UNIT 3 AP ECON

Housing is a good that tends to take up a substantial share of a consumer's spending. If the price of housing increases, this will result in:

both an income and substitution effect to decrease the quantity demanded of housing

If a consumer purchases a combination of commodities X and Y such that MUx/Px= 20 and MUy/Py=5 to maximize utility, the consumer should

buy more of X and less of Y

When the imposition of an excise tax causes the quantity demanded and quantity supplied to decrease, this will result in

dead weight loss

If the price of a good is increased by 15% and the quantity demanded falls by 20%, the price elasticityof demand is

price-elastic

If the quantity supplied responds substantially to a relatively small change in price, supply would be

price-elastic

suppose an income tax taxes 0% of the first $1,000, 10% of the next $10,000, and 20% of the remainder of earnings. This type of tax can be described as:

progressive

a tax that takes a larger share of the income of high income taxpayers than of low-income taxpayers is called a:

progressive tax

Income tax rates are such that Mr.R Hood earns 35K per year and pays 7k in taxes, while Mr. G Gisbourne earns 1 mil per year and pays 200k in taxes: the tax is

proportional

The absolute value of the price elasticity of demand for cabbage has been estimated to be 0.25 (inelastic). If an insect infestation destroys 20% of the nation's cabbage crop, how will that affect cabbage consumption and total expenditures on cabbage, all other things equal?

quantity demanded falls and total expenditures rise

a tax that rises less than proportion to income is described as

regressive

a progressive tax

takes a larger share of the income of high-income tax payers than of low-income

if a consumer derivers more utlitity by spending an additional $1 on Good X rather than on Good Y, then:

MUx/Px > MUy/Py

Steven consumes only two goods, both of which are normal goods, He is maximizing his utility in consumption of both goods. Now Assume the price of one of the goods falls. How should steven adjust his consumption after the change in price

Steven should consume more of the good that experienced a drop in price and less of the good which did not change in price

Which situation would most likely cause a decrease in consumer surplus in the toy market?

The cost of shipping increase due to higher oil prices (supply shifts to the left)

Which of the following is true if there is a decrease in the supply of ice cream?

There is a decrease in consumer surplus

If the price elasticity of demand equals 0, then this means the demand curve is:

Vertical

after you graduate from college, you open a business selling computers. There are many other businesses in your city that sell similar computers. Based on this information, the price elasticity of demand for the computers that your business sells will be:

highly elastic

an important determinant of the price elasticity of demand is the

importance of the good in household budgets.

To say that two goods are substitutes, their cross-price elasticities of demand should be:

negative, yet almost equal to zero

Suppose the government imposes a 9$ per unit tax on Good Z. If the demand curve for Good Z is perfectly elastic and the supply curve is upward-sloping, the price that consumers pay for the good will:

no change

if your income increases and your consumption of bagel increases, other things equal, bagels are considered a:

normal good

IF the government wants to minimize the deadweight loss from taxes, it should impose taxes on goods for which:

the price elasticity of demand is low

which factor is the most important in determining the price elasticity of supply

the time period the producer has to adjust inputs and outputs

The ability of a good to satisfy a want refers to its

utility

Coffee and tea are substitutes. If there is an increase in the price of coffee, total surplus in the tea market

will increase

Suppose the price elasticity of demand for yachts equals 4.04, while the price elasticity of supply for yachts equals 0.22. If congress reinstates a luxury tax on yachts, how will the burden of the tax be divided?

yacht builders will pay a larger share than yacht builders

At the point where total utility is at a maximum, marginal utility is

zero