, and X and Y are complements. d. -1.2, and X and Y are complements.
a
A tax on the sellers of coffee will increase the price of coffee paid by buyers, a. increase the effective price of coffee received by sellers, and increase the equilibrium quantity of coffee. b. decrease the effective price of coffee received by sellers, and decrease the equilibrium quantity of coffee. c. decrease the effective price of coffee received by sellers, and increase the equilibrium quantity of coffee. d. increase the effective price of coffee received by sellers, and decrease the equilibrium quantity of coffee.
b
According to Arthur Laffer, the graph that represents the amount of tax revenue (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like a. an upward-sloping line or curve. b. an upside-down U. c. a horizontal straight line. d. a U.
b
Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the a. larger is the price elasticity of demand. b. smaller is the price elasticity of supply. c. larger is the amount of the tax. d. All of the above are correct.
b
George produces cupcakes. His production cost is $10 per dozen. He sells the cupcakes for $16 per dozen. His producer surplus per dozen cupcakes is a. $10. b. $6. c. $16. d. $26.
b
Last month, sellers of good Y took in $100 in total revenue on sales of 50 units of good Y. This month sellers of good Y raised their price and took in $120 in total revenue on sales of 40 units of good Y. At the same time, the price of good X stayed the same, but sales of good X increased from 20 units to 40 units. We can conclude that goods X and Y are a. substitutes, and have a cross-price elasticity of 0.60. b. substitutes, and have a cross-price elasticity of 1.67. c. complements, and have a cross-price elasticity of -0.60. d. complements, and have a cross-price elasticity of -1.67.
b
Last year, Jim bought 8 tickets to sporting events when his income was $30,000. This year, his income is $33,000, and he purchased 10 tickets to sporting events. Holding other factors constant and using the midpoint method, it follows that Jim's income elasticity of demand is about a. 0.43, and Jim regards tickets to sporting events as inferior goods. b. 2.33, and Jim regards tickets to sporting events as normal goods. c. 2.33, and Jim regards tickets to sporting events as inferior goods. d. 0.43, and Jim regards tickets to sporting events as normal goods.
b
Refer to Figure 6-10. A price ceiling set at a. $6 will be binding and will result in a shortage of 6 units. b. $6 will be binding and will result in a shortage of 10 units. c. $16 will be binding and will result in a shortage of 4 units. d. $16 will be binding and will result in a shortage of 10 units.
b
Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. How much will buyers pay per unit after the tax is imposed? a. $5 b. between $10 and $14 c. between $5 and $10 d. $14
b
Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The per-unit burden of the tax on buyers is a. $4. b. $2. c. $1. d. $3.
b
Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The consumer surplus after this tax is a. $40. b. $10. c. $30. d. $80.
b
Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The producer surplus after this tax is a. $30. b. $15. c. $45. d. $60.
b
Refer to Figure 8-14. Which of the following statements is correct? a. Supply 1 is more elastic than supply 2. b. Demand 2 is more elastic than demand 1. c. Demand 1 is more elastic than supply 1. d. All of the above are correct.
b
Refer to Figure 8-23. If the economy is at point B on the curve, then an increase in the tax rate will a. decrease the deadweight loss of the tax and decrease tax revenue. b. increase the deadweight loss of the tax and decrease tax revenue. c. decrease the deadweight loss of the tax and increase tax revenue. d. increase the deadweight loss of the tax and increase tax revenue.
b
A binding price ceiling (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price. a. (iv) only b. (ii) only c. (ii) and (iv) only d. (i) and (iii) only
c
A deadweight loss is a consequence of a tax on a good because the tax a. induces the government to increase its expenditures. b. imposes a loss on buyers that is greater than the loss to sellers. c. induces buyers to consume less, and sellers to produce less. d. increases the equilibrium price in the market.
c
Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is a. inelastic, since the price elasticity of supply is equal to 1.1. b. elastic, since the price elasticity of supply is equal to 0.91. c. elastic, since the price elasticity of supply is equal to 1.1. d. inelastic, since the price elasticity of supply is equal to .91.
c
Refer to Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. What will be the new equilibrium quantity in this market? a. less than 50 units b. greater than 100 units c. between 50 units and 100 units d. 50 units
c
Refer to Figure 7-1. If the price of the good is $150, then consumer surplus amounts to a. $300. b. $200. c. $250. d. $150.
c
Refer to Table 7-1. If the price of the product is $110, then who would be willing to purchase the product? a. Calvin, Sam, Andrew, and Lori b. Calvin and Sam c. Calvin, Sam, and Andrew d. Calvin
c
Refer to Table 7-16. Both the demand curve and the supply curve are straight lines. At equilibrium, total surplus is a. $96. b. $44. c. $72. d. $56.
c
A minimum wage that is set below a market's equilibrium wage will a. result in an excess demand for labor, that is, unemployment. b. result in an excess demand for labor, that is, a shortage of workers. c. result in an excess supply of labor, that is, unemployment. d. have no impact on employment.
d
A tax burden falls more heavily on the side of the market that a. has a fewer number of participants. b. is closer to unit elastic. c. is less inelastic. d. is more inelastic.
d
Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $250. His consumer surplus is a. $650. b. $400. c. $250. d. $150.
d
If the demand for donuts is elastic, then a decrease in the price of donuts will a. There is not enough information to answer this question. b. not change total revenue of donut sellers. c. decrease total revenue of donut sellers. d. increase total revenue of donut sellers.
d
Refer to Figure 5-15. Using the midpoint method, what is the price elasticity of supply between points D and G? a. 1.26 b. 0.34 c. 1.89 d. 0.53
d
Refer to Figure 6-1. A binding price ceiling is shown in a. both panel (a) and panel (b). b. neither panel (a) nor panel (b). c. panel (a) only. d. panel (b) only.
d
Refer to Figure 6-10. A price floor set at a. $6 will be binding and will result in a surplus of 10 units. b. $16 will be binding and will result in a surplus of 4 units. c. $6 will be binding and will result in a surplus of 6 units. d. $16 will be binding and will result in a surplus of 10 units.
d
Refer to Figure 6-24. The price paid by buyers after the tax is imposed is a. $16. b. $21. c. $18. d. $24.
d
Refer to Figure 7-19. At the equilibrium price, total surplus is a. $125. b. $450. c. $500. d. $250.
d
Refer to Figure 7-5. If the price of the good is $12, then consumer surplus is a. $9. b. $13. c. $11. d. $16.
d
Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The amount of deadweight loss resulting from this tax is a. $80. b. $120. c. $50. d. $25.
d
Which of the Ten Principles of Economics does welfare economics explain more fully? a. Trade can make everyone better off. b. A country's standard of living depends on its ability to produce goods and services. c. The cost of something is what you give up to get it. d. Markets are usually a good way to organize economic activity.
d
a general measure of the responsiveness of an economic variable in response to a change in another economic variable
elasticity
unchanging status of a customers buying habit even after changes in price
inelastic