MicroEconomics Test 2 Review

What does the price elasticity of demand measure?

Price elasticity of demand is measured as the

A producer knows that the price elasticity for his product is -0.5. He wants to increase quantity demanded by 30%. By what percentage does he need to change the price?

When the price elasticity of demand is elastic, a consumer is

When would oil producers see the largest percentage decline in the quantity demanded for oil due to an increase in the price of oil today?

When the price of softballs is high, a ________ in price will raise total revenue. When the price is low, the seller should ________ the price to increase total revenue.

How can a firm increase total revenue?

Pepsi vendors who raise their price at professional sporting events increase total revenue because the price elasticity of demand is ________. When they raise their prices at gas stations, they decrease total revenue because the price elasticity of demand is ________.

Income elasticity refers to

When incomes fall by 20 percent, quantity demanded of specialty baked goods falls by 50 percent. Specialty baked goods are

What good is most likely to have a negative income elasticity of demand?

The measure of the responsiveness of the demand for one good to the percentage change in the price of the other good is

Which one of the following pairs of goods is likely to have a negative cross-price elasticity of demand?

If the cross-price elasticity of demand between Good A and Good B is 2 and the percentage change in price of Good A is 5 percent, what is the percentage change in quantity demanded of Good B?

The price elasticity of supply is

The price elasticity supply of doctors could be considered ________ because it takes a minimum of four to six years of training to be able to work as a physician.

The difference between the willingness to pay for a good and the amount that is paid to get it is also known as

Consider the market for socks. The current price of a pair of plain white socks is $5.00. Two consumers, Igor and Samir, are willing to pay $7.25 and $8.00, respectively, for a pair of plain white socks. Two sock manufacturers are willing to sell plain white socks for as little as $4.00 and $4.15 per pair. How much is total consumer surplus in this market?

When the price of a good increases and all else is held constant

When looking at a supply and demand graph, you would find producer surplus

Which of the following statements is concerned with efficiency rather than equity

What is the total amount of producer and consumer surplus (i.e., social welfare) in this market after the tax is imposed?

Which areas represent the total cost to society, in terms of lost social welfare, created as a result of the tax?

Excise taxes are taxes that are

Excise taxes are popular sources of revenue for governments because

Assume that a $0.25/gallon tax on milk causes a loss of $250 million in consumer and producer surplus and creates a deadweight loss of $45 million. From this information, we know that the tax revenue from the tax is

In the long run, both supply and demand tend to become more elastic. This suggests that, in the long run, the

Peanut butter and jelly are complements. If a tax is imposed on peanut butter, how will that affect the market for jelly?

Of the following items, which is/are most important in determining the distribution of tax burden?

In a market where supply and demand are both somewhat elastic, but demand is more elastic than supply, consumers will bear less of the burden of a tax because

The maximum amount of tax revenue is generated when the good being taxed has a

Ireland's tax on plastic shopping bags successfully reduced consumer use of these bags because the

Why do government leaders impose price controls?

What will happen in a market where a binding price ceiling is removed?

Why would a politician find it difficult to remove a binding price ceiling?

If there is a $60 price ceiling imposed on a textbook, what will be the disequilibrium amount?

Katherine is the president of the United States. In an attempt to make gasoline prices cheaper, she has imposed a binding price ceiling on gas. What would she expect her critics to say?

The economic entity most likely to engage in price gouging is

Which is a correct statement about a rent control law?

If the local government tells gas stations that they are not allowed to change the price of gas for three weeks during hurricane season, what will be the consequence?

The town of Fairness has a law stating that wages should be high enough to ensure that all people can afford to buy enough food for their families. The law that sets wages would be an example of a

Why is it often difficult to remove a binding price floor after it exists?

What is the surplus when the price floor is $0.75 in the market for public transportation?

As the time frame shifts from the short run to the long run, what happens to consumers who are subject to a binding price floor?

What is the long-run consequence of a price floor law?

Which of the following is a correct statement?

Who potentially benefits from a price floor?

At what price level does the labor market experience its largest surplus?

The pollution emitted by a car is an example of a(n) ________ cost

The external cost is equal to ________ per unit.

Consider a market where production of the good is creating a negative externality. In the market equilibrium, there is a deadweight loss because the

The social optimum occurs where price is ________ and quantity is ________.

If the government imposes a tax on each aluminum can sold, payable by consumers when they purchase the item, then, in the market for goods sold in aluminum cans, the

Which of the following is true of a positive externality?

Which of the following is an example of a positive externality?

Which of the following is true?

Clean air becomes polluted because

If property rights over the river are assigned to Smith, then

A free-rider problem exists when

A good that is nonrival and nonexcludable is defined as a ________ good.

Which of the factors listed contributes to making street performances a public good?

What is the purpose of a cost-benefit analysis of a public good?

The tragedy of the commons

How many fishermen will choose to operate their boats?