MicroEcon Ch 5 Quiz – Flashcards
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If the purchase and sale of marijuana become legalized
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the equilibrium quantity will rise, but the change in equilibrium price depends upon whether the demand curve shifts more or the supply curve shifts more.
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Suppose that television show A is much more popular than television show B. The equilibrium price for a ticket to view the taping of show A is $40 and the equilibrium price for a ticket to view the taping of show B is -$30. If free tickets are offered for the taping of both shows, it is likely that
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there will be a shortage of tickets for show A and a surplus of tickets for show B.
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The lower the price of medical care in general, the higher the ____________________________ medical care and the ______________________ specific items that make up medical care (such as x-rays). The result will be a _______________ price for the specific items that make up medical care.
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quantity demanded of; higher the demand for; higher
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Refer to Exhibit 5-2. If the tuition is set at $60 there will be
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a shortage at 10 a.m. and a surplus at 8 a.m.
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The space on the freeway is fixed at any instant of time. A supply curve that shows this is
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perfectly vertical.
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If patients were allowed to sue their HMO, we would expect
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the supply curve for health care services provided by the HMO to shift to the left and the price of HMO-provided health care coverage to rise.
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Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. Suppose that the government decides to set the money price of driving on the freeway at zero, but builds more freeways to eliminate the shortage of freeway space at 8 a.m. Graphically, the result of the increase in freeway space would be shown by
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NOT: shifting the demand for freeway space curve leftward from D8a.m. to D11p.m.
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The demand for seats in 10 a.m. classes at the university is higher than the demand for seats in 8 a.m. classes. The supply is fixed. If the university can only charge a single price and wishes to maximize the total number of seats purchased during the day, it should set the price
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at equilibrium for 8 a.m. classes.
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Refer to Exhibit 5-2. If the tuition is set at $70 there will be
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equilibrium at 10 a.m. and a surplus of seats at 8 a.m.
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If the government legalized the purchase and sale of marijuana, the equilibrium quantity would _________ and the price would ________ if the supply of marijuana increased by _______ than the demand for marijuana increased.
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NOT: rise; fall; more++Rise; rise; less++
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Good weather in cities such as San Diego
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imposes indirect payments for the residents of that city.
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Refer to Exhibit 5-3 which shows the demand and supply of a college athlete. If the college is allowed to pay this student athlete its market equilibrium wage of $10,000, what is the consumers' surplus for the college that buys the athlete's services at this wage?
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area 1
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A toll of $1 per car is imposed on a road regardless of time of day. If the toll creates equilibrium travel flows at the busiest time of day, it will create a __________ at all other times.
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surplus of space
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Refer to Exhibit 5-4. If television studio executives choose to charge a price of PB to view the taping of all shows, they will find that there is a shortage of tickets to view the taping of show ___________ and a surplus of tickets to view the taping of show ______________.
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C; A
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Residents of cities with a reputation for good weather, ceteris paribus,
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pay a higher price for housing because the demand for housing is higher.
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If there is freeway congestion at 8 a.m., we can reduce (or eliminate) the congestion by
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NOT: building more freeways. ++Building more freeways, raising the price to drive on the freeway at 8 am, and encouraging workers to carpool++
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Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. A TOLL OF P2 creates __________ at 8 a.m. and __________ at 11 p.m.
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NOT: a shortage; equilibrium++at P1 creates a shortage; a surplus++(P2 creates equilibrium at 11am)
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University A sets tuition at the equilibrium level based on price and then imposes entrance requirements in the form of minimum high school GPA and SAT scores. Enrollment at this school will likely be
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below equilibrium because of the non-price rationing.
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Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. At a ZERO money price, there is a ________ of freeway space at 8 a.m. and ________ at 11 p.m.
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shortage; equilibrium
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There is no toll charge to drive on freeway A. If there is freeway congestion at 9 a.m., there will be greater freeway congestion at 11 a.m. if
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the demand to drive on the freeway at 11 a.m. is greater than the demand to drive on the freeway at 9 a.m.
