shiskin microeconomics - Assignment Essays %

question

According to the diagram, what is the total surplus generated by the market if nothing prevents it from reaching the point of allocative efficiency?

answer

$270

question

On the diagram, what would be the DWL (deadweight loss) if for some reason the level of output is set to 40 units.

answer

$30

question

On the diagram above, what would be the DWL (deadweight loss) if for some reason the level of output is set at 70 units?

answer

$7.5

question

If the marginal benefit of a hot dog is greater than its marginal cost, then what should be done to the output of hotdogs to achieve efficiency?

answer

To achieve allocative efficiency, the output of hot dogs should be increased.

question

If the local government sets the highest legally permitted rent at $400 per month, would there be a shortage or surplus? How large?

answer

a shortage of 45 apartments

question

If the local government set the highest legally permitted rent at $400 per month, what would the deadweight loss resulting from this restriction be?

answer

$1,125

question

If the local government set the highest legally permitted rent at $400 per month, how much resources will be lost because of search activity caused by the shortage?

answer

$6,750

question

The figure above illustrates the current market for fast-food restaurant jobs in Springfield. If the city government imposes a minimum wage of $12 an hour, what would be the amount of labor demanded and the amount of labor supplied?

answer

quantity supplied will be 500 worker hours a week and quantity demanded will be only 200 worker hours a week.

question

This figure illustrates the current market for fast-food restaurant jobs in Springfield. If the city government imposes a minimum wage of $12 an hour, what is the deadweight loss resulting from this restriction on wages?

answer

$600 a week

question

The figure above illustrates the current market for fast-food restaurant jobs in Springfield. If the city government imposes a minimum wage of $12 an hour, how much resources will be lost because of an increase in search activity?

answer

$1,200 a week

question

When the price of a cup of coffee falls from $3.00 to $2.50, the quantity demanded increases from 1,000 per month to 1,150 per month. This means that price elasticity of demand is:

answer

0.77

question

If a good has only a few, poor substitutes, then its demand is

answer

inelastic

question

Which is larger: The price elasticity of demand for food or the price elasticity of demand for oranges?

answer

elasticity of demand for oranges is larger than the price elasticity of demand for food because oranges have more substitutes than food

question

Studies have shown that as people's income is growing, the proportion of income that they spend on food is getting smaller. People in developing countries have low incomes and therefore spend a large part of it on food. For example, in Tanzania 62 percent of income is spent on food. On the other hand, in United States only 12 percent of income is spent on food. Based on this information, in which country we would expect elasticity of demand for food to be higher: in United States or in Tanzania?

answer

we would expect elasticity of demand for food to be higher in Tanzania, because people in Tanzania spend larger share of their income on food

question

If the total revenue moves in the same direction as the price, then what can we say about elasticity of demand?

answer

Demand is inelastic

question

If the total revenue moves in the opposite direction of the price, then what can we say about elasticity of demand?

answer

Demand is elastic

question

If the total revenue does not change much as the price of the good changes, then what can we say about elasticity of demand?

answer

Demand is unit elastic

question

Use the following diagram to figure out how a $1 increase in price along the inelastic section of the demand curve affects the total revenue. Fill in the blank spaces to explain your work: as price increases from $2 to $3, total revenue __________ from ___ to ____ .

answer

increases from $76 to $104

question

Use the following diagram to figure out how a $1 increase in price along the ELASTIC section of the demand curve affects the total revenue. Fill in the blank spaces: as price increases from $7 to $8, total revenue __________ from ___ to ____ .

answer

decreases from $104 to $80

question

Suppose that good weather positively affects supply of bananas in CostaRica. How a moderate shift in the supply curve caused by this event is going to affect total revenue generated at this market if in the initial market equilibrium demand is elastic?
Use the following diagram by showing a shift in the supply curve along the elastic section of the demand curve and a resulting change in total revenue on the righthand diagram:

answer

As supply increases, the price drops and the total revenue increases

question

Resource use is allocative efficient

answer

when we produce goods and services that we value most highly.

question

The tollway authority must decide the efficient allocation of resources to build toll roads. To determine the efficient allocation of resources, the tollway authority must compare

answer

marginal cost to marginal benefit.

