question
The effective price that buyers will pay after the tax is imposed is
answer
a
question
There are very few, if any, good substitutes for motor oil. Therefore,
answer
the demand for motor oil would tend to be inelastic
question
Demand is elastic if elasticity is
answer
greater than 1.
question
The section of the demand curve labeled A represents the
answer
elastic section of the demand curve.
question
The section of the demand curve labeled C represents the
answer
inelastic section of the demand curve.
question
Assume the section of the demand curve labeled A corresponds to prices between $6
and $12. Then, when the price increases from $8 to $10
and $12. Then, when the price increases from $8 to $10
answer
the percent decrease in the quantity demanded exceeds the percent increase in the price
question
Demand is said to be unit elastic if
answer
quantity demanded changes by the same percent as the price
question
Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a
change in price, the
change in price, the
answer
flatter the demand curve will be.
question
In the case of perfectly inelastic demand,
answer
quantity demanded stays the same whenever price changes.
question
When demand is perfectly inelastic, the demand curve will be
answer
vertical, because buyers purchase the same amount as before whenever the price rises or
falls.
falls.
question
When small changes in price lead to infinite changes in quantity demanded, demand is perfectly
answer
elastic and the demand curve will be horizontal.
question
Suppose demand is perfectly inelastic and the supply of the good in question decreases. As a result,
answer
the equilibrium price increases and the equilibrium quantity is unchanged.
question
Alice says that she would buy one banana split a day regardless of the price. If she is telling the truth,
answer
Alice's demand for banana splits is perfectly inelastic.
question
Total revenue when the price is P2 is represented by the area(s)
answer
A + B.
question
Harry's Barber Shop increased its total monthly revenue from $1,500 to $1,800 when it raised the price of a
haircut from $5 to $9. The price elasticity of demand for Harry's Haircuts is
haircut from $5 to $9. The price elasticity of demand for Harry's Haircuts is
answer
0.417.
question
Income elasticity of demand measures how
answer
the quantity demanded changes as consumer income changes.
question
Which of the following expressions represents a cross-price elasticity of demand?
answer
. percentage change in quantity demanded of apples divided by percentage change in price
of pears
of pears
question
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
increases by 20 percent, she will buy
answer
30 percent more football tickets.
question
If the quantity supplied responds only slightly to changes in price, then
answer
supply is said to be inelastic
question
Which of the following would be true as the price elasticity of supply approaches infinity?
answer
Very small changes in price lead to very large changes in quantity supplied.
question
Knowing that the demand for wheat is inelastic, if all farmers voluntarily plowed under 10 percent of their
wheat crop, then
wheat crop, then
answer
wheat farmers would experience an increase in their total revenue.
question
Technological advances in wheat production can lower farmers' total revenue because the
answer
demand for wheat is inelastic.
question
Which of the following statements does not help to explain why government drug interdiction increases
drug-related crime?
drug-related crime?
answer
Government drug programs are more lenient now with drug offenders than they were in
the 1980s
the 1980s
question
There are fewer farmers in the United States today than 200 years ago because of
answer
increases in farm technology and an inelastic demand for food.
question
Necessities tend to have inelastic demands, whereas luxuries have elastic demands.
answer
True
question
Goods with close substitutes tend to have more elastic demands than do goods without close substitutes.
answer
True
question
The demand for Rice Krispies is more elastic than the demand for cereal in general.
answer
True
question
The demand for gasoline will respond more to a change in price over a period of five weeks than over a
period of five years.
period of five years.
answer
False
question
If the price of calculators increases by 15 percent and the quantity demanded per week falls by 45 percent as a
result, then the price elasticity of demand is 3.
result, then the price elasticity of demand is 3.
answer
True
question
The flatter the demand curve that passes through a given point, the more inelastic the demand
answer
False
question
If demand is perfectly inelastic, the demand curve is vertical, and elasticity is equal to 0.
answer
True
question
When demand is inelastic, a decrease in price increases total revenue.
answer
False
question
Price elasticity of demand along a linear, downward-sloping demand curve increases as price falls
answer
False
question
The income elasticity of demand is defined as the percentage change in quantity demanded divided by the
percentage change in income.
percentage change in income.
