Microeconomics Unit 2 Review
You're a producer in this market, and you'd be willing to sell a Greebe for $0.15. How much producer surplus would you get from selling this Greebe?
$0.15
If a business is willing to produce 50 of a good at a price of $20 and is willing to produce 100 at a price of $30, then the elasticity of supply over this range (measured with a price of $20 as the starting point) is:
2
To say that two goods are unrelated, their cross price elasticities of demand should be:
equal to zero
For which of the following is the cross-price elasticity of demand most likely a large positive number?
french fries and onion rings
If a quota is set above the equilibrium quantity, there will be:
No effect from the quota
The market system corrects a shortage by
raising product price to increase production
The price elasticity of supply measures:
responsiveness of quantity supplied to a change in price
The price of bookcases increases by 8% and the quantity supplied of bookcases increases by 4%. The price elasticity of supply for bookcases is:
0.5
You are told that the income elasticity for pinwheels is -3.0. This means that:
A 10 percent increase in income produces a 30 percent decrease in the consumption of pinwheels as they are an inferior good.
What is a price ceiling?
A legal maximum on the price at which a good can be sold
What is a price floor?
A legal minimum on the price at which a good can be sold
What is a quota?
A limit on the number of goods that can be imported
Suppose the cross-price elasticity between demand for Burger King burgers and the price of McDonald's burgers is 0.8. If McDonald's increases the price of its burgers by 10%, then:
Burger King will sell 8% more burgers
Nico's DVD rentals increase by 10% when his income increases by 20%. Based on this information, we know that:
His DVDs are normal goods
Suppose the U.S. government imposes a quota on the number of Japanese-made cars allowed into the United States (the quota is set at a quantity below equilibrium). Then we would expect the price of Japanese cars to ________ and the price of U.S.-made cars to ________.
Increase, Increase
The market for salmon is in equilibrium. A price ceiling, a price floor, and a quota limit in this market would all have what outcome in common?
Inefficiencies created by a quantity exchanged that is less than the equilibrium quantity.
When elasticity is less than 1, it is:
Inelastic
To say that two goods are complements, their cross-price elasticities of demand should be:
Less than zero
Which of the following is likely to make supply more inelastic?
The inputs necessary for production cannot readily be increased.This answer is correct.
If growing corn becomes more profitable than growing wheat, which of the following will occur?
The price of corn will decrease
An increase in the price of gasoline will cause the demand curve for tires to shift in which direction?
To the left, because gasoline and tires are complements
If your purchases of shoes remain constant at 9 pairs per year when the price of shirts increases from $8 to $12, then, for you, shoes and shirts are considered:
Unrelated goods
An increase in the supply of wheat in the United States is most likely to result from
a change in farming technology that improves the soil for wheat
An increase in demand and and supply will
affect price indeterminately and increase equilibrium quantity
The law of demand states that
as price increases, quantity demanded decreases
If price elasticity is equal to 1:
demand is unit elastic
If the quantity supplied responds substantially to a relatively small change in price, supply would be:
price-elastic
If the price elasticity of supply is greater than 1, then:
supply is price-elastic
Consumer surplus
the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it
What is deadweight loss?
the fall in total surplus that results from a market distortion, such as a tax
If the income elasticity of demand for a good is negative
the good is inferior
if the income elasticity of demand is positive
the good is normal
A perfectly inelastic supply curve is:
vertical line indicating that even a very large increase in price won't increase the quantity supplied.