question

Marginal benefit is the benefit that a person receives from consuming

answer

one more unit of a good or service.

question

Marginal benefit is the

answer

additional benefit we receive from consuming one more unit of a good or service.

question

Marginal benefit

answer

decreases as more of a good is consumed.

question

The principle of decreasing marginal benefit explains why the marginal benefit curve

answer

is downward sloping.

question

The point that each glass of lemonade consumed on a hot day brings lower and lower levels of satisfaction is known as the principle of

answer

decreasing marginal benefit.

question

The marginal benefit of the first hotdog consumed is ________ the marginal benefit of the fifth hotdog consumed.

answer

greater than

question

Marginal cost equals

answer

the opportunity cost of producing one more unit of output.

question

The marginal cost of a good or service

answer

can be derived from the production possibilities frontier.

question

Which of the following is necessary for allocative efficiency to be achieved?

answer

Marginal benefit must equal marginal cost.

question

When the marginal cost of producing a bike is greater than the marginal benefit of the bike, for resource use to be allocatively efficient,

answer

fewer bikes should be produced.

question

Which of the following are the rules for finding the point of allocative efficiency?

answer

Produce on the PPF and then produce where marginal benefit equals marginal cost.

question

Suppose the nation is producing at a point on its PPF. If the marginal cost of producing one more computer is greater than the marginal benefit, the nation is producing

answer

too many computers to be allocatively efficient.

question

The figure above shows Kaley's marginal benefit from swimming with manatees and Scott's marginal cost of providing manatee swimming tours. At 1 manatee swim per week, Kaley's marginal benefit is ________ and Scott's marginal cost is ________.

answer

$40; $10

question

The figure above shows Kaley's marginal benefit from swimming with manatees and Scott's marginal cost of providing manatee swimming tours. For Kaley and Scott, allocative efficiency is achieved at what point?

answer

question

To an economist, "value" is the same as

answer

marginal benefit.

question

Value and price can be compared by noting that

answer

price is what we must pay and value is what we are willing to pay.

question

The maximum amount of other goods and services that people are willing to give up in order to get one more unit of a good is defined as the good's

answer

marginal benefit.

question

What must be true for a consumer to buy a good or service?

answer

The price must be equal to or less than the marginal benefit.

question

Mark loves ice cream. At any point in time, he will buy an additional ice cream cone if

answer

the marginal benefit from it exceeds the price.

question

A point on the demand curve shows the

answer

Both answers price and the corresponding quantity demanded and marginal benefit from that unit are correct.

question

The demand curve is also the

answer

marginal benefit curve.

question

Consumer surplus exists when a

answer

person buys something with a marginal benefit more than what they paid.

question

Jake just bought a new hockey stick. When he was leaving the shop, he thought that he such a great deal and would have paid $50 more dollars for the stick. Jake received

answer

consumer surplus.

question

Consumer surplus exists when

answer

consumers value the good more highly than what they must pay to buy it.

question

Which of the following statements is correct?

answer

An increase in price decreases consumer surplus.

question

Consumer surplus is the area

answer

below the demand curve and above the market price.

question

The figure above shows that for the 8,000th ticket, the marginal benefit is ________ and the consumer surplus is ________.

answer

$60; $20

question

The figure above shows that the total benefit equals ________ which is the total of ________.

answer

$900,000; consumer surplus plus the amount paid

question

In the figure above, at the market price of $15, the consumer surplus equals

answer

$10,000.

question

In the figure above, suppose that $20 is the market equilibrium price. What is the amount of the consumer surplus?

answer

$375

question

Ben's cost of making an additional rocking chair is $75.

answer

Both answers If he sells it for a $100, his producer surplus is $25 and His marginal cost is equal to $75 are correct.

question

A supply curve shows quantities supplied at various prices. It also shows the

answer

marginal cost of production.

question

The supply curve is upward sloping because of

answer

increasing marginal cost.

question

If the price is greater than the marginal cost of producing a good, the seller has

answer

some producer surplus from the sale.

