Micro Econ 2100 Exam 2 PDF

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Micro Econ 2100 Exam 2...

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The price elasticity of demand measures how much A. quantity demanded responds to a change in price. B. quantity demanded responds to a change in income. C. price responds to a change in demand. D. demand responds to a change in supply. - A. quantity demanded responds to a change in price. Suppose there is a 6 percent increase in the price of good X and a resulting 6 percent decrease in the quantity of X demanded. Price elasticity of demand for X is A. 0 B. 1 C. 6 D. 36 - B. 1 Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand? A. D1 B. D2 C. D3 D. All of the above are equally elastic. - A. D1 Refer to Table 5-3. The table shows the demand schedule for a particular good. Using the midpoint method, what is the price elasticity of demand when price rises from $9 to $12? A. 0.43 B. 0.67 C. 1.50 D. 2.33 - D. 2.33 The case of perfectly elastic demand is illustrated by a demand curve that is A. vertical. B. horizontal. C. downward-sloping but relatively steep.

D. downward-sloping but relatively flat. - B. Horizontal If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is A. 0.63, and supply is elastic. B. 0.63, and supply is inelastic. C. 1.60, and supply is elastic. D. 1.60, and supply is inelastic. - C. 1.60 and supply is elastic If the price elasticity of supply for a good is equal to infinity, then A. the supply curve is vertical. B. the supply curve is horizontal. C. the supply curve also has a slope equal to infinity. D. the quantity supplied is constant regardless of the price. - B. the supply curve is horizontal Given the market for illegal drugs, when the government is successful in reducing the flow of drugs into the United States, A. supply decreases, demand is unaffected, and price increases. B. demand decreases, supply is unaffected, and price decreases. C. demand and supply both decrease, leaving price essentially unchanged. D. supply decreases, demand increases, and price increases substantially as a result. - A. supply decreases, demand is unaffected, and price increases Muriel's income elasticity of demand for football tickets is 1.50. All else equal, this means that if her income increases by 20 percent, she will buy A. 150 percent more football tickets. B. 50 percent more football tickets. C. 30 percent more football tickets. D. 20 percent more football tickets. - C. 30 percent more football tickets Which of the following could be the cross-price elasticity of demand for two goods that are complements? A. -1.3

B. 0 C. 0.2 D. 1.4 - A. -1.3 A price ceiling will be binding only if it is set A. equal to the equilibrium price. B. above the equilibrium price. C. below the equilibrium price. D. either above or below the equilibrium price. - C. below the equilibrium price A minimum wage that is set above a market's equilibrium wage will result in A. an excess demand for labor, that is, unemployment. B. an excess demand for labor, that is, a shortage of workers. C. an excess supply of labor, that is, unemployment. D. an excess supply of labor, that is, a shortage of workers. - C. An excess supply of labor, that is, unemployment If the government removes a tax on sellers of a good and imposes the same tax on buyers of the good, then the price paid by buyers will A. increase and the price received by sellers will increase. B. increase and the price received by sellers will not change. C. not change and the price received by sellers will increase. D. not change and the price received by sellers will not change. - D. not change and the price received by sellers will not change Figure 6-9. The price that buyers pay after the tax is imposed is A. $5. B. $6. C. $7. D. $8. - D. $8 Figure 6-9. The burden of the tax on sellers is

A. $1 per unit. B. $1.50 per unit. C. $2 per unit. D. $3 per unit. - A. $1 per unit Suppose that in a particular market, the demand curve is highly elastic and the supply curve is highly inelastic. If a tax is imposed in this market, then A. the buyers will bear a greater burden of the tax than the sellers. B. the sellers will bear a greater burden of the tax than the buyers. C. the buyers and sellers are likely to share the burden of the tax equally. D. the buyers and sellers will not share the burden equally, but it is impossible to determine who will bear the greater burden of the tax without more information. - B. the sellers will bear a greater burden of the tax then the buyers Consumer surplus is A. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. B. the amount a buyer is willing to pay for a good minus the cost of producing the good. C. the amount by which the quantity supplied of a good exceeds the quantity demanded of the good. D. a buyer's willingness to pay for a good plus the price of the good. - A. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it Refer to Table 7-1. If the price of the product is $18, then the total consumer surplus is A. $38. B. $42. C. $46. D. $72. - C. $46 Refer to Figure 7-1. When the price is P1, consumer surplus is A. A. B. A+B. C. A+B+C.

