microeconomics exam 2

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_____ A) vertical, perfectly elastic B) vertical, perfectly inelastic C) horizontal, perfectly elastic D) horizontal, perfectly inelastic

vertical: perfectly elastic

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? a. $200 b. $120 c. $70 d. $50

$70

binding price floor

the lowest price that sellers can charge is set ALWAYS AT the equilibrium

A price ceiling is: A) any price above the equilibrium price. B) the maximum price that a seller can charge in a market. C) the minimum price that a seller can charge in a market. D) the average price that a seller can charge in a market.

the maximum price sellers are allowed to charge for a good or service

People gain consumer surplus when they purchase an item: A) at a price below the value of the benefit they receive from the item. B) with a marginal benefit below the price of the item. C) at a price above marginal revenue but lower than the cost of production. D) at an equitable price.

at a price below the value of the benefit they receive from the item.

A binding price floor in a market is removed. Which of the following is likely to occur as a result? a. The supply of the item will rise. b. The market price will fall. c. The market price will rise. d. The demand for the item will fall.

b. The market price will fall.

tax incidence depends on the..

elasticity of demand + elasticity supplied

question 14 chapter 7

...

two types of normal goods

luxery + necessity

Chin purchases five protein bars at a price of $3 each. The marginal benefit he receives from each bar is $5 for the first bar, $4.50 for the second bar, $4 for the third bar, $3.50 for the fourth bar, and $3 for the fifth bar. The marginal cost of producing the bars is $2 each. What is Chin's consumer surplus on the fifth bar? A) $5 B) $0 C) $2.50 D) $.50EW

$0

comparative advantage

to produce at a lower opportunity cost than someone else

A tax on sellers causes which of the following? (i) a leftward shift of the supply curve (ii) a decrease in quantity sold (iii) an increase in the price buyers pay

(i), (ii), and (iii)

Ang can mow the lawn in two hours. Bill takes three hours to mow the same lawn. What can you conclude from this information? a. Ang has an absolute advantage over Bill in mowing the lawn. b. Bill has an absolute advantage over Ang in mowing the lawn.

ang has an absolute advantage over bill in mowing the lawn

You have a comparative advantage if you can complete a task: a. using more inputs than anyone else. b. using fewer inputs than anyone else. c. at a lower opportunity cost than anyone else. d. at a higher opportunity cost than anyone else.

at a lower opportunity cost than anyone else

Efficient outcomes: a. will make everyone better off. b. are equitable outcomes. c. may not make everyone happy. d. minimize wasteful economic surplus.

b. are equitable outcomes.

When trade is based on comparative advantage a. output may fall. b. specialization will diminish. c. both trading partners end up better off. d. one trading partner gains at the expense of the other.

c. both trading partners end up better off.

Specialization will increase output when it is based on: a. who can produce at the least comparative cost. b. absolute advantage. c. who can produce the fastest. d. comparative advantage.

comparative advantage

When your employees receive work assignments based on who has the lowest opportunity cost in performing each task, the basis for the work assignments is a. work-based efficiency. b. absolute advantage. c. comparative advantage. d. absolute cost.

comparative advantage

the person who has an absolute advantage in a task a. can perform the task at a lower opportunity cost than anyone else. b. is the person who should do the task. c. can perform the task at a higher opportunity cost than anyone else. d. is the one who is best at the task.

is the one who is best as the task

Comparative advantage explains why people a. try to gain a wide range of skills. b. work at the job they love the most. c. specialize and trade. d. lack focus in their production decisions.

specialize and trade?? maybe

whats if eD < 1?

demand is inelastic if less than one

when eD = 0.5

if price goes up by 1% quantity demanded goes down 0.5%

negative=

inferior goods, (goods we buy less of as income rises)

suppose the percentage change in newspapers demanded for any price change is infinite. The absolute value of the elasticity of demand for newspapers is _________ and demand is ____________

infinity: perfectly elastic

Suppose the percentage change in newspapers demanded for any price change is infinite. The absolute value of the elasticity of demand for newspapers is _____, and demand is _____. A) infinity; perfectly elastic B) 0; perfectly elastic C) 0; perfectly inelastic D) infinity; perfectly inelastic

infinity; perfectly elastic

a quota

is a limit on the max quantity that can be sold.. as a result a quota raises prices

