Test 3 micro

Refer to Figure 6-1. A binding price ceiling is shown in

graph (b) only

If consumers think that there are very few substitutes for a good, then

demand would tend to be price inelastic

Refer to Figure 6-9. In this market, a minimum wage of $7.00 creates a labor

surplus of 4,000 worker hours.

A buyer's willingness to pay is

that buyer's maximum amount he is willing to pay for a good.

Producer Surplus is

the amount a seller is paid minus the cost of production.

If a price ceiling is not binding, then

there will be no effect on the market price or quantity sold

if the price of elasticity of supply is zero, the supply curve is

vertical

If a buyer's willingness to pay for a new Honda is $30,000 and she is able to actually buy it for $28,000, her consumer surplus is

$2,000

Refer to Figure 7-3 . If the price of the good is $14, then producer surplus is

$20.50

During the last two days, Chad purchased a latte from two different stores. The following below shows Chad's willingness to pay on each day and his consumer surplus from each purchase. Refer to Table 7-6. The price that Chad paid for a latte on the first day is

$3.75

Diego, Emi, and Finn are available to work as tutors for the semester. The opportunity cost of tutoring is $100 for Diego, $200 for Emi, and $400 for Finn. The university is hiring tutors at a price of $300. Producer surplus equals

$300

Refer to Table 7-7 . If the market price is $1,000, the producer surplus in the market is

$300

Refer to Table 5-3 . Using the midpoint method, the income elasticity of demand for good Y is

-2.33 and good Y is an inferior good

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

1.2, and X and Y are substitutes.

If the price elasticity of supply is 1.5, and a price increase led to a 1.8 percent increase in quantity supplied, then the price increase is about

1.20 percent

Refer to Figure 7-9. At equilibrium, producer surplus is represented by the area

D+H+F

Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is

positive, and the good is a normal good.

Suppose that at a price of $30 per month, there are 30,000 subscribers to cable television in Small Town. If Small Town Cablevision raises its price to $40 per month, the number of subscribers will fall to 20,000. At which of the following prices does Small Town Cablevision earn the greatest total revenue?

$30 per month

in general, a steeper supply curve is more likely to be

price inelastic

If the cross-price elasticity of two goods is negative, then the two goods are

Complements

In a market with a binding price ceiling, increasing the ceiling price will

Decrease the shortage

Refer to Figure 5-6 . Along which of these segments of the supply curve is supply least elastic?

GH

A shortage results when a

a binding price ceiling is imposed on a market.

The seller's cost of production is

the minimum amount the seller is willing to accept for a good.

Income elasticity of demand measures how

the quantity demanded changes as consumer income changes

Rent-control laws dictate

only a maximum rent that landlords may charge tenants.

Minimum-wage laws dictate

only a minimum wage that firms may pay workers

Suppose there are three identical vases available to be purchased. Buyer 1 is willing to pay $30 for one, buyer 2 is willing to pay $25 for one, and buyer 3 is willing to pay $20 for one. If the price is $25, how many vases will be sold and what is the value of consumer surplus in this market?

Two vases will be sold, and consumer surplus is $5

Refer to Figure 6-5. Which of the following statements is not correct?

When the price is $6, there is a surplus of 8 units.

A price ceiling is

a legal maximum on the price at which a good can be sold

Cross-price elasticity of demand measures how

the quantity demanded of one good changes in response to a change in the price of another good.

if a supply curve for a good is price elastic, then

the quantity supplied is sensitive to changes in the price of that good

Suppose that at a price of $30 per month, there are 30,000 subscribers to cable television in Small Town. If Small Town Cablevision raises its price to $40 per month, the number of subscribers will fall to 20,000. Using the midpoint method for calculating the elasticity, what is the price elasticity of demand for cable television in Small Town?

1.4

the price of a good rises from $16 to $24, and the quantity supplied rises from 90 to 110 units. Calculated with the midpoint method, the price elasticity of supply is

1/2

The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor $2 above the equilibrium price in this market. Refer to Table 6-1. How many units of the good are purchased after the imposition of the price floor?

