Question 1

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 2

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

Question 3

If the demand curve for a good is unit price elastic and the supply curve is perfectly price elastic,a $1 specific tax imposed on the sellers of this good will

Accepted Answer

A)  shift the supply curve up vertically by $1. 
B)  shift the demand curve down vertically by $1. 
C)  not raise price at all. 
D)  cause price to increase but by less than $1. 
A)  shift the supply curve up vertically by $1. 
B)  shift the demand curve down vertically by $1. 
C)  not raise price at all. 
D)  cause price to increase but by less than $1.

Question 4

Suppose the market for grass seed can be expressed as
Demand: QD = 100 - 2p
Supply: QS = 3p
Price elasticity of supply is constant at 1.If the demand curve is changed to Q = 10 - .2p,price elasticity of demand at any given price is the same as before.Yet,the incidence of a tax falling on consumers will be higher.Why?

Accepted Answer

With the same vertical intercept,the ste

Question 5

Suppose the demand function for a good is expressed as Q = 100 - 4p.If the good currently sells for $10,then the price elasticity of demand equals

Accepted Answer

A)  -1.5. 
B)  -0.67. 
C)  -4. 
D)  -2.5. 
A)  -1.5. 
B)  -0.67. 
C)  -4. 
D)  -2.5.

Question 6

If a good has an income elasticity of demand greater than 1,one might classify that good as

Accepted Answer

A)  a necessity. 
B)  a luxury. 
C)  unusual. 
D)  inelastic. 
A)  a necessity. 
B)  a luxury. 
C)  unusual. 
D)  inelastic.

Question 7

The elasticity of supply of rental units in New York City is estimated to be about 0.10.Current price restrictions (price floors)are estimated to decrease the price of rental units by 10% below equilibrium price.By how much would price and quantity supplied change if the price floors were removed from the rental unit market in New York City?

Accepted Answer

A)  Price will increase by 10% and quantity supplied will increase by 1%. 
B)  Price will decrease by 10% and quantity supplied will increase by 1%. 
C)  Price will increase by 10% and quantity supplied will decrease by 1%. 
D)  Price and quantity supplied will increase by 10%. 
A)  Price will increase by 10% and quantity supplied will increase by 1%. 
B)  Price will decrease by 10% and quantity supplied will increase by 1%. 
C)  Price will increase by 10% and quantity supplied will decrease by 1%. 
D)  Price and quantity supplied will increase by 10%.

Question 8

Some environmental groups are on record suggesting that the price of gasoline should be much higher than it was in the early 1990s.Why might they say this?

Accepted Answer

A)  They own stock in oil companies. 
B)  They anticipate that the longer the price is high, the more elastic the response by consumers will be. 
C)  They anticipate that the longer the price is high, the less elastic the response by consumers will be. 
D)  They anticipate that higher prices will reduce the price elasticity of supply of oil. 
A)  They own stock in oil companies. 
B)  They anticipate that the longer the price is high, the more elastic the response by consumers will be. 
C)  They anticipate that the longer the price is high, the less elastic the response by consumers will be. 
D)  They anticipate that higher prices will reduce the price elasticity of supply of oil.

Question 9

If the supply curve of cigarettes shifts to the left,quantity demanded for cigarettes

Accepted Answer

A)  will decrease substantially. 
B)  will increase substantially. 
C)  will slightly increase. 
D)  will slightly decrease. 
A)  will decrease substantially. 
B)  will increase substantially. 
C)  will slightly increase. 
D)  will slightly decrease.

Question 10

A specific tax on sellers will

Accepted Answer

A)  shift the demand curve to the right. 
B)  shift the demand curve to the left. 
C)  shift the supply curve to the right. 
D)  shift the supply curve to the left. 
A)  shift the demand curve to the right. 
B)  shift the demand curve to the left. 
C)  shift the supply curve to the right. 
D)  shift the supply curve to the left.

Question 11

Explain why the price elasticity of demand changes along a linear demand curve.

Accepted Answer

The price elasticity of demand

Question 12

The tax incidence of a specific tax or ad valorem tax is influenced by

Accepted Answer

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

Question 13

Suppose the market for grass seed can be expressed as
Demand: QD = 100 - 2p
Supply: QS = 3p
At the market equilibrium,calculate the price elasticities of supply and demand.Use these numbers to predict the change in price resulting from a specific tax.

Accepted Answer

At p = 20 Q = 60,e = -2 ∗ (20/

Question 14

The market demand for wheat is Q = 100 - 2p + 1pb + 2Y.If the price of wheat,p,is $2,and the price of barley,pb,is $3,and income,Y,is $1000,the income elasticity of wheat is

Accepted Answer

A)  2 ∗ (1000/2099). 
B)  2. 
C)  1/2 ∗ (1000/2099). 
D)  cannot be calculated from the information provided. 
A)  2 ∗ (1000/2099). 
B)  2. 
C)  1/2 ∗ (1000/2099). 
D)  cannot be calculated from the information provided.

Question 15

-The above figure shows the supply and demand curves for rice in the U.S.and in Japan.Assume there is no trade between the two countries.If bad weather causes the supply curves in each country to shift leftward by the same amount,then

Accepted Answer

A)  the price will increase the same amount in both countries. 
B)  the price will decrease the same amount in both countries. 
C)  the price will increase more in Japan than in the U.S. 
D)  the price will decrease more in Japan than in the U.S. 
A)  the price will increase the same amount in both countries. 
B)  the price will decrease the same amount in both countries. 
C)  the price will increase more in Japan than in the U.S. 
D)  the price will decrease more in Japan than in the U.S.