question

Bill and Krista sell potted plants from a roadside stand. The figure above shows Bill and Krista's marginal cost curve and the market price. If Bill and Krista sell 60 plants per week at $8 per plant, their producer surplus from all their plants is

answer

$240.

question

If marginal benefit is equal to marginal cost, then the

answer

sum of producer surplus and consumer surplus is as large as possible.

question

Which of the following occurs when a market is efficient?

answer

The sum of consumer surplus and producer surplus is maximized.

question

If the market for bicycles is efficient, then

answer

it is not possible to produce more bicycles without sacrificing another, more highly valued good.

question

The figure above shows the t-shirt market. Market failure will occur in the t-shirt market if the quantity produced equals

answer

both 20,000 because a deadweight loss occurs due to underproduction and 35,000 because a deadweight loss occurs due to overproduction. are correct.

question

When underproduction occurs,

answer

there is a deadweight loss that is borne by
the entire society.

question

A price ceiling

answer

is the maximum price that can legally be charged.

question

If a price ceiling is set above the equilibrium price, then

answer

there will be neither a shortage nor a surplus of the good.

question

A price ceiling in the market for gasoline that is below the equilibrium price will lead to

answer

the quantity demanded of gasoline exceeding the quantity supplied.

question

The demand and supply schedules for pizza are in the table above. A price ceiling of $2 per slice results in

answer

a shortage of 20 slices of pizza.

question

The graph shows the market for apartments in Rivercity. As a result of the rent ceiling of $400, ________ are rented and people are willing to incur search costs of ________.

answer

2,000; more than $100

question

A rent ceiling set below the equilibrium rent

answer

creates a situation in which the quantity demanded of housing is greater than quantity supplied.

question

A housing shortage results when

answer

a rent ceiling below the equilibrium rent is imposed.

question

Suppose the equilibrium rent in Denver is $1,050. A rent ceiling of $755 per month leads to

answer

a shortage of apartments in Denver.

question

Which of the following results from a price ceiling?
i.increased search activity
ii.surplus
iii.black market

answer

i and iii

question

In a housing market with a rent ceiling below the equilibrium rent, apartment seekers spend more time searching for an apartment than they would in a housing market without a rent ceiling. Why does this difference exist?

answer

In the market with the rent ceiling, the quantity of housing demanded is greater than quantity supplied at the ceiling price.

question

In a market with a rent ceiling set below the equilibrium rent, the producer and consumer surplus

answer

both decrease, but generally not to zero.

question

People who benefit from a rent ceiling include

answer

tenants who have a rent-controlled apartment.

question

Assuming that the rent ceiling is strictly enforced so that there is no black market, which of the following statements about a housing market with a rent ceiling set below the equilibrium rent is correct?

answer

The rent ceiling creates a deadweight loss.

question

The above figure shows the market for 2 bedroom town homes in San Diego. If a rent ceiling is set at $1,000 per month then there is a

answer

shortage equal to 150,000 town homes.

question

The above figure shows the market for 2 bedroom town homes in San Diego. If a rent ceiling is set at $1,000 per month, what is true?

answer

Black market rents might be as high as $1,300 per month.

question

The above figure shows the market for 2 bedroom town homes in San Diego. If a rent ceiling is set at $1,000 per month, what is the maximum rent someone is willing to pay in the black market?

answer

$1,300 per month

question

The above figure shows a housing market with a rent ceiling equal to $1,000. In this figure, after taking account of the resources lost in search, what area is equal to the consumer surplus?

answer

area A

question

The above figure shows a housing market with a rent ceiling equal to $1,000. In this figure, what area is equal to the producer surplus?

answer

area D

question

The above figure shows a housing market with a rent ceiling equal to $1,000. In this figure, what area is equal to the deadweight loss?

answer

area C

question

The above figure shows a housing market with a rent ceiling equal to $1,000. In this figure, what area is equal to the resources lost due to search?

answer

area B

question

New York City, which has had a rent ceiling law for more than sixty years, has many abandoned apartment buildings throughout the city. Which of the following explains this?

answer

Landlords have no incentive to finance maintenance and remodeling of apartment buildings.

