Download Fall `12 Test 2

Econ 2113 – Test 2A
Name________________________________
Dr. Rupp – Fall 2012
Pledge: “I have neither given or received aid on this exam”
Signature_____________________________________
Multiple Choice
Identify the choice that best completes the statement or answers the question.
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1. If a 6% decrease in price for a good results in a 2% increase in quantity demanded, the price elasticity of
demand is
a. -0.02.
b. -0.33.
c. -3.
d. -4.
2. The local bakery makes such great cinnamon rolls that consumers do not respond much at all to a change in
the price. If the owner is only interested in increasing revenue, she should
a. lower the price of the cinnamon rolls.
b. leave the price of the cinnamon rolls unchanged.
c. raise the price of the cinnamon rolls.
d. reduce costs.
3. If the demand for apples is elastic, then an increase in the price of apples will
a. increase total revenue of apple sellers.
b. decrease total revenue of apple sellers.
c. not change total revenue of apple sellers.
d. There is not enough information to answer this question.
4. If the demand for textbooks is inelastic, then an increase in the price of textbooks will
a. increase total revenue of textbook sellers.
b. decrease total revenue of textbook sellers.
c. not change total revenue of textbook sellers.
d. There is not enough information to answer this question.
Figure 5-10
Price
55
50
45
40
35
30
25
20
15
10
Demand
5
50 100 150 200 250 300 350 400 450 500 550
____
Quantity
5. Refer to Figure 5-10. An increase in price from $20 to $30 would
a. increase total revenue by $2,000.
b. decrease total revenue by $2,000.
c. increase total revenue by $1,000.
d. decrease total revenue by $1,000.
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____
____
____
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6. You and your college roommate eat three packages of Ramen noodles each week. After graduation last
month, both of you were hired at several times your college income. Your roommate still enjoys Ramen
noodles very much and buys even more, but you plan to buy fewer Ramen noodles in favor of foods you
prefer more. When looking at income elasticity of demand for Ramen noodles, yours would
a. be negative and your roommate's would be positive.
b. be positive and your roommate's would be negative.
c. be zero and your roommate's would approach infinity.
d. approach infinity and your roommate's would be zero.
7. Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a
good. The income elasticity of demand for the good is
a. negative, and the good is an inferior good.
b. negative, and the good is a normal good.
c. positive, and the good is an inferior good.
d. positive, and the good is a normal good.
8. Cross-price elasticity of demand measures how
a. the price of one good changes in response to a change in the price of another good.
b. the quantity demanded of one good changes in response to a change in the quantity
demanded of another good.
c. the quantity demanded of one good changes in response to a change in the price of another
good.
d. strongly normal or inferior a good is.
9. If the cross-price elasticity of demand for two goods is 1.25, then
a. the two goods are luxuries.
b. the two goods are substitutes.
c. one of the goods is normal and the other good is inferior.
d. the demand for one of the goods conforms to the law of demand, but the demand for the
other good violates the law of demand.
10. The price elasticity of supply measures how responsive
a. sellers are to a change in price.
b. sellers are to a change in buyers' income.
c. buyers are to a change in production costs.
d. equilibrium price is to a change in supply.
11. A legal maximum on the price at which a good can be sold is called a price
a. floor.
b. subsidy.
c. support.
d. ceiling.
Figure 6-6
20
price
18
16
S
14
12
10
8
6
D
4
2
10
20
30
40
50
60
70
80
quantity
____ 12.
Refer to Figure 6-6. If the government imposes a price ceiling of $12 on this market, then there will be
a. neither a shortage nor a surplus.
b. a shortage of 10 units.
c. a shortage of 20 units.
d. a shortage of 40 units.
e. a surplus of 10 units
Figure 6-8
10
price
9
8
S
7
6
5
4
3
D
2
1
5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
quantity
____ 13. Refer to Figure 6-8. If the government imposes a price ceiling of $2 on this market, then there will be
a. neither a shortage nor a surplus of the good.
