Question 1

Which of the following is an example of an ad valorem tax?

Accepted Answer

A) 5% of price 
B) 5% of quantity sold 
C) $0.50 per unit sold 
D) Government regulation 
A) 5% of price 
B) 5% of quantity sold 
C) $0.50 per unit sold 
D) Government regulation

Question 2

The price elasticity of supply when the supply curve is Q = 5 is

Accepted Answer

A) 5. 
B) perfectly inelastic. 
C) perfectly elastic. 
D) Cannot be calculated from the information provided. 
A) 5. 
B) perfectly inelastic. 
C) perfectly elastic. 
D) Cannot be calculated from the information provided.

Question 3

If the demand function for orange juice is expressed as Q = 2000 - 500p, where Q is quantity in gallons and p is price per gallon measured in dollars, then the demand for orange juice has a unitary elasticity when price equals

Accepted Answer

A) $0. 
B) $1. 
C) $2. 
D) $4. 
A) $0. 
B) $1. 
C) $2. 
D) $4.

Question 4

If the price of orange juice rises 10%, and as a result the quantity demanded falls by 8%, the price elasticity of demand for orange juice is

Accepted Answer

A) -1.25. 
B) elastic. 
C) Both A and B above. 
D) Neither A nor B above. 
A) -1.25. 
B) elastic. 
C) Both A and B above. 
D) Neither A nor B above.

Question 5

Electricity accounts for almost 20% of the cost of making steel. A 10% increase in electricity prices results in steel firms decreasing production and thereby demanding 5% less electricity. Over many years, technological innovations can change the way steel firms make steel and reduce the industry's energy requirements. This suggests that the steel industry's short-run elasticity of demand for electricity is probably

Accepted Answer

A) less than one in absolute terms in the short run. 
B) less than its long-run elasticity of demand for electricity. 
C) Both A and B above. 
D) Neither A nor B above. 
A) less than one in absolute terms in the short run. 
B) less than its long-run elasticity of demand for electricity. 
C) Both A and B above. 
D) Neither A nor B above.

Question 6

If the price of orange juice rises 10%, and as a result the quantity demanded falls by 8%, the price elasticity of demand for orange juice is

Accepted Answer

A) -1.25. 
B) -80.0. 
C) -0.80. 
D) -10.0. 
A) -1.25. 
B) -80.0. 
C) -0.80. 
D) -10.0.

Question 7

If a linear supply curve has a zero intercept, the elasticity of supply is always unitary.

Accepted Answer

A) True 
 B)False

Question 8

Explain why the shape of the demand curve will determine how a shock to the market equilibrium affects price and quantity.

Accepted Answer

A flatter demand curve has a smaller slo

Question 9

Which of the following is most likely to be TRUE?

Accepted Answer

A) Income elasticity of demand for fur coats exceeds that of oatmeal. 
B) Income elasticity of demand for oatmeal exceeds that of fur coats. 
C) Income elasticity of demand for fur coats equals that of oatmeal. 
D) It is not possible to make any prediction about relative income elasticities. 
A) Income elasticity of demand for fur coats exceeds that of oatmeal. 
B) Income elasticity of demand for oatmeal exceeds that of fur coats. 
C) Income elasticity of demand for fur coats equals that of oatmeal. 
D) It is not possible to make any prediction about relative income elasticities.

Question 10

Consumers will always pay the entire amount of a specific tax whenever

Accepted Answer

A) demand is perfectly inelastic. 
B) supply is perfectly elastic. 
C) Both A and B above. 
D) Either A or B above but not at the same time. 
A) demand is perfectly inelastic. 
B) supply is perfectly elastic. 
C) Both A and B above. 
D) Either A or B above but not at the same time.

Question 11

Suppose the market for grass seed can be expressed as
Demand: QD = 100 - 2p
Supply: QS = 3p
If government imposes a $5 specific tax to be collected from sellers, what is the price consumers will pay? How much tax revenue is collected? What fraction is paid by sellers?