Analysis that describes what would happen if various actions were taken is _____ analysis. A) partitioning B) valuation C) normative D) positive

positive

The producer surplus on a unit sold equals: A) (price minus marginal cost) multiplied by (1/2 quantity sold). B) price minus marginal cost. C) marginal benefit minus price. D) 1/2 (price times quantity minus marginal cost).

price minus marginal cost

reasons for setting a price floor

to raise the price, reduce quantity sold

Chin purchases five protein bars at a price of $3 each. The marginal benefit he receives from each bar is $5 for the first bar, $4.50 for the second bar, $4 for the third bar, $3.50 for the fourth bar, and $3 for the fifth bar. The marginal cost of producing the bars is $2.50 each. What is Chin's total consumer surplus from the five bars that he purchased? A) $5 B) $0 C) $2.50 D) $.50

$5

Portia produces and sells headbands. Her marginal cost for one headband is $6, and her average cost is $4. She gains producer surplus only when she sells headbands at a price above: A) $4. B) $10. C) $5. D) $6.

$6

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) a. $40 b. $50 c. $90 d. $120

$90

A tax on buyers causes which of the following? (i) a leftward shift of the demand curve (ii) a decrease in quantity sold (iii) an increase in the price buyers pay

(i), (ii), and (iii)

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 ______. A) -0.75 complements B) -1.25 complements C) -1 complements D) 1.25 complements

-1 complements

The price of product A is cut by 30%. As a result, the quantity demanded of product B rises by 40%. The cross-price elasticity of demand between product A and product B is _____, and they are _____. A) -0.75; substitutes B) -1.25; complements C) 1.25; complements D) -1.33; complements

-1.33, compliments

The price of milk at the local grocery store rises by 25%, and the quantity of milk demanded falls by 10%. The absolute value of the price elasticity of demand for milk is _____, and demand is _____. A) 0.4; inelastic B) 2.5; inelastic C) 0.4; elastic D) 2.5; elastic

0.4, inelastic

If income rises by 20% and the quantity demanded of an item rises by 10%, the income elasticity of demand for this item is: A) -0.5. B) -2. C) 2. D) 0.5.

0.5

The price of milk at the local grocery store is cut by 15%, and the quantity of milk demanded increases by 10% in response. What is the absolute value of the price elasticity of demand for milk? A) -0.67 B) -1.5 C) 1.5 D) 0.67

0.67

the price of chicken breast rises from $3.50 per pound to $4.25 per pound. In response to this price change the quantity demanded for chicken breast falls by 30%. what is the price elasticity of demand for chicken breast? A) 0.83 B) -0.83 C) 1.4 D) -1.4

1.4

if income rises by 10% and the quantity demanded of an item rises by 20% the income of elasticity of demand for this item is.. A) 2 B) -2 C) 0.5 D) -0.5

2

The price of product C rises by 10%. As a result, the quantity demanded of product D rises by 20%. The cross-price elasticity of demand between product C and product D is _____, and they are _____. A) -2 substitutes B) 0.5 substitutes C) 2 substitutes D) 1.5 complements

2 substitutes

Lyft cuts the price of a ride in New York City by 10%. Thereafter, the quantity of rides demanded rises by 25%. What is the absolute value of the price elasticity of demand for Lyft rides? A) 0.4 B) -0.4 C) 2.5 D) -2.5

2.5

the price of a dozen eggs rises from $3 to $4.70. In response to this price change quantity supplied increased from 100,000 dozen eggs to 127,000 dozen eggs. what is the approximate price elasticity of supply for eggs? A) 1.86 B) 3.52 C) 0.48 D) 2.5

2.5 (CHECK)

The price of a dozen eggs falls from $3 to $2.70. In response to this price change, the quantity supplied of eggs falls from 100,000 dozen eggs to 75,000 dozen eggs. What is the price elasticity of supply for eggs? A) 0.37 B) 0.5 C) 2.7 D) 2

2.7

The price of product C rises by 10%. As a result, the quantity demanded of product D rises by 20%. The cross-price elasticity of demand between product C and product D is _____, and they are _____. A) 1.5; complements B) -2; substitutes C) 0.5; substitutes D) 2; substitutes

2: substitutes

A subsidy is a: A) a tax designed to encourage particular purchases or productive activities. B) government regulation of the quantity sold in a market. C) form of tax. D) a government payment designed to encourage particular purchases or productive activities.