Question 16

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 17

The market demand for wheat is Q = 100 - 2p + 1pb,where pb is the price of barley.The cross price elasticity of demand for wheat with respect to barley

Accepted Answer

A)  cannot be calculated from just the information provided. 
B)  is negative. 
C)  suggests that wheat and barley are complements. 
D)  equals 1. 
A)  cannot be calculated from just the information provided. 
B)  is negative. 
C)  suggests that wheat and barley are complements. 
D)  equals 1.

Question 18

In the late 1980s,the health benefits of oat bran were widely advertised.If the price of oats increased 50%,causing the quantity of oats supplied to increase by 40%,then the price elasticity of supply was

Accepted Answer

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

Question 19

Suppose the supply curve and the demand curve both have unitary elasticity at all prices.The price increase to consumers resulting from a specific tax of $1 imposed on sellers will be

Accepted Answer

A)  $1. 
B)  50 cents. 
C)  zero. 
D)  impossible to calculate without knowing the slope of the supply curve. 
A)  $1. 
B)  50 cents. 
C)  zero. 
D)  impossible to calculate without knowing the slope of the supply curve.

Question 20

The short-run price elasticity of demand for refrigerators is relatively inelastic.

Accepted Answer

A) True 
 B)False

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

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 demand curve for a good is unit price elastic and the supply curve is perfectly price elastic,a $1 specific tax imposed on the sellers of this good will

Suppose the demand function for a good is expressed as Q = 100 - 4p.If the good currently sells for $10,then the price elasticity of demand equals

If a good has an income elasticity of demand greater than 1,one might classify that good as

Some environmental groups are on record suggesting that the price of gasoline should be much higher than it was in the early 1990s.Why might they say this?

If the supply curve of cigarettes shifts to the left,quantity demanded for cigarettes

A specific tax on sellers will

Explain why the price elasticity of demand changes along a linear demand curve.

The tax incidence of a specific tax or ad valorem tax is influenced by

Suppose the market for grass seed can be expressed as Demand: Q^D = 100 - 2p Supply: Q^S = 3p At the market equilibrium,calculate the price elasticities of supply and demand.Use these numbers to predict the change in price resulting from a specific tax.

The market demand for wheat is Q = 100 - 2p + 1p_b + 2Y.If the price of wheat,p,is $2,and the price of barley,p_b,is $3,and income,Y,is $1000,the income elasticity of wheat is

-The above figure shows the supply and demand curves for rice in the U.S.and in Japan.Assume there is no trade between the two countries.If bad weather causes the supply curves in each country to shift leftward by the same amount,then

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

The market demand for wheat is Q = 100 - 2p + 1p_b,where p_b is the price of barley.The cross price elasticity of demand for wheat with respect to barley

In the late 1980s,the health benefits of oat bran were widely advertised.If the price of oats increased 50%,causing the quantity of oats supplied to increase by 40%,then the price elasticity of supply was

Suppose the supply curve and the demand curve both have unitary elasticity at all prices.The price increase to consumers resulting from a specific tax of $1 imposed on sellers will be

The short-run price elasticity of demand for refrigerators is relatively inelastic.

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

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

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 demand curve for a good is unit price elastic and the supply curve is perfectly price elastic,a $1 specific tax imposed on the sellers of this good will

Suppose the demand function for a good is expressed as Q = 100 - 4p.If the good currently sells for $10,then the price elasticity of demand equals

If a good has an income elasticity of demand greater than 1,one might classify that good as

Some environmental groups are on record suggesting that the price of gasoline should be much higher than it was in the early 1990s.Why might they say this?

If the supply curve of cigarettes shifts to the left,quantity demanded for cigarettes

A specific tax on sellers will

Explain why the price elasticity of demand changes along a linear demand curve.

The tax incidence of a specific tax or ad valorem tax is influenced by

Suppose the market for grass seed can be expressed as Demand: QD = 100 - 2p Supply: QS = 3p At the market equilibrium,calculate the price elasticities of supply and demand.Use these numbers to predict the change in price resulting from a specific tax.

The market demand for wheat is Q = 100 - 2p + 1pb + 2Y.If the price of wheat,p,is $2,and the price of barley,pb,is $3,and income,Y,is $1000,the income elasticity of wheat is

-The above figure shows the supply and demand curves for rice in the U.S.and in Japan.Assume there is no trade between the two countries.If bad weather causes the supply curves in each country to shift leftward by the same amount,then

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

The market demand for wheat is Q = 100 - 2p + 1pb,where pb is the price of barley.The cross price elasticity of demand for wheat with respect to barley

In the late 1980s,the health benefits of oat bran were widely advertised.If the price of oats increased 50%,causing the quantity of oats supplied to increase by 40%,then the price elasticity of supply was

Suppose the supply curve and the demand curve both have unitary elasticity at all prices.The price increase to consumers resulting from a specific tax of $1 imposed on sellers will be

The short-run price elasticity of demand for refrigerators is relatively inelastic.

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 At the market equilibrium,calculate the price elasticities of supply and demand.Use these numbers to predict the change in price resulting from a specific tax.

The market demand for wheat is Q = 100 - 2p + 1p_b + 2Y.If the price of wheat,p,is $2,and the price of barley,p_b,is $3,and income,Y,is $1000,the income elasticity of wheat is

The market demand for wheat is Q = 100 - 2p + 1p_b,where p_b is the price of barley.The cross price elasticity of demand for wheat with respect to barley