Microeconomics Exam 2 chpt. 4-6

Assume the supply curve shifts to the right by a given amount at each price. Price in the market will decline the most if demand is more:
a. elastic; inelastic
b. elastic; elastic
c. inelastic; inelastic
d. inelastic; elastic

The price elasticity of demand is computed as the percentage change in the _____ divided by the percent change in _____.
a. quantity demanded; income
b. quantity demanded; price
c. price; quantity demanded
d. quantity demanded; quantity supplied

One of the consequences of minimum wage had been:
a. increased employment for high-skilled workers.
b. lower production costs for small businesses.
c. workers offering to work off the books for less than minimum wage.
d. decreased unemployment for low-skilled workers.

If the market for grapefruit is in equilibrium without any outside intervention to change the equilibrium price:
a. consumer and producers surplus is maximized.
b. total surplus is minimized.
c. a few mutually beneficial trades are missed.
d. there is some dead weight loss.

If the estimated price elasticity of demand for foreign travel is 4, then:
a. a 20% decrease in price of foreign travel will increase quantity demanded by 80%.
b. a 20% increase in price of foreign travel will increase quantity demanded by 80%.
c. a 10% increase in price of foreign travel will increase quantity demanded by 40%.
d. the demand for foreign travel is inelastic.

If the government intervened in the market by lowering the price of a good below the equilibrium price, which scenario would NOT occur?
a. producers would likely lose some producer surplus.
b. some consumers would receive an increase in consumer surplus.
c. the outcome would be efficient.
d. total surplus would be lower.

We can measure total consumer surplus for good X as the:
a. sum of the individual consumer surpluses for all buyers of X.
b. area above the demand curve for X is below the price paid for X.
c. area above the supply curve for X.
d. area bounded by the demand curve for X and the two areas.

The publisher of an economics textbook finds that, when the book's price is lowered from $70 to $60, sales rise from 10,000 to 15,000. By the midpoint method, the price elasticity of demand is:
a. 500
b. 2.6
c. 50
d. 3.5

The likely result of a binding price floor is a ____ of the good at a price ____ the equilibrium price.
a. surplus; above
b. shortage; below
c. shortage; above
d. surplus; below

A major state university in the South recently raised tuition by 12%. An economics professor at this university asked his students, "How many of you will transfer to another university because of the increase in tuition?" One student in about 300 said that he or she would transfer. Based on this information, the price elasticity of demand for education at this university is:
a. 0
b. highly inelastic
c. highly elastic
d. 1

If the cross- elasticity of demand between rice and beans is -0.25, rice and beans are complements. T/F

A price ceiling below equilibrium will cause a larger shortage when demand is ____ and supply is ____.
a. perfectly inelastic; elastic
b. elastic; elastic
c. inelastic; inelastic
d. elastic; inelastic

All else equals, when the supply curve shifts left, the producer surplus increases. T/F

Ashley bought a new pair of jeans. When she walked out of the store, she thought, "I got such a great deal; I would have paid $40 more for these jeans!" This BEST represents the concept of:
a. producer surplus
b. equilibrium
c. consumer surplus
d. total surplus

Consumers willingness to pay for a good is used to derive the ___ for that good.
a. cost of production
b. producer surplus
c. demand curve
d. supply curve

There is a trade off between equity and efficiency in that policies designed to promote equity often come at the cost of decreased efficiency. T/F

The price elasticity of demand along a demand curve with a constant slope:
a. increases in absolute value as the price rises.
b. is greater than the slope.
c. is less than the slope.
d. is equal to the slope.

Property rights are an important feature of an effective market because they:
a. lead to the development of government control over price.
b. prevent harm to the environment from pollution.
c. give owners of goods and services the right to use and dispose of those good and services as they choose.
d. are the basis for an equitable tax system.

Use mid-point method to calculate the price elasticity of demand eliminates the problem of computing:
a. different elasticities, depending on whether price decreases or increases.
b. total revenue when price falls and demand is elastic.
c. total revenue when price falls and demand is inelastic.
d. different elasticities because price and quantity are inversely related on the demand curve.

Along a given upward- sloping supply curve, a decrease in price will cause producer surplus to:
a. decrease
b. increase
c. stay the same
d. none of the above

The cross-price elasticity of demand for Coke with respect to the price of Pepsi has been estimated to be 0.61. If the price of Pepsi falls by 10%, all other things unchanged, the quantity demanded of Coke will:
a. decrease by 6.1%
b. increase
c. decrease by less than 6.1%
d. not change

The price elasticity of demand for gasoline in the short run has been estimated to be 0.1. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that effect total expenditures on gasoline in the short run, all other things equal?
a. total expenditures will remain unchanged
b. quantity demanded will decrease a massive amount, but total expenditures will rise.
c. quantity demanded will not change much, but total expenditures will rise.
d. quantity demanded will stay the same, but total expenditures will falls.

The pair of items that is likely to have the LARGEST positive cross-elasticity demand is:
a. milk and cookies
b. pizzas and pepperoni
c. skis and ski boots
d. coffee and tea

An effective price ceiling will MOST likely result in:
a. a decrease in deadweight loss.
b. a decrease in producer surplus.
c. no change in either
d. an increase in price.

Since the demand for cashews increases as the price of walnuts increases, we can assume that these two goods are:
a. inferior
b. superior
c. substitutes
d. complements

Suppose the price elasticity of demand for blueberries is 1.5. If climate change destroys 1/4 of the nations blueberry crop, how will that affect total revenue for blueberry producers, all other things unchanged?
a. total revenue will fall
b. total revenue will remain unchanged
c. total revenue will rise
d. none of the above

midpoint method

midpoint method

A consumer's willingness to pay reflects the:

Consumers' willingness to pay for a good is used to derive the _____ for that good.

A competitive market for cell phone chargers is in equilibrium. If the price temporarily falls below the equilibrium price:

Which factor is key in the effectiveness of well-functioning markets?

If there is an increase in supply, assuming a positively sloped supply curve and a negatively sloped demand curve, total surplus:

One of the ways rent control is inefficient is that it leads to:

Producers will sometimes lower the quality of a good when the government imposes:

Suppose at $10 the quantity demanded is 100. When the price falls to $8, the quantity demanded increases to 130. The price elasticity of demand between $10 and $8, by the midpoint method, is approximately:

Suppose the price elasticity of demand for cheeseburgers equals 0.37. This means the overall demand for cheeseburgers is:

When the price of chocolate-covered peanuts increases from $1.55 to $2.00, the quantity demanded decreases from 220 to 160. In this price range, the demand for chocolate-covered peanuts is _____, and total revenue will _____ when the price increases.

The price elasticity of a good will tend to be larger:

Suppose that the cross-price elasticity of demand for Mountain Dew with respect to the price of Coke is 0.7. This implies that the two goods are:

The price of pretzels increases and the demand for tortilla chips decreases, so we can assume that these two goods are:

If the income elasticity of demand for a good is positive, the good is said to be:

If your purchases of good A remain constant at 9 units per year when the price of good B increases from $8 to $12, all other things equal, for you, shoes and shirts are considered _____ goods.

Assume the supply curve shifts to the right by a given amount at each price. The price in the market will decline the most if demand is more price-_____ and supply is more price-_____.

The likely result of a binding price floor is a _____ of the good at a price _____ the equilibrium price.

West African cotton farmers are very upset about the subsidies the U.S. government pays to American cotton farmers. One reason for this could be that subsidized cotton from the United States:

A binding price floor is a _____ price set _____ the equilibrium price.

The difference between the demand price and the supply price at the quota limit is: