Student W22 ECON 1000 Final Review CH 5-6 with Answer PDF

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Student W22 ECON 1000 Final Review CH 5- A new minimum wage law most hurts the working poor when a. demand for unskilled labour is elastic. b. gains from workers who remain employed are greater than the lost income of workers who lose their jobs. c. businesses have few substitutes for unskilled labo...

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Student W22 ECON 1000 Final Review CH 5-6

1. A new minimum wage law most hurts the working poor when a. demand for unskilled labour is elastic. b. gains from workers who remain employed are greater than the lost income of workers who lose their jobs. c. businesses have few substitutes for unskilled labour. d. all of the above are true. e. none of the above are true.

2. a. b. c. d. e.

Demand will be more inelastic the longer the time to adjust. lower the income level. fewer good substitutes are available. higher the income level. greater the fraction of income spent on the product or service

3. Which factor leads a business to have an inelastic supply? a. A limited amount of time to respond to price changes. b. A product or service that can be produced in a very short amount of time. c. An understanding landlord who holds the lease on the store. d. Flexible contracts with the suppliers of key inputs. e. A lack of reliable customers.

4. A perfectly elastic demand curve is a. downward sloping. b. upward sloping. c. vertical. d. horizontal. e. none of the above.

5. The cross elasticity of demand between any two products is defined as the percentage change in the a. price of a product divided by the percentage change in the price of the substitute or complement. b. quantity of a product demanded divided by the percentage change in income.

c. quantity demanded of one product divided by the percentage change in the price of a substitute or complement. d. price elasticity of demand for one product divided by the change in the price elasticity of demand for the substitute or complement. e. quantity of a product demanded divided by the percentage change in its price.

6. a. b. c. d. e.

If the supply of a product is perfectly inelastic, then a tax on the product is paid entirely by buyers. entirely by sellers. equally by buyers and sellers. mostly by buyers. mostly by sellers.

7. If a 10 percent increase in income causes a 5 percent decrease in quantity demanded, what is the income elasticity of demand? a. 0.5 b. -0.5 c. 2.0 d. -2.0 e. 1.5 -

/ /+

+ -

8. For Billy Bob’s Barber shop, a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob’s Barber Shop? a. 0.15 b. 3.0 c. 0.10 d. 0.05 e. 2.0 9. Which of the following DOES NOT affect the price elasticity of demand of a product? a. Number of substitutes b.

Time to adjust

c.

Proportion of income spent on a product/service

d. The marginal opportunity cost 10. A retailer noticed that when he decreased his price slightly, his total revenue decreased. What can you conclude about the price elasticity of demand within the current price range?

a. Elastic b. Inelastic c. Perfectly inelastic d. Perfectly elastic e. Unit elastic 11. Suppose that Norma is disappointed in the revenue from her custom dress shop she is thinking of raising the price but she asks you for advices. You decide that she should a. Lower the price if demand is inelastic b. Raise the price if income is inelastic c. Raise the price If income is elastic d. Lower the price if demand is elastic e. Raise the price if demand is unit elastic 12. If the price elasticity of supply is 2.0, when prices rise by 20%, the quantity supplied will a. increase by 40.0% and the supply is considered elastic b. decrease by 0.20 % and the supply is considered elastic. c. increase by 2.00% and the supply is considered inelastic d. decrease by 40.0% and the supply is considered inelastic e. increase by 20.0% and the supply is considered elastic 13. If the price of gloves falls from $12 to $10 and this increases the sales of scarves by 1500 units per season, we can say that gloves and scarves are a. Inferior goods b. Substitutes c. Normal goods d. Complements e. Unrelated

14. Suppose the demand and supply in a market are shown in the graph below. A sales tax of $2 is imposed on the product. Answer all the following questions:

a. The supply is _______Perfectly Inelastic____ b. After the tax sellers will receive________3_____ c. After the tax buyers will pay ______0____ d. The burden of the tax will be on ____sellers____

15. Which is not an outcome of rent ceilings? a. shortage of rental housing b. black market rents below the rent-controlled prices c. surplus of condominium housing d. long waiting lists for rent-controlled housing e. black market rents above the rent-controlled prices 16. A price ceiling set above the equilibrium price results in a. surpluses. b. shortages. c. the equilibrium price. d. an increase in supply. e. a decrease in demand.

17. When prices are fixed above the equilibrium price a. There is an increase in supply b. There is an increase in demand c. Quantity demanded is greater than quantity supplied d. Quantity demanded is less than quantity supplied e. None of the above 18. Most city governments set a maximum price that can be charged by taxis. This is an example of a. key money b. an inferior service

c. a price floor d. a price ceiling e. cost saving technology

19. Figure 6.3.1 gives the supply and demand schedules for teenage labour in Moncton, New Brunswick. If this labour market is not regulated by government, a. teenage unemployment is 400 hours and the hourly wage rate is $12. b. teenage unemployment is 400 hours and the hourly wage rate is $10. c. the minimum hourly wage is $14. d. there is no teenage unemployment and the hourly wage rate is $12. e. there is no teenage unemployment and the hourly wage rate is $10

20. When there is a minimum wage above the equilibrium wage, at the new minimum wage the quantity a. Supplied exceeds the quantity demanded resulting in a shortage of workers b. Demanded exceeds the quantity supplied resulting in a surplus of workers c. Demanded exceeds the quantity supplied resulting in a shortage of workers d. Supplied exceeds the quantity demanded resulting in a surplus of workers e. Supplied is equal to the quantity demanded and the market is in equilibrium

21. Eliminating rent controls should lead landlords to create additional rental housing. This increase in rental units is largest when a. there is a lack of available land in the area. b. supply is inelastic. c. supply is elastic. d. demand is inelastic. e. demand is elastic

22. Look at the market for apartments in Figure 6.2.2. The producer surplus of the market-clearing outcome is area a. AEL b. NKL c. DEK d. ACL e. CEL

23. An effective rent ceiling a. increases producer surplus. b.

results in a producer surplus of zero.

c. sometimes increases producer surplus and sometimes decreases producer surplus. d. decreases producer surplus. e. decreases the supply of housing.

24. Which of the following is true for a left-leaning politician a. They think that equality of outcome is more important than equality of opportunity b. The believe in income redistribution to achieve equality c. They prioritize equity over efficiency d. All of the above e. None of the above

25. Which of the following is true for a right-leaning politician? a. They prioritize efficiency over equality b. They believe that unequal outcomes are the result of personal differences c. They are more likely to implement market outcomes over equitable government outcomes d. All of the above e. None of the above

26. When price is fixed below market-clearing levels which of the following does not happen? a. Shortages develop b. quantity demanded greater than quantitysupplied c. consumers are frustrated. d. quantity sold = quantity supplied only. e. All of the above are true

27. A major flood occurs in Watertown and the demand for bottled water increases. The table below shows the demand and supply schedules for bottled water in the city of Watertown before and after the flood. If the government acts to limit the price of bottled water to the market-clearing level that occurred before the flood,

a. the price will be $ _______2.20____ b. The quantity will adjust to _____400_____

28. When prices are fixed above the market-clearing level all of the above happen except a. Shortages b. Frustrated sellers c. Undesired increases in inventories d. Surpluses...