Accepted Answer

At equilibrium without the tax, p = 20 a

Question 12

The elasticity of demand for employees is -0.50. It is also estimated that the existing minimum wage (price floor)has increased the raise the wage by 25% above equilibrium wage. How much would the employment change if the price floor was eliminated?

Accepted Answer

A) Employment would decrease by 12.5%. 
B) Employment would increase by 12.5%. 
C) Employment would decrease by 25%. 
D) Employment would increase by 25%. 
A) Employment would decrease by 12.5%. 
B) Employment would increase by 12.5%. 
C) Employment would decrease by 25%. 
D) Employment would increase by 25%.

Question 13

Explain why a tax increase on cigarettes in one state might not lead to a substantial price increase for all consumers in that state.

Accepted Answer

Smuggling of non-taxed cigaret

Question 14

Suppose the demand curve for movie tickets has unitary price elasticity and the supply curve is perfectly price elastic. If 3 million tickets are currently sold at a price of $5, approximately how much tax revenue could the government generate from a $1 specific tax?

Accepted Answer

A) $18 million 
B) $3 million 
C) $2.7 million 
D) $1.5 million 
A) $18 million 
B) $3 million 
C) $2.7 million 
D) $1.5 million

Question 15

Suppose that a specific tax of $3 is imposed on producers of bread. The bread market supply is Qs = 10 + 0.5P and the bread market demand is Qd = 100-P. What is the producers' tax burden?

Accepted Answer

A) Producers' tax burden is $1.30. 
B) Producers' tax burden is $3.00. 
C) Producers' tax burden is $2.00. 
D) Producers' tax burden is $2.30 
A) Producers' tax burden is $1.30. 
B) Producers' tax burden is $3.00. 
C) Producers' tax burden is $2.00. 
D) Producers' tax burden is $2.30

Question 16

Why is the supply of oil more price elastic in the long run?

Accepted Answer

A) New deposits are found. 
B) Better extraction technology is developed. 
C) Firms have the ability to change the amount of all inputs. 
D) All of the above. 
A) New deposits are found. 
B) Better extraction technology is developed. 
C) Firms have the ability to change the amount of all inputs. 
D) All of the above.

Question 17

The government heavily subsidizes the production of ethanol to encourage the purchase of ethanol over oil, a less environmentally friendly form of energy. Given that the supply elasticity of ethanol, η, is estimated to be about 0.13, what would the elasticity of demand, ε, have to be for consumers to receive at least half of the subsidy, and therefore encourage ethanol consumption?

Accepted Answer

A) ε must be less than   . 
B) ε must be greater than   . 
C) ε must be more inelastic than the elasticity of supply. 
D) Both A and C. 
A) ε must be less than   . 
B) ε must be greater than   . 
C) ε must be more inelastic than the elasticity of supply. 
D) Both A and C.

Question 18

If the cross price elasticity of two goods is -3.5, then

Accepted Answer

A) these two products are relatively elastic substitutes. 
B) these two products are relatively inelastic substitutes. 
C) these two products are relatively elastic complements. 
D) these two products are relatively inelastic complements. 
A) these two products are relatively elastic substitutes. 
B) these two products are relatively inelastic substitutes. 
C) these two products are relatively elastic complements. 
D) these two products are relatively inelastic complements.

Question 19

-The above figure shows the demand curve for crude oil. The demand curve has unitary price elasticity when price equals

Accepted Answer

A) $0. 
B) $1. 
C) $10. 
D) $20. 
A) $0. 
B) $1. 
C) $10. 
D) $20.

Question 20

In the case of a specific tax the resulting price received by producers depends on

Accepted Answer

A) who pays the tax. 
B) the price elasticity of supply. 
C) the price elasticity of demand. 
D) All of the above. 
A) who pays the tax. 
B) the price elasticity of supply. 
C) the price elasticity of demand. 
D) All of the above.

Which of the following is an example of an ad valorem tax?

The price elasticity of supply when the supply curve is Q = 5 is

If the demand function for orange juice is expressed as Q = 2000 - 500p, where Q is quantity in gallons and p is price per gallon measured in dollars, then the demand for orange juice has a unitary elasticity when price equals

If the price of orange juice rises 10%, and as a result the quantity demanded falls by 8%, the price elasticity of demand for orange juice is

If the price of orange juice rises 10%, and as a result the quantity demanded falls by 8%, the price elasticity of demand for orange juice is

If a linear supply curve has a zero intercept, the elasticity of supply is always unitary.

