Review 5, 6, 19, 20

With a given level of money​ income, when the price of a product that a consumer buys​ declines, the purchasing power of your money income A. increases. B. decreases. C. is unchanged. D. can increase or decreases depending on the goods being consumed.

A. increases.

When an​ individual's purchasing power changes due to a change in the price of a good or​ service, this is referred to as A. ​real-income effect. B. marginal effect. C. substitution effect. D. utility effect.

A. ​real-income effect.

Which of the following is an example of a negative​ externality? A.There is an increase in injuries to pedestrians caused by accidents resulting from electronic billboards distracting drivers. B.The opening of a new shopping mall increases the business of nearby restaurants. C.Consumers pay a sales tax in addition to the price of a product. D.A consumer pays a higher price than another consumer does for the same product.

A. There is an increase in injuries to pedestrians caused by accidents resulting from electronic billboards distracting drivers.

A situation in which a benefit or a cost associated with an economic activity spills over to third parties is called A.an externality. B.the​ free-rider problem. C.a merit good. D.a public good.

A. an externality.

How is the market for gasoline affected if the excise tax on gasoline is​ reduced? A.The supply of gasoline increases. B.The supply of gasoline decreases. C.The equilibrium price of gasoline increases. D.The equilibrium quantity of gasoline decreases.

A.The supply of gasoline increases.

The result of the calculation of the price elasticity of demand is A.always negative. B.sometimes​ positive, sometimes negative. C.always positive. D.always greater than one.

A.always negative.

When marginal utility is​ zero, total utility is A.at its maximum. B.decreasing. C.at its minimum. D.increasing.

A.at its maximum.

The price of hamburgers is​ $2 and the price of movies is​ $4. The consumer has​ $14 of income. The consumer is purchasing 3 hamburgers and receiving 30 utils for the last hamburger. He is also purchasing 2 movies and receiving 40 utils for the last movie. This set of goods A.is not an optimum because the marginal utility per dollar spent is greater for hamburgers than for movies. B.is not an optimum because the consumer has not spent all of his money. C.is an optimum since the entire income is spent and total utility is maximized. D.is an optimum since the entire income is spent and the marginal utility per dollar spent is the same for the last unit of each good.

A.is not an optimum because the marginal utility per dollar spent is greater for hamburgers than for movies.

A rational consumer will NEVER purchase a product when its A.marginal utility is negative. B.marginal utility is decreasing. C.total utility is decreasing at an increasing rate. D.total utility is increasing at a decreasing rate.

A.marginal utility is negative.

When total utility is​ falling, A.marginal utility is negative. B.marginal utility has​ decreased, but is now increasing. C.marginal utility is at zero. D.marginal utility is at a maximum.

A.marginal utility is negative.

The largest source of receipts for the federal government is A.personal income taxes. B.corporate income taxes. C.capital gains taxes. D.Social Security taxes.

A.personal income taxes.

Jamal earns​ $160,000 per year and Josephina earns​ $80,000 per year. If Jamal pays​ $16,000 in income taxes and Josephina pays​ $8,000 in income​ taxes, the income tax system would be: A.proportional. B.progressive. C.regressive. D.marginal.

A.proportional.

Bill ate four hot dogs at the baseball game. The first one tasted​ best, but he found that as he ate more hot dogs the amount of extra satisfaction he was receiving was beginning to fall. This would demonstrate A.the law of diminishing marginal utility. B.the law of zero utility. C.the law of total utility maximization. D.the law of diminishing costs.

A.the law of diminishing marginal utility.

The price of a large pepperoni pizza used to be​ $14, but this week the price rose to​ $18. With a budget of just​ $30, you​ can't afford as many pizzas at the higher price. This change in consumer behavior reflects the A. nominal income effect. B. real income effect. C. concept of diminishing marginal utility. D. substitution effect.

B. real income effect.

If the price of good A increases from​ $15 to​ $20 per unit and quantity demanded falls from 150 to 100​ units, then by using the method of average​ values, we can calculate the absolute price elasticity of demand to be A.0.75. B.1.4. C.2.4. D.2.6.

B.1.4

Local government expenditures depend on which​ taxes? A.Capital gains taxes B.Local​ property, sales, and excise taxes C.Social Security taxes D.Revenues from licenses and permits

B.Local​ property, sales, and excise taxes

An example of a regressive tax is the: A.state inheritance tax. B.Social Security tax. C.corporate income tax. D.personal income tax.

B.Social Security tax.