A government payment designed to encourage particular purchases or productive activities

You have an absolute advantage in producing a product if you: A) can produce the product using the fewest inputs. B) have training in producing it. C) can produce the product at the lowest opportunity cost. D) have the most capital to work with.

A) can produce the product using the fewest inputs.

The main role of markets is: A) reallocating resources to better uses. B) providing jobs and products. C) facilitating consumption. D) preventing waste in choices.

A) reallocating resources to better uses.

A binding price floor is: A) the maximum price that a seller can charge in a market. B) always below the equilibrium price. C) always at the equilibrium price. D) always above the equilibrium price.

Always above the equilibrium price

four factors that determine whether a good has elastic/inelastic demand (Price elasticity of demand, eD)

Avaliability, necessities, consumer research and time

You have a comparative advantage if you can complete a task: A) at a higher opportunity cost than anyone else. B) at a lower opportunity cost than anyone else. C) using more inputs than anyone else. D) using fewer inputs than anyone else.

B) at a lower opportunity cost than anyone else.

To get maximum output, you should allocate each task to the person who: A) has an absolute advantage in completing the task. B) can do the task with the lowest opportunity cost. C) can do the task with the smallest amount of input. D) has a cost advantage in completing the task.

B) can do the task with the lowest opportunity cost.

If Mary can bake a cake at a lower opportunity cost than Sarah can, then: A) Mary should not bake cakes. B) Mary can bake more cakes than Sarah can in a given amount of time. C) Mary has a comparative advantage in baking cakes. D) Sarah has a comparative advantage in baking cakes.

C) Mary has a comparative advantage in baking cakes.

Which of the four options best represents specialization and its relationship with trade? A) absolute advantage B) economic crises C) comparative advantage D) all the above

C) comparative advantage

If Bishan wants to capitalize on comparative advantage in his life, then he should: A) compare his preferences to those of others and trade with those who like things he does not like. B) produce either goods or services but not both. C) do more of what he is relatively good at and then trade for other things. D) do more of what he has an absolute advantage in and trade for other things.

C) do more of what he is relatively good at and then trade for other things.

Specialization will increase output when it is based on: A) absolute advantage. B) who can produce the fastest. C) who can produce at the least comparative cost. D) comparative advantage.

D) comparative advantage.

market outcomes that are determined by the forces of demand and supply are..

Efficient creating largest possible economic surplus

binding price ceiling

highest price sellers can charge ALWAYS BELOW equilibrium

Which term best describes the situation that, relative to England, France can produce beef at a lower cost of production (i.e., can produce beef using fewer inputs)? A) appreciating currency B) comparative advantage C) budget constraint D) black market E) compound interest F) absolute advantage

F) absolute advantage

Avaliability of inputs, inventories, and time are...

Factors that determine whether a good has an Elastic/inelastic supply

If France is said to have an absolute advantage over Canada in the production of natural gas, this means that, given the same resources, A: Canada must have a comparative advantage over France in the production of natural gas. B: France has an absolute advantage in all goods that are complements to natural gas. C: France must have an absolute advantage over Canada in producing all goods. D: Canada must have an absolute advantage in producing some good other than natural gas. E:France can produce more natural gas than Canada

France can produce more natural gas than Canada

Which of the following is a positive economic statement? A) A 10% inflation rate is too high and should be reduced. B) If the government raises taxes, people will have less income available for purchases and saving. C) That company with a 50% profit rate made too much profit at the expense of consumers. D) The government ought to balance its budget and eliminate the deficit.

If the government raises taxes, people will have less income available for purchases and saving.

markets achieve the efficient allocations by allocating goods to those who can produce at the....

LOWEST COST

income of elasticity of demand

Measures how responsive the demand for a good is to income changes

positive=

Normal good (goods we buy more of as income rises)

A binding price floor in a market is removed. Which of the following is likely to occur as a result? A) The supply of the item will rise. B) The market price will fall. C) The demand for the item will fall. D) The market price will rise.

The market price will fall.

