Quiz 2 attempt
If price increases by 10 percent and quantity demanded decreases by 12 percent, demand is
-1.2 elastic?
If the price of a good increases by 10 percent, its quantity demanded drops by 50 percent. The price elasticity of demand is:
-5
When the price of paintings is set at $500, the local art gallery supplies 20 paintings per week. When the price of paintings increases to $750, the gallery supplies 25 paintings. Calculate the price elasticity of supply using the mid-point formula. The price elasticity of supply is
.5555
If the price elasticity of demand for used cars priced between $4,000 and $6,000 is -0.75 (using the mid-point method), what will be the percent change in quantity demanded when the price of a used car falls from $6,000 to $4,000?
.56
In considering the decision to adopt a dog, indicate which of the following is an example of a private cost, a private benefit, an external cost, and an external benefit that may result from the decision: The food for the dog is . The dog discouraging intruders and trespassers from the neighborhood is . The enjoyment from a new companion is . Barking disturbing the neighbors' sleep is .
1. private cost 2. external benefit 3. private benefit 4. external cost
If the price of a haircut is $15, the number of haircuts provided is 100. If the price rises to $30 per haircut, barbers will work much longer hours, and the supply of haircuts will increase to 300. The price elasticity of supply for haircuts between $15 and $30 using the mid-point method is
1.5
When the price of paperback books is set at $10, the local bookstore sells 100 books per week. When the price of books increases to $12, the store sells 75 books.
1.57????
Use the market represented in the figure below to draw the consumer surplus when the price is $5.
100
. The socially optimal level of production is: But, the market will end up producing:
100;200
Consider the market shown below. The government has imposed a price ceiling of $18. a. If there is a price ceiling of $18, the quantity demanded is BLANK and the quantity supplied is BLANK b. There is a BLANK of BLANK units.
140;40; shortage; 100
The graph shown portrays a subsidy to buyers. Before the subsidy is put in place, the producers sold _____ units and received _____ for each of them.
150; $40
Assume the market in the graph shown is in equilibrium. Total surplus is:
200
At a specific point on the demand curve for backpacks, the elasticity of demand is calculated to be -2.2. b. If the price of backpacks fell by 10%, the quantity demanded would BLANK and revenue for the backpack industry would BLANK
22%; rise?
ulie says, "I am willing to pay $10.00 for a pizza." The price of a pizza is $8. Julie's consumer surplus is Which of the following is not a true statement about Julie's consumer surplus?
2; Consumer surplus represents the total value that Julie placed on the pizza.
Based on the figure below, producer surplus is $0 when price is less than or equal to
3
At a specific point on the demand curve for backpacks, the elasticity of demand is calculated to be -2.2. c. If the price of backpacks rose by 20% the quantity demanded would fall by BLANK and revenue for the backpack industry would BLANK
44%; fall?
According to the graph shown, producer surplus is:
48
If the price elasticity of demand for used cars priced between $3,000 and $5,000 is -1.4 (using the mid-point method), what will be the percent change in quantity demanded when the price of a used car falls from $5,000 to $3,000?
70%
Assume the market depicted in the graph is in equilibrium. Consumer surplus is:
A B C
Suppose that for health reasons, the government of the nation of Ironia wants to increase the amount of broccoli citizens consume. Which of the following policies could be used to achieve the goal?
A subsidy paid to shoppers who buy broccoli. checked A subsidy paid to farmers who grow broccoli.
If a price floor of $23 were placed on the market in the graph shown, which area represents the surplus that is transferred from consumers to producers?
B
In the diagram below, draw the price effect and the quantity effect for a price change from $10 to $20.
Based on the graph, the price effect is larger. Based on the graph, total revenue increases .
In the diagram below, draw the price effect and the quantity effect for a price change from $60 to $50.
Based on the graph, the price effect is larger. Based on the graph, total revenue increases .
If a price ceiling of $8 were placed on the market in the graph shown, which area represents the surplus that is transferred from producers to consumers?
C
A market has four individuals, each considering buying a grill for his backyard. Assume that grills come in only one size and model. Abe considers himself a grill-master, and finds a grill a necessity, so he is willing to pay $400 for a grill. Butch is a meat-lover, honing his grilling skills, and is willing to pay $350 for a grill. Collin just met the girl of his dreams, and she loves a good grilled steak, so in his effort to impress her he is willing to pay $320 for a grill. Daniel loves grilled shrimp and thinks it might be cheaper in the long run if he buys a grill instead of eating out every time he wants grilled shrimp, so he is willing to pay $200 for a grill. If the market price of grills increases from $300 to $325, given the scenario described:
Collin would drop out of the market
BLANK surplus is the net benefit that a consumer receives from purchasing a good or service
Consumer
When the price is artificially low and some transactions no longer take place:
Consumer surplus may rise or fall and producer surplus alls
Which of the following groups will always lose from a price floor?