When the consumer spends a large portion of her income on a​ good, demand will be A.inelastic. B.elastic. C. unit-elastic. D.elastic, unit-elastic or inelastic depending upon supply.

B.elastic

The government can achieve the optimal outcome by A.establishing a tax of P3−P2 per unit of good sold. B.establishing a tax of P3−P1 per unit of good sold. C.setting the price at P4. D.setting the price at P2.

B.establishing a tax of P3−P1 per unit of good sold.

The longer any price change​ persists, the A.more difficult it is to alter quantity demanded. B.greater is the price elasticity of demand. C.more likely price will return to its original level. D.lower is the price elasticity of demand.

B.greater is the price elasticity of demand.

When marginal utility is​ positive, total utility is A.decreasing. B.increasing. C.zero. D.at its minimum.

B.increasing.

According to your​ text, which of the following represents the largest source of tax receipts for the Federal ​government? A.sales taxes B.individual income taxes C.property taxes D.corporate income taxes

B.individual income taxes

Total satisfaction is maximized when A.marginal utility is positive. B.marginal utility is zero. C.marginal utility is negative. D.marginal utility is equal to total utility.

B.marginal utility is zero.

If goods X and Y are​ complements, then the cross price elasticity of demand will be A.greater than zero but less than 1. B.negative. C.elastic. D.positive.

B.negative.

John has just eaten another potato chip and his total utility decreased. This means that​ John's marginal utility for this additional potato chip is A.positive. B.negative. C.zero. D.not determinable without more information.

B.negative.

The price elasticity of demand shows A.the relationship between market price and household income. B.the proportionate amount by which the quantity demanded changes in response to a proportionate change in price. C.the quantity demanded at a given price. D.the change in the demand for one product in response to a change in the price of another product.

B.the proportionate amount by which the quantity demanded changes in response to a proportionate change in price.

When you purchase the​ lower-priced store brand bread instead of the more expensive name​ brand, you are experiencing A.diminishing marginal product. B.the substitution effect. C.the income effect. D.a fall in total utility.

B.the substitution effect.

The principle feature of private goods is that: A.they cannot be rented or purchased. B.no one can be excluded from consumption of the product. C. consumption by one person reduces the quantity available to others. D. externality problems associated with their production are always negative

C. consumption by one person reduces the quantity available to others.

Public goods are: A.provided only by the capitalistic system. B. provided only by the communist system. C. provided to additional users at no additional cost. D. any goods or services produced by the government.

C. provided to additional users at no additional cost.

A​ well-known athlete loves cupcakes. He receives 200 utils for the first​ cupcake, an additional 160 for the​ second, an additional 120 for the​ third, another 80 for the​ fourth, and another 40 for the fifth. The marginal utility of the fourth cupcake is​ ________ and the total utility of consuming four cupcakes is​ ________. A.80; 600 B.40; 40 C.80; 560 D.40; 80

C.80; 560

if a Medicare subsidy that had previously been paid by the government has now been​ eliminated, the result will be A. an increase in the price paid by​ consumers, from P0 to Ps. B.a decrease in the price paid by​ consumers, from Ps to P0. C.a decrease in the price received by​ producers, from Ps to P0. D.an increase in the price received by​ producers, from P0 to Ps.

C.a decrease in the price received by​ producers, from Ps (highest pont in demand) to P0 (equilibrium)

A friend of yours receives a government voucher for an apartment in a public housing project. This apartment represents: A.the​ drop-in-the-bucket problem. B.a public good. C.a​ government-sponsored good. D.the​ free-rider problem.

C.a​ government-sponsored good.

Marginal utility is measured as A.output of a good or service divided by price. B.utility per unit of production. C.extra utility from each additional good consumed. D.extra output divided by extra utility.

C.extra utility from each additional good consumed.

The price elasticity of demand is the A.change in price divided by the change in quantity demanded. B.percentage change in price divided by the percentage change in quantity demanded. C.percentage change in quantity demanded divided by the percentage change in price. D.change in quantity demanded divided by the change in price

C.percentage change in quantity demanded divided by the percentage change in price.

The consumer optimum for consuming two goods is achieved when A.the total utility from each good is equal. B.the price multiplied by the marginal utility is equal for the two goods. C.the marginal utility per last dollar spent is equal for the two goods. D.the price of each good is equal.

C.the marginal utility per last dollar spent is equal for the two goods.

In the absence of a​ subsidy, A.Qd would be demanded and QM would be supplied. B.the price Pd would be charged and quantity QM demanded. C.the quantity Q0 and price P0 would prevail in the market. D.None of the above is correct.