A quantity regulation is a: A) minimum or maximum quantity that can be sold. B) limit on the number of consumers allowed in a market. C) limit on how many firms can operate in a market. D) minimum or maximum price that can be charged.

a minimum or maximum quantity that can be sold

(Figure: Market for Sustainable Furniture) The graph depicts the market for furniture made from sustainable, man-made forests. The government wants to encourage buyers to buy such furniture and imposes a price ceiling of $250. What occurs as a result of the price ceiling? A) a surplus of 300,000 pieces of furniture. B) a surplus of 400,000 pieces of furniture. C) a shortage of 200,000 pieces of furniture. D) a shortage of 400,000 pieces of furniture.

a shortage of 400,000 pieces of furniture.

Which of the following claims reflects normative analysis? a. The minimum wage should be higher so that workers earn a living wage. b. Higher prices mean that the purchasing power of income falls. c. If the minimum wage were higher, companies that employ minimum wage workers would have higher costs. d. Fewer people will buy cars if their price rises.

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

People gain consumer surplus when they purchase an item: a. at a price below the value of the benefit they receive from the item. b. at an equitable price. c. at a price above marginal revenue but lower than the cost of production. d. with a marginal benefit below the price of the item.

a. at a price below the value of the benefit they receive from the item.

absolute advantage

ability to produce something using fewer inputs

In a market graph, consumer surplus is the area: A) above the price. B) above the price and below the demand curve. C) between the demand curve and the supply curve. D) below the demand curve.

above price and below demand curve

When looking at a demand and supply graph, if a tax is implemented on a seller, the vertical distance between the old and new supply curves at the new equilibrium quantity will be equivalent to the a. economic burden of the tax on the seller. b. economic burden of the tax on the buyer. c. amount of the tax. d. price of the item.

amount of tax

The graph shows the market for teddy bears. When the market produces and sells nine teddy bears, the deadweight loss is represented by the: A) rectangle between prices $6.50 and $2 and quantities of zero to 5. B) rectangle between prices of $6.50 and $2 and quantities of 5 and 9. C) area between the demand and supply curves between quantities of 5 and 9. D) area between the demand and supply curves to the left of a quantity of 5.

area between the demand and supply curves between quantities of 5 and 9.

The concept of equity focuses on: a. efficiency. b. fairness. c. the level of economic surplus. d. profit.

b. fairness. (maybe)

When the economic surplus in a market is less than it would be if the market were efficient, the market is experiencing: A) asymmetry problems. B) deadweight loss. C) an inverse externality. D) a situation in which marginal benefit equals marginal cost.

deadweight loss

The economic burden of a tax is the: A) laws governing sales taxes in a country. B) percentage increase in the tax on an item. C) government-designated burden of a tax payment. D) burden created by the change in after-tax prices faced by buyers and sellers.

burden created by the change in after-tax prices faced by buyers and sellers

When the price elasticity of demand is _____ relative to the price elasticity of supply, then buyers bear _____ of the economic burden of a tax. a. small; all b. small; none c. large; a smaller share d. large; a bigger share

c. large; a smaller share

Which principle helps buyers and sellers make decisions about whether to trade? A) the equity principle B) the law of diminishing returns C) the cost-benefit principle D) the law of surplus

cost benefit principle

What is positive analysis? a. It prescribes what should happen, which involves value judgments. b. It puts the options that are available in order of the priorities held by the decision maker. c. It is based on beliefs about what is most important. d. It describes what is happening, explains why it is happening, or predicts what will happen.

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

if you are a seller making decisions according to the rational rule, you will: a. earn some producer surplus on every unit sold. b. earn producer surplus on all except the last unit sold. c. ensure that all consumers earn consumer surplus. d. ensure that consumers lose maximum surplus in order to lower producer surplus.

d. ensure that consumers lose maximum surplus in order to lower producer surplus.

In 2016, Amazon began charging a 5.75% sales tax on products it sells in the District of Columbia. Holding all else constant, the effect of this tax would be to _____ in the District of Columbia. A) decrease the number of consumers B) decrease Amazon sales C) decrease prices for local businesses D) increase Amazon sales

decrease amazon sales

A subsidy for buyers of a product shifts the: A) supply curve to the left. B) demand curve to the right. C) demand curve to the left. D) supply curve to the right.

demand curve to the right

The cross-price elasticity of demand measures how responsive the: A) price of a good is to a change in the price of another good. B) demand for one good is to a change in the price of another good. C) demand for one good is to a change in the demand for another good. D) supply of one good is to a change in the price of another good.

demand for one good is to a change in the price of another good.