question

Which of the following is an example of the unfairness of rent ceilings?

answer

Newcomers have a more difficult time finding apartments.

question

Rent ceilings are difficult to abolish because

answer

current renters offer political support for ceilings.

question

Rent ceilings

answer

increase search activity.

question

A rent ceiling creates a deadweight loss

answer

if it is set below the equilibrium rent.

question

In the labor market, as wages rise, households

answer

increase the quantity of labor supplied.

question

In a competitive labor market, a minimum wage law set above the equilibrium wage rate

answer

creates a surplus of labor.

question

Suppose the current equilibrium wage rate for housekeepers is $8.60 per hour. An increase in the minimum wage to $7.50 per hour leads to

answer

no change in the market for housekeepers.

question

The figure shows the labor market for fast food workers. A minimum wage of ________ per hour will create unemployment of ________ workers.

answer

$15; 150,000

question

A minimum wage law

answer

increases the time spent searching by workers who cannot find a job.

question

The people who immediately benefit from a minimum wage are

answer

the workers who retain their jobs after enactment of the minimum wage.

question

In the figure above, if the minimum wage rate is $8 per hour, then after taking account of resources lost in job search, the workers' surplus is the area ________ and the firms' surplus is the area ________.

answer

a; f

question

In the figure above, if the minimum wage is $8 per hour, then

answer

resources used in job-search activity increase compared to the situation before the minimum wage.

question

The above figure shows a labor market with a minimum wage of $8 an hour. How many people are employed when the minimum wage is in place?

answer

40,000

question

The price elasticity of demand measures which of the following?

answer

how responsive the quantity demanded is to changes in price

question

The price elasticity of demand measures the extent to which the quantity demanded changes when

answer

the price of the good changes.

question

Suppose the price of a box of cereal rises from $4 to $6. Using the midpoint method, what is the percentage change in price?

answer

40 percent

question

Suppose the local university charges $85 per credit hour. If tuition increases from $85 to $93 per credit hour, using the midpoint method, what is the percentage change in price?

answer

8.99 percent

question

When the percentage change in the quantity demanded exceeds the percentage change in price, then demand is

answer

elastic.

question

Suppose the Chicago Bears football team raises ticket prices by 13 percent and as a result the quantity of tickets demanded decreases by 21 percent. This response means that the demand for Bears tickets is

answer

elastic

question

Suppose the demand for peaches sold from one roadside stand in Georgia is perfectly elastic. As a result, a 7 percent increase in the price charged by the owner of this stand leads to

answer

zero peaches sold by this stand.

question

When the percentage change in the quantity demanded is less than the percentage change in price, then demand is

answer

inelastic.

question

If the price elasticity of demand for opera tickets in Orlando is 1.00, then the demand for opera tickets in Orlando is

answer

unit elastic.

question

If a good has many close substitutes, then its demand is most likely

answer

elastic.

question

If a product is narrowly defined, it is likely to

answer

have many substitutes and therefore its demand is elastic.

question

Of the following, which good has the most elastic demand?

answer

Post Raisin Brand purchased at a Safeway grocery store

question

The price elasticity of demand for Red Delicious apples, a certain type of apple, is likely

answer

elastic.

question

One reason why the demand for gasoline is inelastic is because

answer

substitutes for gas are hard to find.

question

The longer the time that has elapsed since the price of a good changed, the

answer

more elastic the demand for that good.

question

The demand for a necessity generally is

answer

inelastic.

question

You are more sensitive to a change in price if you

answer

spend a lot of your income on the good.

question

What is the formula for the price elasticity of demand? The percentage change in the

answer

quantity demanded divided by the percentage change in price.

question

The price of furnace filters increased by 5 percent and the quantity demanded did not change. The price elasticity of demand for furnace filters is

answer

perfectly inelastic.

question

If the price elasticity of demand for a good is 2, then a 10 percent increase in the price of that good ________ the quantity demanded by ________ percent.

answer

decreases; 20

question

When the price of Cosmopolitan magazine decreases from $5 to $3, the quantity demanded increases from 600,000 to 1,000,000 copies each month. Using the midpoint method, the price elasticity of demand equals

answer

question

A firm can sell 10 units if the price is $100 and can sell 8 units if the price is $125. Using the midpoint method, what is the price elasticity of demand?