answer
True
question
Normal goods have negative income elasticities of demand, while inferior goods have positive income
elasticities of demand.
elasticities of demand.
answer
False
question
Cross-price elasticity of demand measures how the quantity demanded of one good changes as the price of
another good changes.
another good changes.
answer
True
question
Supply tends to be more elastic in the short run and more inelastic in the long run.
answer
False
question
When the price of knee braces increased by 25 percent, the Brace Yourself Company increased its quantity
supplied of knee braces per week by 75 percent. BYC's price elasticity of supply of knee braces is 0.33.
supplied of knee braces per week by 75 percent. BYC's price elasticity of supply of knee braces is 0.33.
answer
False
question
If a supply curve is horizontal then supply is said to be perfectly elastic and the price elasticity of supply
approaches infinity.
approaches infinity.
answer
True
question
OPEC failed to maintain a high price of oil in the long run, partly because both the supply of oil and the
demand for oil are more elastic in the long run than in the short run.
demand for oil are more elastic in the long run than in the short run.
answer
True
question
Drug interdiction, which reduces the supply of drugs, may decrease drug-related crime because the demand
for drugs is inelastic
for drugs is inelastic
answer
False
question
Consider the following pairs of goods. For which of the two goods would you expect the demand to be more
price elastic? Why?
a. water or diamonds
b. insulin or nasal decongestant spray
c. food in general or breakfast cereal
d. gasoline over the course of a week or gasoline over the course of a year
e. personal computers or IBM personal computers
price elastic? Why?
a. water or diamonds
b. insulin or nasal decongestant spray
c. food in general or breakfast cereal
d. gasoline over the course of a week or gasoline over the course of a year
e. personal computers or IBM personal computers
answer
Diamonds are luxuries, and water is a necessity. Therefore, diamonds have the more
elastic demand, The longer the time period, the more elastic demand is. Therefore, gasoline over the
course of a year has the more elastic demand. There are more substitutes for IBM personal computers than there are for personal
computers. Therefore, IBM personal computers have the more elastic demand. Insulin has no close substitutes, but decongestant spray does. Therefore, nasal
decongestant spray has the more elastic demand. Breakfast cereal has more substitutes than does food in general. Therefore, breakfast
cereal has the more elastic demand.
elastic demand, The longer the time period, the more elastic demand is. Therefore, gasoline over the
course of a year has the more elastic demand. There are more substitutes for IBM personal computers than there are for personal
computers. Therefore, IBM personal computers have the more elastic demand. Insulin has no close substitutes, but decongestant spray does. Therefore, nasal
decongestant spray has the more elastic demand. Breakfast cereal has more substitutes than does food in general. Therefore, breakfast
cereal has the more elastic demand.
question
When the Shaffers had a monthly income of $4,000, they usually ate out 8 times a month. Now that the
couple makes $4,500 a month, they eat out 10 times a month. Compute the couple's income elasticity of
demand for restaurant meals. Is a restaurant meal a normal or inferior good to the couple?
couple makes $4,500 a month, they eat out 10 times a month. Compute the couple's income elasticity of
demand for restaurant meals. Is a restaurant meal a normal or inferior good to the couple?
answer
The income elasticity of demand for the Shaffers is 2. Normal good.
question
Recently, in Smalltown, the price of Twinkies fell from $0.80 to $0.70. As a result, the quantity demanded of
Ho-Ho's decreased from 120 to 100. Compute the cross-price elasticity of demand for Ho-Ho's. Does a
typical consumer view Twinkies and Ho-Ho's substitutes or compliments?
Ho-Ho's decreased from 120 to 100. Compute the cross-price elasticity of demand for Ho-Ho's. Does a
typical consumer view Twinkies and Ho-Ho's substitutes or compliments?
answer
1.33. Substitutes.
question
Price controls are usually enacted
answer
b
question
A legal maximum price at which a good can be sold is a price
answer
d
question
A shortage results when
answer
a
question
If the government imposes a price ceiling of $8 in this market, the result would be a
answer
d
question
In which of the following cases would sellers have to develop a rationing mechanism?
answer
a
question
Over time, housing shortages caused by rent control
answer
b
question
Under rent control, tenants can expect
answer
b
question
Which of the following is not a result of government-imposed rent control?