C.the quantity Q0 and price P0 would prevail in the market (Equilibrium point)

The major economic effect of Medicare subsidies is: A.to increase the price of medical services and reduce the quantity demanded. B.that the number of physicians has decreased since compensation is low. C.to increase the price of medical services and increase the quantity demanded. D.to lower the price of medical services and reduce the quantity demanded.

C.to increase the price of medical services and increase the quantity demanded.

When the price of a soft drink from the campus vending machine was​ $0.60 per​ can, 100 cans were sold each day. After the price increased to​ $0.75 per​ can, sales dropped to 85 cans per day. Over this​ range, the absolute price elasticity of demand for soft drinks was approximately equal to A. 0.60 B. 0.15 C. 1.67 D. 0.73

D. 0.73

Market failures occur when: A. economic efficiency increases. B. there is an increase in demand. C. there is a change in quantity demanded. D. externalities exist

D. externalities exist

Refer to the figure at right. An external cost exists. The amount of that cost is represented by: A. p2 B.the distance between C and A. C. Q1 D. the vertical distance between point A and the supply curve Upper S 1S1.

D. the vertical distance between point A and the supply curve S1

If price decreases by 10 percent and quantity demanded increases by 30​ percent, the price elasticity of demand will be A.30. B.300. C.0.333. D.3.

D.3

By subsidizing the provision of public​ education, the government A.generates an increase in the quantity of educational services demanded.. B.pushes the​ per-unit price that producers of educational services receive above the market clearing price. C.pushes the​ per-unit price that consumers pay for educational services below the market clearing price.. D.All of the above

D.All of the above

How does the imposition of an excise tax on a good affect its market​ equilibrium? A.Equilibrium quantity​ increases, and equilibrium price increases B.Equilibrium quantity​ decreases, and equilibrium price decreases. C.Equilibrium quantity​ increases, and equilibrium price decreases. D.Equilibrium quantity​ decreases, and equilibrium price increases.

D.Equilibrium quantity​ decreases, and equilibrium price increases.

If the calculated price elasticity of demand between two points is minus−​4, demand is A.inelastic. B.unresponsive to price. C.unit-elastic. D.elastic.

D.elastic

Suppose that the absolute price elasticity for cookies equals 0.9. We could then say that the demand for cookies is A.elastic. B.perfectly elastic. C.unit-elastic. D.inelastic.

D.inelastic.

If total utility is​ increasing, then marginal utility is A.negative. B.decreasing. C.zero. D.positive.

D.positive.

Suppose you are making​ $50,000 per year and paying​ $5,000 per year in income taxes. You get a​ $10,000 per year raise and your income taxes are now​ $6,000 per year. Based on this​ information, the income tax system is: A.progressive. B.regressive. C.bracketed. D.proportional.

D.proportional.

What determines the proportion of a unit excise tax that will be passed on to consumers in the form of higher​ prices? A.the popularity of the tax B.the number of additional taxes that consumers have to pay C.the nature of the projects funded by the tax D.the degree to which quantity demanded and supplied of the good respond to price changes

D.the degree to which quantity demanded and supplied of the good respond to price changes

A​ government-sponsored good is one that: A.everybody is willing to support with funding contributions. B.is inherently valuable. C.everybody will receive concrete benefits from. D.the political process has determined socially desirable.

D.the political process has determined socially desirable.

A positive externality

Demand line shifts

Which of the panels would be consistent with the situation in which benefits exist

Demand line shifts (Panel 2)

If the government pays a​ per-unit subsidy to the producer of a​ service, we would expect to see​ a(n) I. increase in the quantity demanded. II. decrease in the​ out-of-pocket price paid by consumers. III. increase in the quantity supplied by producers.

I, II, and III

For good A and good​ B, the consumer maximizes personal satisfaction when

MUa/pA = MUb/pB

A negative externality

Supply line shifts

Medicare subsidies have increased the price of medical services to Ps. Which of the following statements is true about the effect the Medicare subsidy has had on the consumption of medical​ services?

The amount of medical services provided has increased from Q0 to Qm (both points in the supplyline) as a result of the subsidy.

The total dollar amount of the Medicare subsides provided by the governmant is equal to:

The difference btw Ps (Top point in the demand line) and Pd (bottom point in the supply line) multiplied by Qm (the bottom poin in the demand line)

The qusntity demanded of medical services is

in the demand line

The perceived price on the part of consumers is

in the supply line