Buyers bear a smaller incidence of the tax when: A) demand is perfectly inelastic. B) supply is more elastic than demand. C) the tax is higher. D) demand is more elastic than supply.

demand is more elastic than supply

The marginal benefit minus the marginal cost equals: A) the consumer surplus minus the producer surplus. B) the consumer surplus. C) the efficiency balance. D) the economic surplus.

economic surplus

When the absolute value of the price elasticity of demand is greater than 1, demand is: A) perfectly inelastic. B) inelastic. C) perfectly elastic. D) elastic.

elastic

The statutory burden of a tax is the: A) government-designated burden of a tax payment. B) percentage increase in the tax on an item. C) burden created by the change in after-tax prices faced by buyers and sellers. D) laws governing sales taxes in a country.

government-designated burden of a tax payment.

Mary loves avocados and must consume avocados every week, regardless of the price. Which of the following must be true? A) Mary has an elastic demand for avocados. B) Mary has an inelastic demand for avocados. C) Avocados are in large supply in the market. D) All consumers in the market have a high demand for avocados.

mary has an inelastic demand for avocados

elasticity of demand

measures how responsive buyers are to price changes, lower price of a good, higher quantity demanded

price of elasticity of supply

measures how responsive sellers are to price changes

cross price elasticity of demand

measures how responsive the demand of one good is to the price change of another good (negative for compliments) (positive for substitutes)

Suppose the price of gasoline rises. As time passes, people adjust to the higher price by searching for the alternatives. The demand for gasoline becomes: A) higher. B) more inelastic. C) more elastic. D) steeper.

more elastic

Statements about what option should be chosen are _____ statements. A) valuation B) positive C) normative D) assessment

normative

When the absolute value of the price elasticity of demand is infinite, demand is: A) perfectly inelastic. B) inelastic. C) perfectly elastic. D) elastic.

perfectly elastic

The price elasticity of demand for a good with a vertical demand curve is: A) perfectly inelastic. B) inelastic. C) perfectly elastic. D) elastic.

perfectly inelastic

income elasticity of demand measures...

quantity demanded of a good is to changes in income

In 2017, eBay started charging a 20% value-added tax on fees charged to small businesses in the United Kingdom. Holding all else constant, this would _____ in the United Kingdom. A) shift the demand for eBay products to the right B) shift the supply curve of eBay products to the right C) raise the prices that eBay sellers charge their customers D) lead to increased sales for eBay sellers

raise the prices that eBay sellers charge their customers

Taking the absolute value of the income elasticity of demand is incorrect because it would: A) remove the ability to tell whether the product is an inferior good or a normal good. B) cause the value of the cross-price elasticity of demand to become smaller. C) remove the ability to tell whether the two products have inelastic demand or elastic demand. D) cause the value of the cross-price elasticity of demand to become zero.

remove the ability to tell whether the product is an inferior good or a normal good.

taking the absolute value of the cross-price elasticity of demand is incorrect because it would.. A) remove the ability to tell whether the two products have inelastic demand of elastic demand B) cause the value of the cross-price elasticity of demand to become smaller C) remove the ability to tell whether the two products are substitutes or compliments D) cause the value of the cross-price elasticity of demand to become zero

remove the ability to tell whether the two products are substitutes or compliments

You are given data on four products — toothpaste, shampoo, soap, and laundry detergent. The absolute value of the price elasticity of demand for toothpaste is 4. The absolute value of the price elasticity of demand for shampoo is 0.2. The absolute value of the price elasticity of demand for soap is 0.5. The absolute value of the price elasticity of demand for laundry detergent is 2. Which product has the most inelastic demand? A) shampoo B) laundry detergent C) soap D) toothpaste

shampoo

A tax on sellers shifts the: A) demand curve to the left. B) supply curve to the right. C) supply curve to the left. D) demand curve to the right.

shifts supply curve to the left

Which of the following statements is based on normative analysis? A) We should protect the environment. B) The temperature in the office room is 22 degrees centigrade. C) When the burner beneath a pot of water on the stove is turned on, the water will heat up. D) Mario is 24 years old.

we should protect the environment