answer
d
question
At a minimum wage that exceeds the equilibrium wage
answer
b
question
The minimum wage, if it is binding, lowers the incomes of
answer
b
question
Opponents of the minimum wage point out that the minimum wage
answer
d
question
When government imposes a price ceiling or a price floor in a market,
answer
a
question
A tax on the buyers of coffee will
answer
c
question
When a tax is imposed on tea and buyers of tea are required to send in the tax payments to the government
answer
a
question
A tax imposed on the sellers of a good will
answer
a
question
In which market will the majority of the tax burden fall on the seller?
answer
a
question
The effective price that sellers receive after the tax is imposed is
answer
a
question
The amount of the tax per unit is
answer
c
question
Buyers of a good bear the larger share of the tax burden when a tax is placed on a product for which
answer
b
question
Which of the following is the most correct statement about tax burdens?
answer
a
question
The burden of a luxury tax falls
answer
b
question
Which of the following statements is true?
answer
c
question
The demand for salt is inelastic and the supply of salt is elastic. The demand for caviar is elastic and the
supply of caviar is inelastic. Suppose that a tax of $1 per pound is levied on the sellers of salt and a tax of $1
per pound is levied on the buyers of caviar. We would expect that most of the burden of these taxes will fall
on
supply of caviar is inelastic. Suppose that a tax of $1 per pound is levied on the sellers of salt and a tax of $1
per pound is levied on the buyers of caviar. We would expect that most of the burden of these taxes will fall
on
answer
b
question
If a price ceiling of $2 per gallon is imposed on gasoline, and the market equilibrium price is $1.50, the price
ceiling is a binding constraint on the market.
ceiling is a binding constraint on the market.
answer
c
question
If a price ceiling is below equilibrium price, the quantity demanded will exceed the quantity supplied.
answer
False
question
Binding price ceilings benefit consumers because they allow consumers to buy all the goods they demand at a
lower price.
lower price.
answer
True
question
Rent control may lead to lower rents for those who find housing, but the quality of the housing may also be
lower
lower
answer
False
question
A binding minimum wage in a competitive labor market creates unemployment.
answer
True
question
Economists use the term tax incidence to refer to who is legally responsible for paying the tax.
answer
True
question
A government-imposed tax on a market shrinks the size of the market.
answer
False
question
A tax on golf clubs will cause buyers of golf clubs to pay a higher price, and the equilibrium quantity will
decrease
decrease
answer
True
question
If a tax is imposed on the buyers of a product, the tax burden will fall entirely on the buyers
answer
True
question
The incidence of a tax depends on whether the tax is levied on buyers or sellers.
answer
False
question
Lawmakers can decide whether the buyers or the sellers must send a tax to the government, but they cannot
legislate the true burden of a tax.
legislate the true burden of a tax.
answer
False
question
In general, a tax burden falls more heavily on the side of the market that is more inelastic
answer
True
question
Using the graph shown, answer the following questions.
a. What was the equilibrium price and quantity in this market before the tax?
b. What is the amount of the tax?
c. How much of the tax will the buyers pay?
d. How much of the tax will the sellers pay?
e. How much will the buyer pay for the product after the tax is imposed?
f. How much will the seller receive after the tax is imposed?
g. As a result of the tax, what has happened to the level of market activity?
a. What was the equilibrium price and quantity in this market before the tax?
b. What is the amount of the tax?
c. How much of the tax will the buyers pay?
d. How much of the tax will the sellers pay?
e. How much will the buyer pay for the product after the tax is imposed?
f. How much will the seller receive after the tax is imposed?
g. As a result of the tax, what has happened to the level of market activity?
answer
a. Equilibrium price is $8 and equilibrium is 8,000 units.
b. The tax is $3.00.
c. Buyers will pay $1.00.
d. Sellers will pay $2.00.
e. $9.00
f. $6.00
g. Instead of 8,000 units being bought and sold, only 6,000 will be bought and sold.
b. The tax is $3.00.
c. Buyers will pay $1.00.
d. Sellers will pay $2.00.
e. $9.00
f. $6.00
g. Instead of 8,000 units being bought and sold, only 6,000 will be bought and sold.
question
...
answer
...
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