Consumers Society as a whole, because total surplus will decrease
Consider a market in which the government imposes a price floor. Assume that neither supply nor demand is perfectly elastic nor perfectly inelastic. Which of the following groups will always lose from a price floor?
Consumers and Society
The graph below shows the market for pizza. Suppose that the price of pizza is set at $2.
DWL
When the price of gasoline was very high in the summer of 2008, several U.S. presidential candidates proposed implementing a national price ceiling to keep fuel affordable. This policy would cause total surplus to:
Decrease
If price increases by 10 percent and quantity demanded decreases by 15 percent, demand is
Elastic
At a specific point on the demand curve for backpacks, the elasticity of demand is calculated to be -2.2. a. At that point, we would describe demand as
Elastic?
An effective milk price BLANK that is above the equilibrium price means BLANK producers will be willing to sell milk, but BLANK buyers will be willing to buy milk.
Floor; more; fewer
Assume the market was in equilibrium in the graph shown. If the market price were set to $12, which of the following is true?
For those still interacting in the market, some surplus is transferred from buyer to seller.
Consider a market in which the government imposes a price floor. Assume that neither supply nor demand is perfectly elastic nor perfectly inelastic. Which of the following groups will always gain from a price floor?
No group will always gain from a price floor
Consider a market in which the government imposes a price floor. Assume that neither supply nor demand is perfectly elastic nor perfectly inelastic. Which of the following groups will always gain from a price floor?
No one
For each of the following pairs, predict whether the cross-price elasticity of demand will be positive or negative: a. Soap and hand sanitizer: . b. CDs and MP3s: . c. Sheets and pillowcases:
PPN
surplus is the net benefit that a producer receives from the sale of a good or service.
Producer
When the price of gasoline was very high in the summer of 2008, several U.S. presidential candidates proposed implementing a national price ceiling to keep fuel affordable. How would this policy have affected producer and consumer surplus?
Producer surplus would fall, and individual consumer surplus may increase or decrease
Many people are concerned about the rising price of gasoline. Suppose that government officials are thinking of capping the price of gasoline below its current price. Which of the following outcomes do you predict will result from this policy?
Quantity demanded for gaslone will increase long lines will develop at gas stations
Many people are concerned about the rising price of gasoline. Suppose that government officials are thinking of capping the price of gasoline below its current price. Which of the following outcomes do you predict will result from this policy?
Quantity demanded for gasoline will increase long lines will develop at gas stations
You are in the market for a new couch and found two advertisements for the kind of couch you want to buy. Seller One notes in her ad that she is selling because she is moving to a smaller apartment and the couch won't fit in the new space. Seller Two says he is selling because the couch doesn't match his other furniture. You will probably get a better deal from:
Seller One because the couch must be removed from her home.
Suppose that the government imposes a $10 tax on sellers of Humbugs. The pre-tax price of Humbugs was $50. If, at the original equilibrium price, the elasticity of demand was -2 and the elasticity of supply was 1.5, which of the following is true? Now suppose that the elasticity of demand was 0, and the elasticity of supply was 1.5. Which of the following is true?`
Sellers will pay relatively more of the tax than buyers. Buyers will pay all of the tax. The price of Humbugs will rise to $60. The quantity of Humbugs demanded will not change.
Assume a market has an equilibrium price of $7. If the market price is set at $3, which of the following is true?
Some surplus is transferred from producers to consumers, but total surplus falls.
If the cross-price elasticity of goods A and B is 0.8, these goods are BLANK . The size of the number indicates that these goods can best be described as BLANK .
Substitutes?, weak substitutes
It is sometimes argued that increases in gasoline prices act as an "income" tax on consumers in the short run. That is, consumers pay more for gasoline but do not change their consumption, and thus they simply have less money to spend on other goods. Which of the following best explains why this occurs? In the long run:
The demand for gasoline is very inelastic in the short run. demand will be more elastic, and consumers will buy less gas.
Is it possible for sellers to benefit more than consumers from a subsidy to buyers?
Yes, if the supply curve is relatively less elastic than the demand curve.
Does a tax on sellers affect the supply curve?
Yes, it shifts up by the amount of the tax.
The city of Seattle limits each household to one can of free garbage collection per week. There are fees for any extra garbage collected from the curb. This type of quota policy is BLANK efficient way of reducing waste than charging a set price per can because:
a less because: the marginal benefit of having a can of garbage collected varies among households.
When demand is elastic:
a price increase causes total revenue to fall.