answer

1.00

question

When the price of a cup of coffee falls from $3.00 to $2.50, the quantity demanded increases from 1,000 per month to 1,150 per month. Using the midpoint method, the price elasticity of demand is

answer

0.77.

question

The figure shows a demand curve. Using the midpoint formula, the elasticity of demand moving from point A to point B equals

answer

question

In the figure above, using the midpoint method, the price elasticity of demand when the price falls from $8 to $7 is equal to

answer

2.50.

question

Moving downward along a linear (straight-line) downward-sloping demand curve, the

answer

demand becomes less elastic.

question

In the figure above, using the midpoint method, what is the price elasticity of demand between points A and B?

answer

0.43

question

In Tanzania a larger proportion of income is spent on food compared to Canada.As a result, we'd expect the price elasticity of demand for food to be

answer

greater in Tanzania.

question

The price of the good multiplied by the quantity sold is its

answer

total revenue.

question

If demand is price inelastic and the price is lowered, which of the following occurs?

answer

The total revenue of the firms selling the product decreases.

question

Total revenue increases if the price of the good

answer

rises and demand is inelastic.

question

If the supply of a good decreases and it causes total revenue to increase, this shows that the good has an

answer

inelastic demand.

question

You own a small store. Your cashier thinks you should raise prices to increase your total revenue and your customer thinks you should lower prices to increase your total revenue. The cashier thinks the price elasticity of demand is ________ and the customer believes the price elasticity of demand is ________.

answer

inelastic; elastic

question

If the demand for insulin is inelastic, an increase in insulin prices leads to

answer

more total revenue for insulin makers.

1 of 130

question

According to the diagram, what is the total surplus generated by the market if nothing prevents it from reaching the point of allocative efficiency?

answer

$270

question

On the diagram, what would be the DWL (deadweight loss) if for some reason the level of output is set to 40 units.

answer

$30

question

On the diagram above, what would be the DWL (deadweight loss) if for some reason the level of output is set at 70 units?

answer

$7.5

question

If the marginal benefit of a hot dog is greater than its marginal cost, then what should be done to the output of hotdogs to achieve efficiency?

answer

To achieve allocative efficiency, the output of hot dogs should be increased.

question

If the local government sets the highest legally permitted rent at $400 per month, would there be a shortage or surplus? How large?

answer

a shortage of 45 apartments

question

If the local government set the highest legally permitted rent at $400 per month, what would the deadweight loss resulting from this restriction be?

answer

$1,125

question

If the local government set the highest legally permitted rent at $400 per month, how much resources will be lost because of search activity caused by the shortage?

answer

$6,750

question

answer

quantity supplied will be 500 worker hours a week and quantity demanded will be only 200 worker hours a week.

question

answer

$600 a week

question

answer

$1,200 a week

question

When the price of a cup of coffee falls from $3.00 to $2.50, the quantity demanded increases from 1,000 per month to 1,150 per month. This means that price elasticity of demand is:

answer

0.77

question

If a good has only a few, poor substitutes, then its demand is

answer

inelastic

question

Which is larger: The price elasticity of demand for food or the price elasticity of demand for oranges?

answer

elasticity of demand for oranges is larger than the price elasticity of demand for food because oranges have more substitutes than food

question

answer

we would expect elasticity of demand for food to be higher in Tanzania, because people in Tanzania spend larger share of their income on food

question

If the total revenue moves in the same direction as the price, then what can we say about elasticity of demand?

answer

Demand is inelastic

question

If the total revenue moves in the opposite direction of the price, then what can we say about elasticity of demand?

answer

Demand is elastic

question

If the total revenue does not change much as the price of the good changes, then what can we say about elasticity of demand?

answer

Demand is unit elastic

question

answer

increases from $76 to $104

question

answer

decreases from $104 to $80

question

answer

As supply increases, the price drops and the total revenue increases

question

Resource use is allocative efficient

answer

when we produce goods and services that we value most highly.

