Question 1

A tax that falls in percentage of income as income rises is a regressive tax.

Accepted Answer

A) True 
 B)False

Question 2

If demand is elastic, the tax incidence falls more heavily on the _____, and deadweight loss is relatively _____.

Accepted Answer

A)  buyer; large 
B)  buyer; small 
C)  seller; large 
D)  seller; small 
A)  buyer; large 
B)  buyer; small 
C)  seller; large 
D)  seller; small

Question 3

Suppose the government places a large tax on the profits of companies that manufacture and sell cigarettes. Which statement is the MOST valid?

Accepted Answer

A)  Much of the tax burden will be borne by shareholders in the form of lower profits because buyers will not be willing to pay higher prices. 
B)  Much of the tax burden will have no effect on quantity supplied because the supply curve is perfectly inelastic, even in the long run. 
C)  Much of the tax burden will be passed on to consumers in the form of higher prices because demand is inelastic. 
D)  Much of the tax burden will be absorbed by tobacco farmers because there are few manufacturers to whom they sell their crops. 
A)  Much of the tax burden will be borne by shareholders in the form of lower profits because buyers will not be willing to pay higher prices. 
B)  Much of the tax burden will have no effect on quantity supplied because the supply curve is perfectly inelastic, even in the long run. 
C)  Much of the tax burden will be passed on to consumers in the form of higher prices because demand is inelastic. 
D)  Much of the tax burden will be absorbed by tobacco farmers because there are few manufacturers to whom they sell their crops.

Question 4

Which event describes a short-run adjustment for a gas station?

Accepted Answer

A)  expansion of the adjacent convenience store 
B)  installation of new gas tanks 
C)  hiring ten more workers to stay open 24 hours 
D)  addition of a car wash 
A)  expansion of the adjacent convenience store 
B)  installation of new gas tanks 
C)  hiring ten more workers to stay open 24 hours 
D)  addition of a car wash

Question 5

In general, tax incidence falls more on the seller if demand for the product taxed is price elastic and falls more on the buyer if demand is price inelastic.

Accepted Answer

A) True 
 B)False

Question 6

If the average price of new homes increased by 15% last year, and, as a result, home builders increased the quantity supplied of new homes by 10%, the price elasticity of supply is _____, and the supply of new homes is _____.

Accepted Answer

A)  0.67; elastic 
B)  0.67; inelastic 
C)  1.5; elastic 
D)  1.5; inelastic 
A)  0.67; elastic 
B)  0.67; inelastic 
C)  1.5; elastic 
D)  1.5; inelastic

Question 7

Suppose the demand for toxic waste disposal is very elastic. The government imposes an excise tax on waste disposal. The deadweight loss associated with the production of toxic waste disposal will be

Accepted Answer

A)  relatively small. 
B)  relatively large. 
C)  zero. 
D)  a rational decision. 
A)  relatively small. 
B)  relatively large. 
C)  zero. 
D)  a rational decision.

Question 8

An excise tax _____ consumer surplus and _____ producer surplus.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

Question 9

A firm increases its price for a good and total revenues increase. From this, we can conclude that its demand is

Accepted Answer

A)  price elastic. 
B)  price inelastic. 
C)  unitary elastic. 
D)  perfectly elastic. 
A)  price elastic. 
B)  price inelastic. 
C)  unitary elastic. 
D)  perfectly elastic.

Question 10

A negative cross elasticity of demand means that two goods are _____, while a negative income elasticity of demand means that a good is a(n) _____ good.

Accepted Answer

A)  complements; normal 
B)  complements; inferior 
C)  substitutes; normal 
D)  substitutes; inferior 
A)  complements; normal 
B)  complements; inferior 
C)  substitutes; normal 
D)  substitutes; inferior

Question 11

The time frames for the short run and the long run differ by industry.

Accepted Answer

A) True 
 B)False

Question 12

Rank the following products in order of price elasticity of demand from highest to lowest and explain: electricity, a Tesla, toothpaste.

Accepted Answer

A Tesla, electricity, toothpaste. Among

Question 13

Holding all else constant, if the percentage change in quantity demanded is less than the percentage change in price, then

Accepted Answer

A)  Ed is elastic. 
B)  Ed is unitary elastic. 
C)  Ed is inelastic. 
D)  Ed is undefined. 
A)  Ed is elastic. 
B)  Ed is unitary elastic. 
C)  Ed is inelastic. 
D)  Ed is undefined.

Question 14

In general, the flatter the supply curve is, the

Accepted Answer

A)  more elastic is supply. 
B)  less elastic is supply. 
C)  shorter the period for adjustment. 
D)  fewer the adjustments to price changes that firms can make. 
A)  more elastic is supply. 
B)  less elastic is supply. 
C)  shorter the period for adjustment. 
D)  fewer the adjustments to price changes that firms can make.

Question 15

Increasing prices has no effect on total revenue if a product's demand curve is

Accepted Answer

A)  perfectly elastic. 
B)  elastic. 
C)  unitary elastic. 
D)  inelastic. 
A)  perfectly elastic. 
B)  elastic. 
C)  unitary elastic. 
D)  inelastic.

Question 16

A grocery store announced a 50% decrease in the price of local honey. Sales increased by 200%. Based on the information, the price elasticity of honey is

Accepted Answer

A)  0.25. 
B)  0.04. 
C)  0.4. 
D)  4. 
A)  0.25. 
B)  0.04. 
C)  0.4. 
D)  4.