D. A+B+D. - C. A + B + C Refer to Table 7-6. If the market price is $1,000, the producer surplus in the market is A. $700. B. $750. C. $2,250 D. $3,700. - B. $750 Refer to Figure 7-7. Which area represents producer surplus when the price is P1? A. BCG B. ACH C. ABGD D. DGH - A. BCG Economists typically measure efficiency using A. the price paid by buyers. B. the quantity supplied by sellers. C. total surplus. D. profits to firms. - C. total surplus Refer to Figure 7-17. At equilibrium, total surplus is measured by the area A. ACG. B. AFG. C. KBG. D. CFG. - A. ACG Refer to Figure 7-17. If 10 units of the good are produced and sold, then A. the good is overproduced relative to the efficient output level and total surplus can be increased by reducing its production. B. producer surplus is maximized. C. total surplus is minimized.

D. the good is under produced relative to the efficient output level and total surplus can be increased by increasing its production. - A. The good is overproduced relative to the efficient output level and total surplus can be increased by reducing its production. Refer to Figure 7-18. Buyers who value this good more than the equilibrium price are represented by which line segment? A. AC. B. CK. C. BC. D. CH. - A. AC Refer to Figure 7-18. Sellers whose costs are less than the equilibrium price are represented by which line segment? A. AC. B. CK. C. BC. D. CH. - C. BC Goods with many close substitutes tend to have A. More elastic demands B. less elastic demands C. price elasticities of demand that are unit elastic D. income elasticities of demand that are negative - A. More elastic demands For a good that is a luxury, demand A. tends to be inelastic B. tends to be elastic C. has unit elasticity D. cannot be represented by a demand curve in the usual way - B. tends to be elastic If the price elasticity of demand for a good is 4.0, then a 10% increase will result in A. 0.4 percent decrease in quantity demanded

B. 2.5 percent decrease in quantity demanded C. 4 percent decrease in quantity demanded D. 40 percent decrease in quantity demanded - D. 40 percent decrease in quantity demanded Demand is said to have unit elasticity if elasticity is A. less than 1 B. greater than 1 C. equal to 1 D. equal to 0 - C. Equal to 1 If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is A. 0.75 B. 1.25 C. 1.33 D. 1.60 - C. 1.33 Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase revenue? A. 0 B. 0.2 C. 1 D. 2.1 - D. 2.1 Eric produces jewelry boxes. If the demand for jewelry boxes is elastic and Eric wants to increase his total revenue, he should A. increase the price of his jewelry boxes B. decrease the price of his jewelry boxes C. not change the price of his jewelry boxes D. non of the above answers are correct - B. decrease the price of his jewelry boxes In the long run, the quantity supplied of most goods

A. will increase in almost all cases, regardless of what happens to the price B. cannot respond at all to change in price C. Can respond to a change in price, but the change is almost always inconsequential D. can respond substantially to a change in price - D. can respond substantially to a change in price As price elasticity of supply increases, the supply curve A. becomes flatter B. becomes steeper C. becomes downward sloping D. shifts to the right - A. becomes flatter If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price increase amounted to A. 1.2% B. 0.5% C. 2% D. 4.5% - C. 2% A shortage results when A. a nonbinding price ceiling is imposed on a market B. a nonbinding price ceiling is removed from a market C. a binding price ceiling is imposed on a market D. a binding price ceiling is removed from a market - C. a binding price ceiling is imposed on a market If a price floor is not binding, then A. the equilibrium price is above the price floor B. the equilibrium price is below the price floor C. it has no legal enforcement mechanism D. more than one of the above is correct - A. the equilibrium price is above the price floor The imposition of a binding price floor on a market causes quantity demanded to be

A. greater than quantity supplied B. less than quantity supplied C. equal to quantity supplied D. Both (a) and (b) are possible - B. less than quantity supplied Price QD QS $0 12 0 $1 10 2 $2 8 4 $3 6 6 $4 4 8 $5 2 10 $6 0 12 Refer to Table 6-1. Which of the following price floors would be binding in this market? A. $1 B. 2$ C. $3 D. $4 - D. $4 Refer to Table 6-1. Suppose the government imposes a price ceiling of $5 on this market. What will be the size of the shortage in this market? A. 0 units B. 2 units C. 8 units D. 10 units - A. 0 units A $2 tax levied on the sellers of mailboxes will shift the supply curve A. upward by exactly $2 B. upward by less than $2

