question

The elasticity of demand is used to

answer

measure how responsive consumers are to a change in price.

question

Suppose the price of a box of cereal rises from $4 to $6. Using the midpoint method, what is the percentage change in price?

answer

40 percent

question

The price elasticity of demand for Red Delicious apples, a certain type of apple, is likely

answer

elastic.

question

The demand for necessities generally is ________ the demand for luxury goods.

answer

less elastic than

question

Moving downward along a linear (straightminus−line) downwardminus−sloping demand curve, the

answer

demand becomes less elastic.

question

The price of the good multiplied by the quantity sold is its

answer

total revenue.

question

If demand is inelastic and the price falls, the total revenue

answer

falls

question

Goods that can be produced at a constant or very gently rising opportunity cost have

answer

have an elastic supply

question

If the price of a Brita water filtration system increases and the quantity demanded of bottled water increases, then these two goods are

answer

substitutes.

question

A product that has a negative income elasticity of demand is ________ good.

answer

an inferior

question

Lattes at Starbucks are allocated to individuals in society through what type of method?

answer

Market Price

question

To achieve allocative efficiency, an economy

answer

Must produce on its PPF

question

The principle of decreasing marginal benefit explains why the marginal benefit curve

answer

is downward sloping

question

We allocate resources efficiently when

answer

marginal benefit is equal to marginal cost.

question

To an economist, "value" is the same as

answer

marginal benefit.

question

The demand curve is also the

answer

marginal benefit curve.

question

Consumer surplus is the area

answer

below the demand curve and above the market price.

question

The cost of producing one more unit of a good or service is equal to its

answer

marginal cost.

question

Cost

answer

is what the seller must give up to produce the good.

question

Efficiency in a market occurs when the production of the good is such that

answer

marginal benefit equals marginal cost.

question

In a housing market with no rent ceilings, the equilibrium rent is that for which the quantity of apartments demanded

answer

equals the quantity supplied.

question

In a housing market with a rent ceiling set below the equilibrium rent, as time passes the supply of apartments

answer

decreases

question

Rent controls increase maintenance by landlords.

answer

A. benefit people who live in rent controlled apartments. C. create a deadweight loss. Both answers A and C are correct.

question

Which of the following is an example of a price floor?

answer

minimum wage law

question

Why do some workers lose their job when the minimum wage is increased?

answer

The increase in the minimum wage decreases the quantity of labor demanded.

question

A minimum wage that is above the equilibrium wage rate

answer

creates a deadweight loss.

question

A minimum wage set above the equilibrium wage rate

answer

increases the quantity of labor services supplied.

question

A price floor in an agricultural market is called a

answer

price support.

question

Agricultural price supports in the United States

answer

harm U.S. consumers, U.S. taxpayers, and foreign farmers and creates a deadweight loss.

question

The figure shows the domestic market for tomatoes. Suppose this market is isolated from global competition and there is a support price set at $16. In this figure, what area equals the consumer surplus?

answer

area A

question

A sales tax imposed on sellers of a good

answer

decreases the supply and shifts the supply curve leftward.

question

The imposition of a tax on a good enables the government to

answer

take part of consumer and producer surplus as tax revenue when the good is purchased.

question

The figure shows the market for gourmet ice cream. In effort to reduce obesity, government places a $2 tax per gallon on suppliers in this market, shifting the supply curve from S0 to S1. The total tax revenue is equal to

answer

$400,000.

question

The figure shows the market for tires. The figure shows that the government has imposed a tax of ________ per tire.

answer

$30

question

If the demand curve for a good is horizontal, a tax is levied on this product is

answer

paid entirely by sellers.

question

The excess burden of a tax refers to the fact that

answer

a tax creates a deadweight loss.

question

Taxes on labor income ________ a deadweight loss and ________ the supply of labor.

answer

create; decrease

question

As a result of the tax on capital, labor productivity

answer

decreases

question

The percentage of an additional dollar of income that is paid in tax is the

answer

marginal tax rate.

question

The proposition that people should pay taxes equal to the benefits they receive from public services is known as the

answer

benefits principle.

question

Of the following, ________ accounts for the largest share of imports into the United States.

answer

crude oil

question

If the United States imports purses, then the quantity of purses produced in the United States will ________ and the quantity of purses purchased by consumers in the United States will ________.

answer

decrease; increase

question

The figure shows the U.S. market for flipminus−flops. When there is no international trade, the U.S. price is ________ per flipminus−flop and the U.S. quantity is ________ flipminus−flops.

answer

$14; 500,000

question

The figure shows the U.S. demand and U.S. supply curves for cherries. At a world price of $2 per pound, the total exports of cherries from the United States to other nations equals

answer

400,000 pounds.

question

After a nation starts importing a good from overseas, the domestic price of the good

answer

falls

question

International trade is definitely in the social interest if

answer

total surplus increases.

question

If a quota is imposed on imports of shrimp into the United States, U.S. consumer surplus from shrimp will ________ and U.S. producer surplus from shrimp will ________.

answer

decrease; increase

question

A quota ________ a deadweight loss and a tariff ________ a deadweight loss.

answer

creates; creates

question

The infantminus−industry argument is used by those who assert they want to

answer

limit imports to protect new industries.

question

Which of the following is an argument that is used for protection from free trade? i. the national security argument ii. the infantminus−industry argument iii. the dumping argument

answer

i, ii, and iii.

question

Joanne rents a TV production studio to produce an extra hour of a TV show. The rent is

answer

a private cost and not an external cost.

question

If a good has an external cost, then the marginal private cost curve

answer

lies below then the marginal social cost curve.

question

The deadweight loss associated with producing a product that has an external cost occurs because

answer

too much output is produced.

question

The figure represents the relationship between output and cost in an industry with an external cost. Which line represents the marginal private cost (MC) curve?

answer

Curve 2

question

The figure shows the costs and benefits associated with producing paper. What is the marginal external cost when output is 6 tons?

answer

$600

question

The proposition that if property rights exist and are enforced, then private transactions are efficient is referred to as the

answer

Coase theorem.

question

The figure shows the market for college education. The efficient quantity of education is

answer

6 million students.

question

When the government uses a private subsidy in a market with an external benefit, to reach the efficient quantity of production, the subsidy must be equal to the marginal

answer

external benefit.

question

Vouchers given to consumers

answer

increase the demand for a good.

question

When people decide whether or not to get a flu vaccination, they ignore the ________ and as a result ________.

answer

.external benefit; too few vaccinations are given

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