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Refer to Exhibit 5-2. If the tuition is set at $50 there will be
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equilibrium at 8 a.m. and a shortage of seats at 10 a.m.
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If the supply of aisle seats equals the supply of middle seats on an airplane, and the demand for aisle seats is _____________ than the demand for middle seats, then the equilibrium price of aisle seats will be ______________ the equilibrium price of middle seats.
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greater; higher than
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If more people join carpools and travel to work together
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the demand curve for freeway space shifts leftward.
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Refer to Exhibit 5-3 which shows the demand and supply of a college athlete. If the college is allowed to pay this student athlete its market equilibrium wage of $10,000, what is the consumers' surplus for the college that buys the athlete's services at this wage?
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area 1
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Refer to Exhibit 5-6. Under law 1 a renter has 30 days to vacate an apartment after being served with an eviction notice. Under law 2, the renter has 90 days to vacate after being served with an eviction notice. This graph shows that the supply of apartments is____________ under law 1 than under law 2, and thus apartment rent is _______________ under law 1 than under law 2.
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greater; lower
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The lower the price of medical care in general, the higher the ____________________________ medical care and the ______________________ specific items that make up medical care (such as x-rays). The result will be a _______________ price for the specific items that make up medical care.
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quantity demanded of; higher the demand for; higher
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If the government decided to legalize the purchase and sale of marijuana, the equilibrium quantity would _________ and the price would ________ if the supply of marijuana increased by _______ than the demand for marijuana increased.
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NOT: rise; fall; less ++Rise; rise; less++
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The demand to attend a certain college is represented by a downward-sloping demand curve. The supply of spots at the college is represented by a vertical supply curve. At the tuition that students are charged, there is a shortage of spots at the college. If the demand to attend the college rises, but the tuition stays constant, it follows that the
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GPA required to attend the college will probably rise.
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Suppose that there are two laws proposed for eviction notices. Plan A requires landlords to give a renter 30 days to vacate an apartment once he has been served an eviction notice. Under Plan B, he has 60 days to vacate an apartment once he has been served an eviction notice. It follows that landlords will find
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Plan B more expensive than Plan A.
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The higher the price of medical care in general, the lower the ____________________________ medical care and the ______________________ specific items that make up medical care (such as, x-rays).
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quantity demanded of; lower the demand for
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Since most colleges and universities charge the same tuition to every student regardless of what time students choose to take their classes,
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a and d
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Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. Suppose that the government decides to set the money price of driving on the freeway at zero, but builds more freeways to eliminate the shortage of freeway space at 8 a.m. Graphically, the result of the increase in freeway space would be shown by
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shifting the supply of freeway space curve rightward.
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Suppose that a television studio has two shows, X and Z, and that tickets for viewing the taping of each show is free. The equilibrium price for a ticket to view the taping of show X is $25 and the equilibrium price for a ticket to view the taping of show B is -$20. It is likely that tickets to show ________ will need to be rationed on a first-come-first-served basis, while the producers of show ________ will have a much more difficult time filling the seats in the studio since the equilibrium price for tickets to that show is a __________ number.
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X; Z; negative
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Which of the following statements is false?
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People who live in cities with good weather receive that benefit for free.
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Refer to Exhibit 5-5. If the airline charges a price that is between P1 and P2 for both aisle seats and middle seats, the result will be
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NOT: a shortage of aisle seats and the equilibrium quantity of middle seats.
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Refer to Exhibit 5-2. If the tuition is set at $70 there will be
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equilibrium at 10 a.m. and a surplus of seats at 8 a.m.
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Refer to Exhibit 5-3 which shows the demand and supply of a college athlete. Suppose that NCAA rules limit the amount that the college can pay this athlete, such that their payment can not exceed the cost of attending the college (currently $8,000). The impact of this ruling would be a loss of income to the athlete of __________ and an equal gain in consumers' surplus to the college represented by ________________.