For each of the following pairs, predict whether the cross-price elasticity of demand will be positive or negative: a). Soap and Hand Sanitizer b). CDs and Mp3s c). Sheets and Pillowcases
a). Positive b). Positive c). Negative
If price elasticity of supply is 1.3 and price increases by 3 percent, quantity supplied will by .
a. Quantity supplied will increase by > 2%. b. Quantity supplied will decrease by < 2%.
Governments may intervene in markets to:
all of these are reasons why governments intervene in market.
Consider the market below. a. Suppose there is a $15 per unit subsidy to sellers. Draw the after-subsidy supply curve.
b. Plot the after-subsidy price paid by consumers and the after-subsidy price paid by sellers.
Suppose a market is initially in equilibrium and supply increases. The consumer surplus will:
be higher since the price is lower and equilibrium moves down along the demand curve.
Suppose there has been a long-standing price ceiling on housing in your city. Recently, population has declined and demand for housing has decreased. The decrease in demand could cause the efficiency of the price ceiling to:
become non-binding so there would be no shortage or deadweight loss.
Thus regulators BLANK increase benefits to one group or the other, but the market BLANK be efficient.
can; will not
A decrease in price:
causes an increase in total revenue due to the price effect.????
A tax on sellers:
causes equilibrium price to increase and equilibrium quantity to decrease.
An effective price , _____ which is below the equilibrium price, means ______ producers will be willing to sell the good but ______ buyers will be willing to buy.
ceiling, fewer, more
Elasticity along a demand curve:
changes when the demand curve is linear.
If price elasticity of demand is -1.3 and price increases by 2 percent, quantity demanded will
decrease by <2?
In general, increasing price above the market equilibrium price will BLANK consumer surplus and BLANK producer surplus. Total surplus will BLANK .
decrease; increase; decrease
If the price elasticity of supply is 5, supply is said to be BLANK . This means that a 1% increase in the price of the product will lead to a BLANK % change in the quantity supplied. Supply is BLANK to price changes. If a 1% change in price leads to no change in the quantity supplied, supply is BLANK
elastic .01 responsive inelastic
An effective price ceiling will cause consumers to:
gain surplus from paying a lower price. checked lose surplus from trades that no longer take place.
If the price of a good is less than a buyer's willingness to pay:
he buyer will purchase the good because the opportunity cost of buying the good is more than the benefit from consuming the good.
A subsidy will increase consumer and producer surplus in a market and will increase the quantity of trades. A subsidy (such as a subsidy for producing corn in the United States) can be considered inefficient because a subsidy results in a quantity:
higher than the market equilibrium quantity where the cost of supplying that unit exceeds the willingness to pay.
You have been hired by the government of Kenya, which produces a lot of coffee, to examine the supply of gourmet coffee beans. Suppose you discover that the price elasticity of supply is 0.85. When you share your information with the Kenyan government, you explain that a price elasticity of supply is 0.85 means that:
if the price rises by 1%, the quantity supplied will increase by 0.85%.
Consider the market for plane tickets to Hawaii. A bad winter in the mainland United States increases demand for tropical vacations, shifting the demand curve to the right. The supply curve stays constant. Total surplus will:
increase because both consumer and producer surplus increase.
Suppose Colombia maintains a price floor for coffee beans. If the price floor encourages new growers to enter the market and produce coffee, the size of the deadweight loss would:
increase because the supply curve would shift right, and the equilibrium price would fall even lower than the original equilibrium price.
Reducing price below market equilibrium will consumer surplus and producer surplus. Total surplus will
increase; decrease; decrease
Refer to the demand schedule below: Price ($) Quantity demanded 80 0 70 50 60 100 50 150 40 200 30 250 20 300 10 350 0 400 Price decreases from $30 to $20. Demand is BLANK and total revenue BLANK
inelastic? decreases
If a good has an income elasticity of 1.83, then it:
is a luxury
You are an advisor to the Egyptian government, which has placed a price ceiling on bread. Unfortunately, many families still cannot buy the bread they need. The price ceiling has not increased consumption of bread because:
it reduces the quantity supplied.
When supply and demand are relatively elastic, and a tax is added to the price of the good, the change in quantity is much:
larger than when supply and demand are relatively inelastic.
An automobile manufacturing plant is likely to have a ______________ price elasticity of supply than a bread bakery due to _________________.
less elastic; a less flexible production process
The price elasticity ofdemand for insulin is:
likely to be perfectly inelastic over some range of prices.
For _____ goods, income elasticity is positive
luxury necessity normal
d. When one more unit of a good is produced, producers pay for inputs such as wages, raw materials, and energy. These are measured by the:
marginal private cost
When one more unit of a good is consumed, society is made better off. This is measured by the
marginal social benefit
When one more unit of a good is produced, producers pay input costs, and pollution costs are borne by others. The sum of these additional burdens on society are measured by the:
marginal social cost
In economics, the concept of surplus:
measures the benefit that people receive when they buy something for less than they would have been willing to pay. measures the benefit that people receive when they sell something for more than they would have been willing to accept. is the best way to look at the benefits people receive from successful transactions.
