Chapter 5-10 Quizzes Essay

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The elasticity of demand is used to
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measure how responsive consumers are to a change in price.
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Suppose the price of a box of cereal rises from​ $4 to​ $6. Using the midpoint​ method, what is the percentage change in​ price?
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40 percent
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The price elasticity of demand for Red Delicious​ apples, a certain type of​ apple, is likely
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elastic.
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The demand for necessities generally is​ ________ the demand for luxury goods.
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less elastic than
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Moving downward along a linear ​(straightminus−​line) downwardminus−sloping demand​ curve, the
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demand becomes less elastic.
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The price of the good multiplied by the quantity sold is its
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total revenue.
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If demand is inelastic and the price​ falls, the total revenue
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falls
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Goods that can be produced at a constant or very gently rising opportunity cost have
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have an elastic supply
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If the price of a Brita water filtration system increases and the quantity demanded of bottled water​ increases, then these two goods are
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substitutes.
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A product that has a negative income elasticity of demand is​ ________ good.
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an inferior
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Lattes at Starbucks are allocated to individuals in society through what type of​ method?
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Market Price
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To achieve allocative​ efficiency, an economy
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Must produce on its PPF
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The principle of decreasing marginal benefit explains why the marginal benefit curve
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is downward sloping
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We allocate resources efficiently when
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marginal benefit is equal to marginal cost.
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To an​ economist, “value” is the same as
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marginal benefit.
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The demand curve is also the
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marginal benefit curve.
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Consumer surplus is the area
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below the demand curve and above the market price.
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The cost of producing one more unit of a good or service is equal to its
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marginal cost.
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Cost
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is what the seller must give up to produce the good.
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Efficiency in a market occurs when the production of the good is such that
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marginal benefit equals marginal cost.
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In a housing market with no rent​ ceilings, the equilibrium rent is that for which the quantity of apartments demanded
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equals the quantity supplied.
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In a housing market with a rent ceiling set below the equilibrium​ rent, as time passes the supply of apartments
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decreases
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Rent controls increase maintenance by landlords.
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A. benefit people who live in rent controlled apartments. C. create a deadweight loss. Both answers A and C are correct.
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Which of the following is an example of a price​ floor?
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minimum wage law
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Why do some workers lose their job when the minimum wage is​ increased?
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The increase in the minimum wage decreases the quantity of labor demanded.
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A minimum wage that is above the equilibrium wage rate
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creates a deadweight loss.
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A minimum wage set above the equilibrium wage rate
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increases the quantity of labor services supplied.
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A price floor in an agricultural market is called a
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price support.
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Agricultural price supports in the United States
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harm U.S.​ consumers, U.S.​ taxpayers, and foreign farmers and creates a deadweight loss.
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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?
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area A
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A sales tax imposed on sellers of a good
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decreases the supply and shifts the supply curve leftward.
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The imposition of a tax on a good enables the government to
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take part of consumer and producer surplus as tax revenue when the good is purchased.
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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
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​$400,000.
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The figure shows the market for tires. The figure shows that the government has imposed a tax of​ ________ per tire.
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$30
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If the demand curve for a good is​ horizontal, a tax is levied on this product is
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paid entirely by sellers.
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The excess burden of a tax refers to the fact that
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a tax creates a deadweight loss.
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Taxes on labor income​ ________ a deadweight loss and​ ________ the supply of labor.
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create; decrease
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As a result of the tax on​ capital, labor productivity
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decreases
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The percentage of an additional dollar of income that is paid in tax is the
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marginal tax rate.
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The proposition that people should pay taxes equal to the benefits they receive from public services is known as the
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benefits principle.
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Of the​ following, ________ accounts for the largest share of imports into the United States.
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crude oil
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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​ ________.
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​decrease; increase
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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.
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​$14; 500,000
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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
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​400,000 pounds.
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After a nation starts importing a good from​ overseas, the domestic price of the good
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falls
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International trade is definitely in the social interest if
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total surplus increases.
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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​ ________.
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​decrease; increase
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A quota​ ________ a deadweight loss and a tariff​ ________ a deadweight loss.
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creates; creates
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The infantminus−industry argument is used by those who assert they want to
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limit imports to protect new industries.
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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
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i, ii, and iii.
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Joanne rents a TV production studio to produce an extra hour of a TV show. The rent is
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a private cost and not an external cost.
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If a good has an external​ cost, then the marginal private cost curve
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lies below then the marginal social cost curve.
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The deadweight loss associated with producing a product that has an external cost occurs because
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too much output is produced.
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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?
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Curve 2
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The figure shows the costs and benefits associated with producing paper. What is the marginal external cost when output is 6​ tons?
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​$600
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The proposition that if property rights exist and are​ enforced, then private transactions are efficient is referred to as the
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Coase theorem.
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The figure shows the market for college education. The efficient quantity of education is
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6 million students.
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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
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external benefit.
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Vouchers given to consumers
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increase the demand for a good.
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When people decide whether or not to get a flu​ vaccination, they ignore the​ ________ and as a result​ ________.
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.external​ benefit; too few vaccinations are given

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