b. a shortage of 40 units of the good.
c. a shortage of 60 units of the good.
d. a shortage of 85 units of the good.
e. a surplus of 60 units of the good
____ 14. Refer to Figure 6-8. If the government imposes a price floor of $5 on this market, then there will be
a. neither a shortage nor surplus of the good.
b. a surplus of 20 units of the good.
c. a surplus of 30 units of the good.
d. a surplus of 55 units of the good.
e. a shortage of 30 units of the good
Figure 6-9
price
12
11
10
S
9
8
7
6
5
4
3
2
1
D
3
6
9
12
15
18
21
24
27
30
quantity
____ 15. Refer to Figure 6-9. A price ceiling set at
a. $4 will be binding and will result in a shortage of 3 units.
b. $4 will be binding and will result in a shortage of 6 units.
____ 16.
____ 17.
____ 18.
____ 19.
____ 20.
c. $7 will be binding and will result in a surplus of 6 units.
d. $7 will be binding and will result in a surplus of 12 units.
A tax on the sellers of coffee mugs
a. increases the size of the coffee mug market.
b. decreases the size of the coffee mug market.
c. has no effect on the size of the coffee mug market.
d. may increase, decrease, or have no effect on the size of the coffee mug market.
A tax levied on the sellers of blueberries
a. increases sellers’ costs, reduces profits, and shifts the supply curve up.
b. increases sellers’ costs, reduces profits, and shifts the supply curve down.
c. decreases sellers’ costs, increases profits, and shifts the supply curve up.
d. decreases sellers’ costs, increases profits, and shifts the supply curve down.
If the government wants to reduce smoking, it should impose a tax on
a. buyers of cigarettes.
b. sellers of cigarettes.
c. either buyers or sellers of cigarettes.
d. whichever side of the market is less elastic.
The tax incidence
a. is the manner in which the burden of a tax is shared among participants in a market.
b. can be shifted to the buyer by imposing the tax on the buyers of a product in a market.
c. can be shifted to the seller by imposing the tax on the sellers of a product in a market.
d. All of the above are correct.
Pat bought a new car for $15,500 but was willing to pay $24,000. The consumer surplus is
a. $8,500.
b. $15,500.
c. $24,000.
d. $39,500.
Table 7-10
Seller
LeBron
Kobe
Kevin
Steve
Cost
$700
$600
$450
$400
____ 21. Refer to Table 7-10. You want to hire a professional photographer to take pictures of your family. The table
shows the costs of the four potential sellers in the local photography market. You take bids from the sellers.
Who offers the winning bid, and what does he offer to charge for the photography session?
a. Steve; more than $400 but less than $450
b. Steve; $399
c. LeBron; more than $700
d. LeBron; more than $600 but less than $700
____ 22. Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts?
a. It increases.
b. It decreases.
c. It remains unchanged.
d. It may increase, decrease, or remain unchanged.
____ 23. Total surplus in a market is equal to
a. consumer surplus + producer surplus.
b. value to buyers - amount paid by buyers.
c. amount received by sellers - costs of sellers.
d. producer surplus - consumer surplus.
____ 24. Efficiency is attained when
a. total surplus is maximized.
b. producer surplus is maximized.
c. all resources are being used.
d. consumer surplus is maximized and producer surplus is minimized.
Figure 7-18
Price
Supply
28
26
24
22
20
18
16
14
12
10
8
Demand
6
4
2
10
20
30
40
50
60
70
80
90 100 110 120 130 140 150 160 170 Quantity
____ 25. Refer to Figure 7-18. At the equilibrium price, consumer surplus is
a. $480.
b. $640.
c. $1,120.
d. $1,280.
____ 26. Refer to Figure 7-18. At the equilibrium price, producer surplus is
a. $480.
b. $640.
c. $1,120.
d. $1,280.