Explain why the shape of the demand curve will determine how a shock to the market equilibrium affects price and quantity.

Which of the following is most likely to be TRUE?

Consumers will always pay the entire amount of a specific tax whenever

Suppose the market for grass seed can be expressed as Demand: Q^D = 100 - 2p Supply: Q^S = 3p If government imposes a $5 specific tax to be collected from sellers, what is the price consumers will pay? How much tax revenue is collected? What fraction is paid by sellers?

The elasticity of demand for employees is -0.50. It is also estimated that the existing minimum wage (price floor)has increased the raise the wage by 25% above equilibrium wage. How much would the employment change if the price floor was eliminated?

Explain why a tax increase on cigarettes in one state might not lead to a substantial price increase for all consumers in that state.

Suppose the demand curve for movie tickets has unitary price elasticity and the supply curve is perfectly price elastic. If 3 million tickets are currently sold at a price of $5, approximately how much tax revenue could the government generate from a $1 specific tax?

Suppose that a specific tax of $3 is imposed on producers of bread. The bread market supply is Qs = 10 + 0.5P and the bread market demand is Qd = 100-P. What is the producers' tax burden?

Why is the supply of oil more price elastic in the long run?

If the cross price elasticity of two goods is -3.5, then

-The above figure shows the demand curve for crude oil. The demand curve has unitary price elasticity when price equals

In the case of a specific tax the resulting price received by producers depends on

Introduction

Supply and Demand

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 3: Applying the Supply-And-Demand Model

Which of the following is an example of an ad valorem tax?

The price elasticity of supply when the supply curve is Q = 5 is

If the demand function for orange juice is expressed as Q = 2000 - 500p, where Q is quantity in gallons and p is price per gallon measured in dollars, then the demand for orange juice has a unitary elasticity when price equals

If the price of orange juice rises 10%, and as a result the quantity demanded falls by 8%, the price elasticity of demand for orange juice is

If the price of orange juice rises 10%, and as a result the quantity demanded falls by 8%, the price elasticity of demand for orange juice is

If a linear supply curve has a zero intercept, the elasticity of supply is always unitary.

Explain why the shape of the demand curve will determine how a shock to the market equilibrium affects price and quantity.

Which of the following is most likely to be TRUE?

Consumers will always pay the entire amount of a specific tax whenever

Suppose the market for grass seed can be expressed as Demand: QD = 100 - 2p Supply: QS = 3p If government imposes a $5 specific tax to be collected from sellers, what is the price consumers will pay? How much tax revenue is collected? What fraction is paid by sellers?

The elasticity of demand for employees is -0.50. It is also estimated that the existing minimum wage (price floor)has increased the raise the wage by 25% above equilibrium wage. How much would the employment change if the price floor was eliminated?

Explain why a tax increase on cigarettes in one state might not lead to a substantial price increase for all consumers in that state.

Suppose the demand curve for movie tickets has unitary price elasticity and the supply curve is perfectly price elastic. If 3 million tickets are currently sold at a price of $5, approximately how much tax revenue could the government generate from a $1 specific tax?

Suppose that a specific tax of $3 is imposed on producers of bread. The bread market supply is Qs = 10 + 0.5P and the bread market demand is Qd = 100-P. What is the producers' tax burden?

Why is the supply of oil more price elastic in the long run?

If the cross price elasticity of two goods is -3.5, then

-The above figure shows the demand curve for crude oil. The demand curve has unitary price elasticity when price equals

In the case of a specific tax the resulting price received by producers depends on

Introduction

Supply and Demand

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Monopoly

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Suppose the market for grass seed can be expressed as Demand: Q^D = 100 - 2p Supply: Q^S = 3p If government imposes a $5 specific tax to be collected from sellers, what is the price consumers will pay? How much tax revenue is collected? What fraction is paid by sellers?