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NOT:$2,000; area 1 + 2
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The demand for seats in 10 a.m. classes at the university is higher than the demand for seats in 8 a.m. classes. The supply is fixed. If the university prices classes at the price required to achieve equilibrium at 10 a.m., there will be
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NOT: equilibrium at 8 a.m. ++A surplus at 8 am. ++
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Refer to Exhibit 5-5. If the airline charges price P2 for both aisle seats and middle seats, the result will be
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a surplus of middle seats and the equilibrium quantity of aisle seats.
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Refer to Figure 5-1. With reference to Graph A, at a price of $10, total revenue equals:
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"A" was at $10 and 40 so the answer is $400.
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__________ is the change in what is on the horizontal axis (quantity) divided by the change in what is on the vertical axis (price).
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Elasticity
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If the supply curve for a product is vertical, then the elasticity of supply is:
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equal to zero.
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When economists are sketching examples of demand and supply, it is common to sketch a demand or supply curve that is close to vertical, and then to refer to that curve as _________.
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inelastic
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The evidence on the supply curve of financial capital is controversial, but at least in the short run, the elasticity of savings with respect to the interest rate appears to be __________.
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inelastic
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If the supply curve for a product is horizontal, then the elasticity of supply is:
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equal to infinity.
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The price elasticity of demand measures the:
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responsiveness of quantity demanded to a change in price.
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Suppose that Mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. What is the price elasticity of Mimi's demand curve?
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0.1 NOT: 0.8 1.0 NOT: 10.0
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Youth smoking seems to be more __________ than adult smoking—that is, the quantity of youth smoking will fall by a greater percentage than the quantity of adult smoking in response to a given percentage increase in price.
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elastic
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Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop?
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3.0
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A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result:
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total revenue will decrease.
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Price elasticity of demand is defined as:
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the percentage change in quantity demanded divided by the percentage change in price.
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If the supply curve for aspirin is perfectly elastic, then a reduction in demand will cause the equilibrium price to:
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stay the same and the equilibrium quantity to fall.
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If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to:
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rise and the equilibrium quantity to stay the same.
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If the supply curve for housing is perfectly inelastic, then a reduction in demand will cause the equilibrium price to:
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fall and the equilibrium quantity to stay the same.
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A 10 percent decrease in the price of potato chips leads to a 30 percent increase in the quantity of soda demanded. It appears that:
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cross-price elasticity of demand for soda is -3.
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The elasticity of supply is defined as the ________ change in quantity supplied divided by the _______ change in price.
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percentage; percentage
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Refer to Exhibit 5-7. As a producer, if you had a choice, which of the depicted markets would you operate in?
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(1) (2) NOT: (3) (4)
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Refer to Exhibit 5-2. The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. Approximately what percentage of the tax do producers end up paying?
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45 percent (From the graph, we see that the tax is $2.25. Firm collects $6.25 selling Q2 units. It keeps $4.00 ( instead of $5.00 before tax the tax increase). In other words, the producer pays $1.00 out of the total $2.25 in tax ( roughly 45%). The remaining will be paid by the customer.)
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Refer to Exhibit 5-3. When price decreases from $3.50 to $2.50, the price elasticity of supply is Price of Good A $5.50 4.50 3.50 2.50 1.50 .50 Quantity Demanded of Good A 5 15 25 35 45 55 Quantity Supplied of Good A 55 45 35 25 15 5
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1.0.
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A price cut will increase the total revenue a firm receives if the demand for its product is:
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elastic.
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When demand is inelastic:
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?price elasticity of demand is greater than 1. consumers are not very responsive to changes in price. NOT: the percentage change in quantity demanded resulting from a price change is greater than the percentage change in price. demand curves appear to be fairly flat.
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Refer to Figure 5-1. With reference to Graph B, at a price of $5, total revenue equals:
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$150.
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A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. It appears that:
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cross-price elasticity of demand for iced tea is -2.
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A perfectly elastic supply curve is:
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horizontal.
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The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. In order to boost ticket revenues, an economist would advise:
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increasing the price of game tickets because demand is inelastic.
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Demand is said to be ___________ when the quantity demanded is very responsive to changes in price.
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elastic