5

Refer to Figure 6-4 . In graph (b), there will be

A surplus

Refer to Figure 7-1 . When the price is P 1 , consumer surplus is

A+B+C

Refer to Figure 7-9. At equilibrium, consumer surplus is represented by the area

A+B+C

Refer to Figure 7-4 . Which area represents the increase in producer surplus when the price rises from P 1 to P 2 ?

AHGB

Refer to Figure 5-4 . If rectangle D is larger than rectangle A, then which of the following is not correct?

An increase in price from P1 to P2 will cause an increase in total revenue.

Refer to Figure 7-4 . Which area represents producer surplus when the price is P 1 ?

BCG

Refer to Table 7-1. If the price of the product is $110, then who would be willing to purchase the product?

Calvin, Sam, and Andrew

Refer to Table 7-7 . If the price is $1,l50, who would be willing to supply the product?

Carlos, Dianne, and Evaline

An increase in the price of a good along a stationary supply curve

Increases producer surplus

Refer to Figure 6-1. The price ceiling shown in graph (a)

Is not binding

Refer to Figure 7-8. Total surplus can be measured as the area

JNL

Your younger sister needs $50 to buy a new bike. She has opened a lemonade stand to make the money she needs. Your mother is paying for all of the ingredients. She currently is charging 25 cents per cup, but she wants to adjust her price to earn the $50 faster. If you know that the demand for lemonade is elastic, what is your advice to her?

Lower the price to increase total revenue.

Which of the following statements is valid when the market supply curve is vertical?

Market quantity supplied does not change when the price changes

For which pairs of goods is the cross-price elasticity most likely to be positive?

Pens and pencils

A supply curve can be used to measure producer surplus because it reflects

Sellers' costs

You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that

The mayor thinks demand is inelastic, and the city manager thinks demand is elastic.

Suppose the equilibrium price for apartments is $800 per month and the government imposes rent controls of $500. Which of the following is unlikely to occur as a result of the rent controls?

The quality of apartments will improve.

Producer surplus is the area

above the supply curve and below the price.

If the income elasticity of demand for a good is negative, it must be

an inferior good

Refer to Figure 5-4 . Total revenue when the price is P1 is represented by

areas B + D.

You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. You still enjoy Ramen noodles very much and buy even more, but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more. When looking at income elasticity of demand for Ramen noodles, yours would

be positive, and your roommate's would be negative.

Consumer surplus is the area

below the demand curve and above the price

Total surplus is the area

below the demand curve and above the supply curve.

Refer to Figure 6-9. In this market, a minimum wage of $7.00 is

binding and creates unemployment.

If the cross-price elasticity between two goods is negative, the two goods are likely to be

compliments

If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the

consumer does not purchase the good.

Refer to Figure 7-6. When the price falls from P2 to P1, producer surplus

decreases by an amount equal to A+B.

Refer to Figure 7-1 . When the price rises from P 1 to P 2 , consumer surplus

decreases by an amount equal to B+C

An increase in the price of a good along a stationary demand curve

decreases consumer surplus

Refer to Figure 5-5 . If the price decreased from $36 to $12, total revenue would

increase by $4,800, and demand is elastic between points X and Z.

If the government removes a binding price ceiling from a market, then the price paid by buyers will

increase, and the quantity sold in the market will increase.

a literal, downward slopping demand curve

inelastic at some points, and elastic at others

if supply is inelastic, the value of the price elasticity of supple must be

less than 1

The price elasticity of supply measures how much

the quantity supplied responds to changes in the price of the good.

If an increase in the price of a good has no impact on the total revenue in that market, demand must be

unit elastic

If a fisherman must sell all of his daily catch before it spoils for whatever price he is offered, once the fish are caught, the fisherman's price elasticity of supply for fresh fish is

zero