question

The tollway authority must decide the efficient allocation of resources to build toll roads. To determine the efficient allocation of resources, the tollway authority must compare

answer

marginal cost to marginal benefit.

question

Marginal benefit is the benefit that a person receives from consuming

answer

one more unit of a good or service.

question

Marginal benefit is the

answer

additional benefit we receive from consuming one more unit of a good or service.

question

Marginal benefit

answer

decreases as more of a good is consumed.

question

The principle of decreasing marginal benefit explains why the marginal benefit curve

answer

is downward sloping.

question

The point that each glass of lemonade consumed on a hot day brings lower and lower levels of satisfaction is known as the principle of

answer

decreasing marginal benefit.

question

The marginal benefit of the first hotdog consumed is ________ the marginal benefit of the fifth hotdog consumed.

answer

greater than

question

Marginal cost equals

answer

the opportunity cost of producing one more unit of output.

question

The marginal cost of a good or service

answer

can be derived from the production possibilities frontier.

question

Which of the following is necessary for allocative efficiency to be achieved?

answer

Marginal benefit must equal marginal cost.

question

When the marginal cost of producing a bike is greater than the marginal benefit of the bike, for resource use to be allocatively efficient,

answer

fewer bikes should be produced.

question

Which of the following are the rules for finding the point of allocative efficiency?

answer

Produce on the PPF and then produce where marginal benefit equals marginal cost.

question

Suppose the nation is producing at a point on its PPF. If the marginal cost of producing one more computer is greater than the marginal benefit, the nation is producing

answer

too many computers to be allocatively efficient.

question

answer

$40; $10

question

answer

question

To an economist, "value" is the same as

answer

marginal benefit.

question

Value and price can be compared by noting that

answer

price is what we must pay and value is what we are willing to pay.

question

The maximum amount of other goods and services that people are willing to give up in order to get one more unit of a good is defined as the good's

answer

marginal benefit.

question

What must be true for a consumer to buy a good or service?

answer

The price must be equal to or less than the marginal benefit.

question

Mark loves ice cream. At any point in time, he will buy an additional ice cream cone if

answer

the marginal benefit from it exceeds the price.

question

A point on the demand curve shows the

answer

Both answers price and the corresponding quantity demanded and marginal benefit from that unit are correct.

question

The demand curve is also the

answer

marginal benefit curve.

question

Consumer surplus exists when a

answer

person buys something with a marginal benefit more than what they paid.

question

Jake just bought a new hockey stick. When he was leaving the shop, he thought that he such a great deal and would have paid $50 more dollars for the stick. Jake received

answer

consumer surplus.

question

Consumer surplus exists when

answer

consumers value the good more highly than what they must pay to buy it.

question

Which of the following statements is correct?

answer

An increase in price decreases consumer surplus.

question

Consumer surplus is the area

answer

below the demand curve and above the market price.

question

The figure above shows that for the 8,000th ticket, the marginal benefit is ________ and the consumer surplus is ________.

answer

$60; $20

question

The figure above shows that the total benefit equals ________ which is the total of ________.

answer

$900,000; consumer surplus plus the amount paid

question

In the figure above, at the market price of $15, the consumer surplus equals

answer

$10,000.

question

In the figure above, suppose that $20 is the market equilibrium price. What is the amount of the consumer surplus?

answer

$375

question

Ben's cost of making an additional rocking chair is $75.

answer

Both answers If he sells it for a $100, his producer surplus is $25 and His marginal cost is equal to $75 are correct.

question

A supply curve shows quantities supplied at various prices. It also shows the

answer

marginal cost of production.

question

The supply curve is upward sloping because of

answer

increasing marginal cost.

question

If the price is greater than the marginal cost of producing a good, the seller has

answer

some producer surplus from the sale.

question

answer

$240.

question

If marginal benefit is equal to marginal cost, then the

answer

sum of producer surplus and consumer surplus is as large as possible.

question

Which of the following occurs when a market is efficient?

answer

The sum of consumer surplus and producer surplus is maximized.

question

If the market for bicycles is efficient, then

answer

it is not possible to produce more bicycles without sacrificing another, more highly valued good.