Figure 7-19
P4
Price
Supply
A
P3
B
C
D
H
P2
P1
F
I
G
Demand
Q1
Q2
Quantity
____ 27. Refer to Figure 7-19. At equilibrium, consumer surplus is represented by the area
a. A.
b. A+B+C.
c. D+H+F.
d. A+B+C+D+H+F.
____ 28. Refer to Figure 7-19. At equilibrium, total surplus is represented by the area
a. A+B+C.
b. A+B+D+F.
c. A+B+C+D+H+F.
d. A+B+C+D+H+F+G+I.
____ 29. The French expression used by free-market advocates, which literally translates as "allow them to do," is
a. laissez-faire.
b. je ne sais pas.
c. si'l vous plait.
d. tête-à-tête.
____ 30. When a tax is levied on a good, the buyers and sellers of the good share the burden,
a. provided the tax is levied on the sellers.
b. provided the tax is levied on the buyers.
c. provided a portion of the tax is levied on the buyers, with the remaining portion levied on
the sellers.
d. regardless of how the tax is levied.
____ 31. When a tax is placed on a product, the price paid by buyers
a. rises, and the price received by sellers rises.
b. rises, and the price received by sellers falls.
c. falls, and the price received by sellers rises.
d. falls, and the price received by sellers falls.
____ 32. The government’s benefit from a tax can be measured by
a. consumer surplus.
b. producer surplus.
c. tax revenue.
d. All of the above are correct.
____ 33. What happens to the total surplus in a market when the government imposes a tax?
a. Total surplus increases by the amount of the tax.
b. Total surplus increases but by less than the amount of the tax.
c. Total surplus decreases.
d. Total surplus is unaffected by the tax.
____ 34. The loss in total surplus resulting from a tax is called
a. a deficit.
b. economic loss.
c. deadweight loss.
d. inefficiency.
Figure 8-1
Price
P'
Supply
J
K
I
L
Y
P''
P'''
M
B
N
Demand
Quantity
____ 35. Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. Total surplus before the tax is
measured by the area
a. I+Y.
b. J+K+L+M.
c. L+M+Y.
d. I+J+K+L+M+Y.
____ 36. Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. Total surplus after the tax is
measured by the area
a. I+Y.
b. J+K+L+M.
c. I+Y+B.
d. I+J+K+L+M+Y.
____ 37. Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The tax revenue is measured by the
area
a. K+L.
b. I+Y.
c. J+K+L+M.
d. I+J+K+L+M+Y.
____ 38. Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The producer surplus after the tax is
measured by the area
a. M.
b. L+M+N+Y+B.
c. L+M+Y.
d. J.
____ 39. Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The consumer surplus after the tax is
measured by the area
a. J+K+I.
b. J.
c. M.
d. L+M+Y.
____ 40. When a good is taxed, the burden of the tax
a. falls more heavily on the side of the market that is more elastic.
b. falls more heavily on the side of the market that is more inelastic.
c. falls more heavily on the side of the market that is closer to unit elastic.
d. is distributed independently of relative elasticities of supply and demand.
Extra Credit Question:
To be eligible to answer this extra credit question, you must satisfy both criteria below:
•
Your cell phone has not rung in class
•
You are taking this test in class at the regularly scheduled time: (Thursday, October 11)
____ 41. If the government levies a $5 tax per ticket on buyers of NFL game tickets, then the price paid by buyers of
NFL game tickets would
a. increase by less than $5.
b. increase by exactly $5.
c. increase by more than $5.
d. decrease by an indeterminate amount.
