question
In a competitive market who are price takers?
answer
Buyers and sellers
question
What is an example of the Law of Demand?
answer
Dave buys more donuts at $0.25 per donut than $0.50, other things equal.
question
When the price of peaches changes, the demand curve for peaches?
answer
Does not shift because the price of peaches is measured on the horizontal axis of the graph.
question
Holding all other things constant, a higher price for ski lift tickets would?
answer
Decrease the number of skis sold.
question
A very hot summer in Atlanta will cause?
answer
The demand for jackets to decrease.
question
Ford Motor Company announces that next month it will offer $3,000 rebates on new Mustangs. As a result of this information, today's demand curve for Mustangs?
answer
Shifts to the left
question
What is an example of the Law of Supply?
answer
When ketchup prices rose, ketchup sellers increased their quantity supplied of ketchup.
question
Matthew bakes apple pies that he sells at the local farmer's market. If the price of apples increases, the?
answer
Supply Curve for Matthew's pies will decrease.
question
Today's supply curve for iPhones could shift in response to a change in?
answer
The expected future price of iPhones
question
What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell?
answer
Price would fall, and the effect on quantity would be ambiguous.
question
A university's football stadium is never more than half-full during football games. This indicates?
answer
The ticket price is above the equilibrium price
question
A decrease in input costs to firms in a market will result in an?
answer
Decrease in equilibrium price and an increase in equilibrium quantity.
question
What would happen to the equilibrium price and quantity of peanut butter if the price of peanuts went up, the price of jelly fell, fewer firms decided to produce peanut butter, and health officials announced that eating peanut butter was good for you?
answer
Price will rise, and the effect on quantity is ambiguous.
question
The price elasticity of demand measures?
answer
Buyers' responsiveness to a change in the price of a good.
question
If demand is price inelastic, then?
answer
Buyers do not respond much to a change in price.
question
Which of the following is likely to have the most price inelastic demand?
Mint Flavored Tooth Paste
Tooth Paste
Colgate Mint-Flavored Tooth Paste
A Generic Mint-Flavored Tooth Paste
Mint Flavored Tooth Paste
Tooth Paste
Colgate Mint-Flavored Tooth Paste
A Generic Mint-Flavored Tooth Paste
answer
Tooth Paste
question
When demand is inelastic, the price elasticity of demand is?
answer
Less than 1, and price and total revenue will move in the same direction
question
Suppose you are in charge of setting prices at a local ice cream shop. The business needs to increase its total revenue, and your job is on the line. You evaluate the data and determine that the price elasticity of demand of ice cream at your shop is 1.8. You should?
answer
Decrease the Price of Ice Cream
question
You and your college roommate eat three packages of Roman Noodles each week. After graduation last month, both of you were hired at several times your college income. You still enjoy Roman Noodles very much and buy even more, but your roommate plans to buy fewer Roman Noodle in favor of foods she prefers more. When looking at income elasticity of demand for Roman Noodles, yours would?
answer
Be positive, and your roommates would be negative.
question
If the cross-price elasticity of two goods is negative, then the two goods are?
answer
Complements
question
The price elasticity of supply measures how much?
answer
The quantity supplied responds to change in the price of the good.
question
As price elasticity of supply increases, the supply curve?
answer
Becomes flatter
question
Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000 packages per week. When the price is $280 , the quantity demanded is 1,700 per week. Using the midpoint method, the price elasticity of demand is about?
answer
1.43 and an increase in the price will cause hotels' total revenue to decrease
question
Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should?
answer
Decrease the price charged to vacationers and increase the price charged to business travelers.
question
Welfare economics is the study of?
answer
How the allocation of resources affects economic well-being.
question
Which of the Ten Principles of Economics does welfare economics explain more fully?
answer
Markets are usually a good way to organize economic activity.
question
Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called?
answer
Willingness to Pay
question
Consumer Surplus is?
answer
The amount a consumer is willing to pay minus the amount the consumer actually pays
question
Suppose Brent, Callie, and Danielle each purchase a particular type of electric pencil sharpener at a price of $20. Brent's willingness to pay was $22, Callie's willingness to pay was $25, and Danielle's willingness to pay was $30. Which of the following statements is correct?
Had the price of the pencil sharpener been $24 rather than $20, only Danielle would have been a buyer.
Brent's consumer surplus is the smallest of the three individual consumer surpluses.
For the three individuals together, consumer surplus amounts to $60
The fact that all three individuals paid $20 for the same type of pencil sharpener indicates that each one placed the same value on that pencil sharpener
Had the price of the pencil sharpener been $24 rather than $20, only Danielle would have been a buyer.
Brent's consumer surplus is the smallest of the three individual consumer surpluses.
For the three individuals together, consumer surplus amounts to $60
The fact that all three individuals paid $20 for the same type of pencil sharpener indicates that each one placed the same value on that pencil sharpener
answer
Brent's consumer surplus is the smallest of the three individual consumer surpluses.
question
Which of the following will cause an increase in consumer surplus?
A technological improvement in the production of a good
An increase in the production cost of the good
A decrease in the number of sellers of the good
The imposition of a binding price floor in the market
A technological improvement in the production of a good
An increase in the production cost of the good
A decrease in the number of sellers of the good
The imposition of a binding price floor in the market
answer
A technological improvement in the production of a good
question
A supply curve can be used to measure producer surplus because it reflects?
answer
Seller's Cost
question
Tom tunes pianos in his spare time for extra income. Buyers of his service are willing to pay $155 per tuning. One particular week, Tom is willing to tune the first piano for $120, the second piano for $125, the third piano for $140, and the fourth piano for $160. Assume Tom is rational in deciding how many pianos to tune. His producer surplus is?
answer
$80
question
If the demand for light bulbs increases, producer surplus in the market for light bulbs?
answer
Increases
question
Total Surplus in a market is equal to?
answer
Consumer surplus + Producer Surplus
question
We can say that the allocation of resources is efficient if?
answer
Total Surplus is maximized.
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