question

The figure above shows the t-shirt market. Market failure will occur in the t-shirt market if the quantity produced equals

answer

both 20,000 because a deadweight loss occurs due to underproduction and 35,000 because a deadweight loss occurs due to overproduction. are correct.

question

When underproduction occurs,

answer

there is a deadweight loss that is borne by
the entire society.

question

A price ceiling

answer

is the maximum price that can legally be charged.

question

If a price ceiling is set above the equilibrium price, then

answer

there will be neither a shortage nor a surplus of the good.

question

A price ceiling in the market for gasoline that is below the equilibrium price will lead to

answer

the quantity demanded of gasoline exceeding the quantity supplied.

question

The demand and supply schedules for pizza are in the table above. A price ceiling of $2 per slice results in

answer

a shortage of 20 slices of pizza.

question

The graph shows the market for apartments in Rivercity. As a result of the rent ceiling of $400, ________ are rented and people are willing to incur search costs of ________.

answer

2,000; more than $100

question

A rent ceiling set below the equilibrium rent

answer

creates a situation in which the quantity demanded of housing is greater than quantity supplied.

question

A housing shortage results when

answer

a rent ceiling below the equilibrium rent is imposed.

question

Suppose the equilibrium rent in Denver is $1,050. A rent ceiling of $755 per month leads to

answer

a shortage of apartments in Denver.

question

Which of the following results from a price ceiling?
i.increased search activity
ii.surplus
iii.black market

answer

i and iii

question

answer

In the market with the rent ceiling, the quantity of housing demanded is greater than quantity supplied at the ceiling price.

question

In a market with a rent ceiling set below the equilibrium rent, the producer and consumer surplus

answer

both decrease, but generally not to zero.

question

People who benefit from a rent ceiling include

answer

tenants who have a rent-controlled apartment.

question

answer

The rent ceiling creates a deadweight loss.

question

The above figure shows the market for 2 bedroom town homes in San Diego. If a rent ceiling is set at $1,000 per month then there is a

answer

shortage equal to 150,000 town homes.

question

The above figure shows the market for 2 bedroom town homes in San Diego. If a rent ceiling is set at $1,000 per month, what is true?

answer

Black market rents might be as high as $1,300 per month.

question

The above figure shows the market for 2 bedroom town homes in San Diego. If a rent ceiling is set at $1,000 per month, what is the maximum rent someone is willing to pay in the black market?

answer

$1,300 per month

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The above figure shows a housing market with a rent ceiling equal to $1,000. In this figure, after taking account of the resources lost in search, what area is equal to the consumer surplus?

answer

area A

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The above figure shows a housing market with a rent ceiling equal to $1,000. In this figure, what area is equal to the producer surplus?

answer

area D

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The above figure shows a housing market with a rent ceiling equal to $1,000. In this figure, what area is equal to the deadweight loss?

answer

area C

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The above figure shows a housing market with a rent ceiling equal to $1,000. In this figure, what area is equal to the resources lost due to search?

answer

area B

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New York City, which has had a rent ceiling law for more than sixty years, has many abandoned apartment buildings throughout the city. Which of the following explains this?

answer

Landlords have no incentive to finance maintenance and remodeling of apartment buildings.

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Which of the following is an example of the unfairness of rent ceilings?

answer

Newcomers have a more difficult time finding apartments.

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Rent ceilings are difficult to abolish because

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current renters offer political support for ceilings.

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Rent ceilings

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increase search activity.

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A rent ceiling creates a deadweight loss

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if it is set below the equilibrium rent.

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In the labor market, as wages rise, households

answer

increase the quantity of labor supplied.

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In a competitive labor market, a minimum wage law set above the equilibrium wage rate

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creates a surplus of labor.

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Suppose the current equilibrium wage rate for housekeepers is $8.60 per hour. An increase in the minimum wage to $7.50 per hour leads to

answer

no change in the market for housekeepers.

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The figure shows the labor market for fast food workers. A minimum wage of ________ per hour will create unemployment of ________ workers.

answer

$15; 150,000

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A minimum wage law

answer

increases the time spent searching by workers who cannot find a job.