Rupp Econ 2113 – Test 2A
Answer Section (Fall 12)
MULTIPLE CHOICE
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B
Analytic
Analytical
C
Analytic
Interpretive
B
Analytic
Applicative
A
Analytic
Applicative
C
Analytic
Applicative
A
Analytic
Interpretive
A
Analytic
Applicative
C
Analytic
Definitional
B
Analytic
Interpretive
A
Analytic
Definitional
D
Analytic
Definitional
A
Analytic
Applicative
C
Analytic
Applicative
C
Analytic
Applicative
B
Analytic
Applicative
B
Analytic
Interpretive
A
PTS: 1
LOC: Elasticity
DIF: 2
REF: 5-1
TOP: Price elasticity of demand
PTS: 1
LOC: Elasticity
DIF: 2
REF: 5-1
TOP: Total revenue | Price elasticity of demand
PTS: 1
LOC: Elasticity
DIF: 2
REF: 5-1
TOP: Total revenue | Price elasticity of demand
PTS: 1
LOC: Elasticity
DIF: 2
REF: 5-1
TOP: Total revenue | Price elasticity of demand
PTS: 1
LOC: Elasticity
DIF: 2
REF: 5-1
TOP: Total revenue | Price elasticity of demand
PTS: 1
LOC: Elasticity
DIF: 2
REF: 5-1
TOP: Income elasticity of demand
PTS: 1
LOC: Elasticity
DIF: 2
REF: 5-1
TOP: Income elasticity of demand
PTS: 1
LOC: Elasticity
DIF: 2
REF: 5-1
TOP: Cross-price elasticity of demand
PTS: 1
LOC: Elasticity
DIF: 2
REF: 5-1
TOP: Cross-price elasticity of demand
PTS: 1
LOC: Elasticity
DIF: 1
REF: 5-2
TOP: Price elasticity of supply
PTS: 1
DIF: 1
LOC: Supply and demand
REF: 6-1
TOP: Price ceilings
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 6-1
TOP: Price ceilings
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 6-1
TOP: Price ceilings
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 6-1
TOP: Price floors
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 6-1
TOP: Price ceilings
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 6-2
TOP: Taxes | Supply
PTS: 1
REF: 6-2
DIF:
2
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Analytic
Interpretive
C
Analytic
Interpretive
A
Analytic
Definitional
A
Analytic
Applicative
A
Analytic
Analytical
A
Analytic
Applicative
A
Analytic
Definitional
A
Analytic
Definitional
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Analytic
Applicative
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Analytic
Applicative
B
Analytic
Applicative
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Analytic
Applicative
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Analytic
Definitional
D
Analytic
Interpretive
B
Analytic
Interpretive
C
Analytic
Interpretive
C
Analytic
Applicative
C
Analytic
Definitional
D
Analytic
LOC: Supply and demand
TOP: Taxes | Supply
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 6-2
TOP: Taxes | Demand | Supply
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 6-2
TOP: Tax incidence
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 7-1
TOP: Consumer surplus
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 7-2
TOP: Cost
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 7-2
TOP: Producer surplus
PTS: 1
DIF: 1
LOC: Supply and demand
REF: 7-3
TOP: Total surplus
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 7-3
TOP: Efficiency
PTS: 1
DIF: 3
LOC: Supply and demand
REF: 7-3
TOP: Consumer surplus
PTS: 1
DIF: 3
LOC: Supply and demand
REF: 7-3
TOP: Producer surplus
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 7-3
TOP: Consumer surplus
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 7-3
TOP: Total surplus
PTS: 1
DIF: 1
LOC: Supply and demand
REF: 7-3
TOP: Laissez-faire policy
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 8-1
TOP: Tax burden
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 8-1
TOP: Taxes
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 8-1
TOP: Tax revenue
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 8-1
TOP: Total surplus
PTS: 1
DIF: 1
LOC: Supply and demand
REF: 8-1
TOP: Deadweight loss
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 8-1
TOP: Total surplus
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Analytical
B
Analytic
Analytical
A
Analytic
Analytical
A
Analytic
Analytical
B
Analytic
Analytical
B
Analytic
Applicative
A
Analytic
Interpretive
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 8-1
TOP: Total surplus
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 8-1
TOP: Tax revenue
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 8-1
TOP: Producer surplus
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 8-1
TOP: Consumer surplus
PTS: 1
LOC: Elasticity
DIF: 2
REF: 8-2
TOP: Tax incidence | Elasticity
PTS: 1
DIF: 2
LOC: Supply and demand
REF: 6-2
TOP: Taxes | Demand