Question 17

In the market period, the price elasticity of supply is

Accepted Answer

A)  greater than 1. 
B)  0. 
C)  less than 1. 
D)  equal to 1. 
A)  greater than 1. 
B)  0. 
C)  less than 1. 
D)  equal to 1.

Question 18

Elasticity along a demand curve that is linear is always equal to the slope of the line.

Accepted Answer

A) True 
 B)False

Question 19

If the income elasticity of demand for ramen noodles is -0.2, ramen noodles are a(n) _____ good.

Accepted Answer

A)  luxury 
B)  normal 
C)  superior 
D)  inferior 
A)  luxury 
B)  normal 
C)  superior 
D)  inferior

Question 20

(Figure: Impact of Tax on Market Equilibrium) Based on the graph, how much is the deadweight loss created by the tax?

Accepted Answer

A)  $80 
B)  $26 
C)  $60 
D)  $120 
A)  $80 
B)  $26 
C)  $60 
D)  $120

A tax that falls in percentage of income as income rises is a regressive tax.

If demand is elastic, the tax incidence falls more heavily on the _, and deadweight loss is relatively _.

Suppose the government places a large tax on the profits of companies that manufacture and sell cigarettes. Which statement is the MOST valid?

Which event describes a short-run adjustment for a gas station?

In general, tax incidence falls more on the seller if demand for the product taxed is price elastic and falls more on the buyer if demand is price inelastic.

If the average price of new homes increased by 15% last year, and, as a result, home builders increased the quantity supplied of new homes by 10%, the price elasticity of supply is _, and the supply of new homes is _.

Suppose the demand for toxic waste disposal is very elastic. The government imposes an excise tax on waste disposal. The deadweight loss associated with the production of toxic waste disposal will be

An excise tax _ consumer surplus and _ producer surplus.

A firm increases its price for a good and total revenues increase. From this, we can conclude that its demand is

A negative cross elasticity of demand means that two goods are _, while a negative income elasticity of demand means that a good is a(n) _ good.

The time frames for the short run and the long run differ by industry.

Rank the following products in order of price elasticity of demand from highest to lowest and explain: electricity, a Tesla, toothpaste.

Holding all else constant, if the percentage change in quantity demanded is less than the percentage change in price, then

In general, the flatter the supply curve is, the

Increasing prices has no effect on total revenue if a product's demand curve is

A grocery store announced a 50% decrease in the price of local honey. Sales increased by 200%. Based on the information, the price elasticity of honey is

In the market period, the price elasticity of supply is

Elasticity along a demand curve that is linear is always equal to the slope of the line.

If the income elasticity of demand for ramen noodles is -0.2, ramen noodles are a(n) _____ good.

(Figure: Impact of Tax on Market Equilibrium) Based on the graph, how much is the deadweight loss created by the tax?

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Consumer Choice and Demand

Production and Costs

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Exam 5: Elasticity

A tax that falls in percentage of income as income rises is a regressive tax.

If demand is elastic, the tax incidence falls more heavily on the _____, and deadweight loss is relatively _____.

Suppose the government places a large tax on the profits of companies that manufacture and sell cigarettes. Which statement is the MOST valid?

Which event describes a short-run adjustment for a gas station?

In general, tax incidence falls more on the seller if demand for the product taxed is price elastic and falls more on the buyer if demand is price inelastic.

If the average price of new homes increased by 15% last year, and, as a result, home builders increased the quantity supplied of new homes by 10%, the price elasticity of supply is _____, and the supply of new homes is _____.

Suppose the demand for toxic waste disposal is very elastic. The government imposes an excise tax on waste disposal. The deadweight loss associated with the production of toxic waste disposal will be

An excise tax _____ consumer surplus and _____ producer surplus.

A firm increases its price for a good and total revenues increase. From this, we can conclude that its demand is

A negative cross elasticity of demand means that two goods are _____, while a negative income elasticity of demand means that a good is a(n) _____ good.

The time frames for the short run and the long run differ by industry.

Rank the following products in order of price elasticity of demand from highest to lowest and explain: electricity, a Tesla, toothpaste.

Holding all else constant, if the percentage change in quantity demanded is less than the percentage change in price, then

In general, the flatter the supply curve is, the

Increasing prices has no effect on total revenue if a product's demand curve is

A grocery store announced a 50% decrease in the price of local honey. Sales increased by 200%. Based on the information, the price elasticity of honey is

In the market period, the price elasticity of supply is

Elasticity along a demand curve that is linear is always equal to the slope of the line.

If the income elasticity of demand for ramen noodles is -0.2, ramen noodles are a(n) _____ good.

(Figure: Impact of Tax on Market Equilibrium) Based on the graph, how much is the deadweight loss created by the tax?

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Consumer Choice and Demand

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

The Labor Market

Land, Capital Markets, and Innovation

Externalities and Public Goods

Network Goods

Poverty and Income Distribution

International Trade

Filters

If demand is elastic, the tax incidence falls more heavily on the _, and deadweight loss is relatively _.

If the average price of new homes increased by 15% last year, and, as a result, home builders increased the quantity supplied of new homes by 10%, the price elasticity of supply is _, and the supply of new homes is _.

An excise tax _ consumer surplus and _ producer surplus.

A negative cross elasticity of demand means that two goods are _, while a negative income elasticity of demand means that a good is a(n) _ good.