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The people who immediately benefit from a minimum wage are

answer

the workers who retain their jobs after enactment of the minimum wage.

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answer

a; f

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In the figure above, if the minimum wage is $8 per hour, then

answer

resources used in job-search activity increase compared to the situation before the minimum wage.

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The above figure shows a labor market with a minimum wage of $8 an hour. How many people are employed when the minimum wage is in place?

answer

40,000

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The price elasticity of demand measures which of the following?

answer

how responsive the quantity demanded is to changes in price

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The price elasticity of demand measures the extent to which the quantity demanded changes when

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the price of the good changes.

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Suppose the price of a box of cereal rises from $4 to $6. Using the midpoint method, what is the percentage change in price?

answer

40 percent

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Suppose the local university charges $85 per credit hour. If tuition increases from $85 to $93 per credit hour, using the midpoint method, what is the percentage change in price?

answer

8.99 percent

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When the percentage change in the quantity demanded exceeds the percentage change in price, then demand is

answer

elastic.

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answer

elastic

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Suppose the demand for peaches sold from one roadside stand in Georgia is perfectly elastic. As a result, a 7 percent increase in the price charged by the owner of this stand leads to

answer

zero peaches sold by this stand.

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When the percentage change in the quantity demanded is less than the percentage change in price, then demand is

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inelastic.

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If the price elasticity of demand for opera tickets in Orlando is 1.00, then the demand for opera tickets in Orlando is

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unit elastic.

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If a good has many close substitutes, then its demand is most likely

answer

elastic.

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If a product is narrowly defined, it is likely to

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have many substitutes and therefore its demand is elastic.

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Of the following, which good has the most elastic demand?

answer

Post Raisin Brand purchased at a Safeway grocery store

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The price elasticity of demand for Red Delicious apples, a certain type of apple, is likely

answer

elastic.

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One reason why the demand for gasoline is inelastic is because

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substitutes for gas are hard to find.

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The longer the time that has elapsed since the price of a good changed, the

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more elastic the demand for that good.

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The demand for a necessity generally is

answer

inelastic.

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You are more sensitive to a change in price if you

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spend a lot of your income on the good.

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What is the formula for the price elasticity of demand? The percentage change in the

answer

quantity demanded divided by the percentage change in price.

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The price of furnace filters increased by 5 percent and the quantity demanded did not change. The price elasticity of demand for furnace filters is

answer

perfectly inelastic.

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If the price elasticity of demand for a good is 2, then a 10 percent increase in the price of that good ________ the quantity demanded by ________ percent.

answer

decreases; 20

question

answer

question

A firm can sell 10 units if the price is $100 and can sell 8 units if the price is $125. Using the midpoint method, what is the price elasticity of demand?

answer

1.00

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When the price of a cup of coffee falls from $3.00 to $2.50, the quantity demanded increases from 1,000 per month to 1,150 per month. Using the midpoint method, the price elasticity of demand is

answer

0.77.

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The figure shows a demand curve. Using the midpoint formula, the elasticity of demand moving from point A to point B equals

answer

question

In the figure above, using the midpoint method, the price elasticity of demand when the price falls from $8 to $7 is equal to

answer

2.50.

question

Moving downward along a linear (straight-line) downward-sloping demand curve, the

answer

demand becomes less elastic.

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In the figure above, using the midpoint method, what is the price elasticity of demand between points A and B?

answer

0.43

question

In Tanzania a larger proportion of income is spent on food compared to Canada.As a result, we'd expect the price elasticity of demand for food to be

answer

greater in Tanzania.

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The price of the good multiplied by the quantity sold is its

answer

total revenue.

question

If demand is price inelastic and the price is lowered, which of the following occurs?

answer

The total revenue of the firms selling the product decreases.

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Total revenue increases if the price of the good

answer

rises and demand is inelastic.

question

If the supply of a good decreases and it causes total revenue to increase, this shows that the good has an

answer

inelastic demand.

question

answer

inelastic; elastic

question

If the demand for insulin is inelastic, an increase in insulin prices leads to

answer

more total revenue for insulin makers.

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