C. downward by exactly $2 D. downward by less than $2 - A. upward by exactly $2 If the government levies a $500 per car on sellers of cars, then the price paid by the buyers of cars would A. increase by more than $500 B. increase by exactly $500 C. increase by less than $500 D. decrease by an indeterminate amount - C. increase by less than $500 Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then A. the demand curve will shift upward by $20, and the price paid by buyers will decrease by less than $20 B. the demand curve will shift upward by $20, and the price paid by buyers will decrease by $20 C. the supply curve will shift downward by $20, and the effective price received by sellers will increase by less than $20 D. the supply curve will shift downward by $20, and the effective price received by sellers will increase by $20 - C. the supply curve will shift downward by $20, and the effective price received by sellers will increase by less than $20 A $2 tax levied on the buyers of lawnmowers will shift the demand curve A. upward by exactly $2 B. upward by less than $2 C. downward by exactly $2 D. downward by less than $2 - C. downward by exactly $2 Figure 6-9. The effective price that sellers receive after the tax is imposed is A. $5 B. $6 C. $7 D. $8 - A. $5

Figure 6-9. The amount of tax per unit is A. $1 B. $1.50 C. $2 D. $3 - D. $3 Figure 6-9. The burden of the tax on buyers is A. $1 per unit B. $1.50 per unit C. $2 per unit D. $3 per unit - C. $2 per unit The maximum price that a buyer will pay for a good is called the A. cost B. willingness to pay C. equity D. efficiency - B. willingness to pay If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the A. consumer has consumer surplus of $2 if he or she buys the good B. consumer does not purchase the good C. market is not a competitive market D. price of the good will fall due to market forces - B. consumer does not purchase the good Table 7-6. Seller Cost Abby $1,500 Bobby $1,200 Carlos $1,000

Dianne $750 Evalina $500 If the price is $775, who would be willing to supply the product A. Abby and Bobby B. Abby, Bobby, and Carlos C. Carlos, Dianne, and Evalina D. Dianne and Evalina - D. Dianne and Evalina Refer to Figure 7-12. At the equilibrium price, surplus is A. $150 B. $200 C. $300 D. $500 - C. $300 Refer to Figure 7-12. If the government imposes a price ceiling of $120 in this market, then total surplus will be A. $0 B. $125 C. $375 D. $500 - D. $500 Refer to Firgure 7-18. If the government mandated a price increase from P1 to a higher price, then A. total surplus would decrease B. consumer surplus would increase C. total surplus would increase, since producer surplus would increase D. total surplus remain unchanged - A. total surplus would decrease What happens to the total surplus in a market when the government imposes a tax? A. Total surplus increases by the amount of the tax B. Total surplus increases but by less than the amount of the tax

C. Total surplus decreases D. Total surplus is unaffected by the tax - C. Total surplus decreases The decrease in Total surplus that results from a market distortion, such as a tax, is called a A. wedge loss B. revenue loss C. dead weight loss D. consumer surplus loss - C. Dead weight loss Refer to Figure 8-4. The vertical distance between points A and B represents a tax in the market. The amount of tax revenue received by the government is equal to A. $210. B. $420. C. $980. D. $1,600. - C. $980 Refer to Figure 8-4. The vertical distance between points A and B represents a tax in the market.The amount of deadweight loss as a result of the tax is A. $210. B. $420. C. $980. D. $1,600. - A. $210 Refer to Figure 8-5. Suppose that the government imposes a tax of P3 - P1. After the tax is levied, consumer surplus is represented by area A. A. B. A+B+C. C. D+H+F. D. F. - A. A Refer to Figure 8-9. Which of the following combinations will minimize the deadweight loss from a tax?

A. supply 1 and demand 1 B. supply 2 and demand 2 C. supply 1 and demand 2 D. supply 2 and demand 1 - A. supply 1 and demand 1 Suppose the government increases the size of a tax by 25%. The dead weight loss from that tax A. increases by 25% B. increases by more than 25% C. increases but by less than 25% D. decreases by 25% - B. increases by more than 25% According to Arthur Laffer, the graph represents the amount of tax revenue (measured on the vertical axis) as the function of the size of the tax (measured on the horizontal axis) looks like A. A U B. An upside-down U C. a horizontal straight line D. an upward-sloping line or curve - B. An upside-down U When a tax is levied on a good, the buyers and sellers of the good share the burden, A. provided the tax is levied on the sellers. B. provided the tax is levied on the buyers. C. provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers. D. regardless of how the tax is levied. - D. Regardless of how the tax is levied When a good is taxed, the burden of the tax A. falls more heavily on the side of the market that is more elastic. B. falls more heavily on the side of the market that is more inelastic. C. falls more heavily on the side of the market that is closer to unit elastic. D. is distributed independently of relative elasticities of supply and demand. - B. falls more heavily on the side of the market that is more inelastic...