Dead-weight loss is the total surplus at the market equilibrium before the intervention BLANK the total surplus after a market intervention.
minus
Coke and Pepsi probably have a:
more elastic cross-price elasticity of demand than do Coke and bananas.????
Price elasticity is a measure of how
much a market responds to a change in market conditions.
When social costs exceed private costs, there is a:
negative externality.
Total surplus can be increased if:
new markets are created.
Many states tax cigarette purchases. Suppose that smokers are unhappy about paying the extra charge for their cigarettes. If the state imposes the tax on the stores that sell the cigarettes rather than on smokers, it will:
not make any difference to smokers because the tax incidence or burden of the tax is a function of the relative elasticities of supply and demand.
At Zooey's elementary school, children are not allowed to trade lunches or components of their lunches with other students. Lunchroom monitors watch closely and strictly enforce this policy. If Zooey prepares an argument about the inefficiency of this policy to her principal, she can say that the school policy is:
preventing a market that would generate mutually beneficial trades
In the diagram below, draw the price effect and the quantity effect for a price change from $10 to $20. Based on the graph, the BLANK is larger. Based on the graph, total revenue BLANK .
price and increases
When two goods are complements, we expect their BLANK to be BLANK .
price-cross elasticity to be negative
When we add BLANK benefits together, the result is called social benefit.
private and external
Social costs are equal to:
private costs plus external costs.
According to the graph shown, if the market goes from equilibrium to having its price set at $10 then which of the follwing is incorrect?
producer surplus increases by $12.
Assume there are three hardware stores, each willing to sell one standard model hammer in a given time period. House Depot can offer their hammer for a minimum of $7. Lace Hardware can offer the hammer for a minimum of $10. Bob's Hardware store can offer the hammer at a minimum price of $13. Given the scenario described, if the market price of hammers increased from $9 to $13:
producer surplus would remain unchanged for Bob's Hardware.
Supply is more elastic over long periods than over short periods because:
producers can make more adjustments in the long run than in the short run.
Mathematically, price elasticity of demand is the percentage change in the:
quantity demanded of a good divided by the percentage change in the price.
In the diagram below, draw the price effect and the quantity effect for a price change from $60 to $70. Based on the graph, the BLANK is larger. Based on the graph, total revenue BLANK .
quantity effect, decreases
You are working as a private math tutor to raise money during spring break. Assuming you want to earn as much money as possible, you should:
raise your price if you think demand is inelastic.
The government imposing a minimum wage is an example of an attempt to:
redistribute surplus in a market.
The factors that determine the price elasticity of demand include:
relative need and relative cost. availability of substitutes. time needed to adjust to price changes.
Government attempts to lower, raise, or simply stabilize prices can:
shift the distribution of surplus. create unintended side effects. reduce efficiency of a market.
A negative externality is when BLANK leading to production of BLANK output.
social costs exceeds private costs; too much
In France, cheese is an important and traditional part of people's meals. The French eat about six times more cheese per person as is consumed in the United States. The demand for cheese can be expected to be more income-elastic in:
the United States because the French will eat cheese regardless of income changes.
Bob got laid off six months ago. He used to go to the movies once a month, but he's only been twice because he lost his job. This type of behavior can be measured using:
the income elasticity of demand.
If people took external costs like pollution into consideration:
the markets for these goods creating such externalities would generate greater surplus. they would act in a way that is optimal from a societal perspective. All of these statements are true. they would consume less of the goods causing these externalities.
The more time people have to adjust to a price change:
the more elastic their demand will be.
b. Becky spends her money on only two things: hiking boots and paintbrushes. For her, the income effect dominates. When the price of paintbrushes rises, Becky will naturally buy fewer paintbrushes. And she will buy BLANK hiking boots.
the same number of
You have noticed that the price of tickets to your university's basketball games keeps increasing but the supply of tickets remains the same. Supply might be unresponsive to changes in price because:
there a fixed number of stadium seats.
Rent control creates deadweight loss for both consumers and suppliers of housing. Consumers are often in favor of this policy because:
they think they will be able to find an apartment at a lower price.
With reference to the graph above, if the intended aim of the price ceiling set at $6 was a net increase in the well-being of consumers, then positive analysis would consider:
whether the surplus transferred from consumers to producers is larger than the consumer surplus lost to deadweight loss.
A binding price ceiling:
will cause quantity demanded to exceed quantity supplied.
The market to buy and sell organs:
would increase the well-being of those who interacted in it.