Download Rupp Econ 2113 2B Fall 09

Econ 2113 – Test 2B
Name:________________________________
Dr. Rupp – Fall 2009
October 15, 2009
Pledge: “I have neither given or received aid on this
exam”.
Signature:________________________________
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
Figure 6-4
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____
____
1. Refer to Figure 6-4. If the government imposes a price ceiling in this market at a price of $5.00, the result
would be a
a. shortage of 20 units.
b. shortage of 10 units.
c. surplus of 20 units.
d. surplus of 10 units.
2. Refer to Figure 6-4. For a price ceiling to be binding, it would have to be set at
a. any price below $6.00.
b. a price between $4.00 and $6.00.
c. a price between $6.00 and $8.00.
d. any price above $6.00.
3. Under rent control, tenants can expect
a. lower rent and higher quality housing.
b. lower rent and lower quality housing.
c. higher rent and a shortage of rental housing.
d. higher rent and a surplus of rental housing.
Figure 6-8
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____
____
____
____
____
____
4. Refer to Figure 6-8. The price that sellers keep after the tax is imposed is
a. $8.
b. $6.
c. $5.
d. $3.
5. Refer to Figure 6-8. The amount of the tax per unit is
a. $1.
b. $2.
c. $3.
d. $5.
6. Refer to Figure 6-8. The burden of the tax on buyers is
a. $1.00 per unit.
b. $1.50 per unit.
c. $2.00 per unit.
d. $3.00 per unit.
7. A tax imposed on the sellers of a good
a. raises both the price buyers pay and the effective price for sellers.
b. raises the price buyers pay and lowers the effective price for sellers.
c. lowers the price buyers pay and raises the effective price for sellers.
d. lowers both the price buyers pay and the effective price for sellers.
8. Although lawmakers legislated a fifty-fifty division in the payment of the Social Security tax,
a. the same outcome, in terms of tax incidence, would occur even if the entire tax had been
levied on only the workers or only on the firms.
b. the employer now is required by law to pay more than 50 percent of the tax.
c. the employee now is required by law to pay more than 50 percent of the tax.
d. employers are no longer required by law to pay any portion of the tax.
9. Willingness to pay
a. measures the value that a buyer places on a good.
b. is the amount a seller actually receives for a good minus the minimum amount the seller is
willing to accept.
c. is the maximum amount a buyer is willing to pay minus the minimum amount a seller is
willing to accept.
d. is the amount a buyer is willing to pay for a good minus the amount the buyer actually
pays for it.
10. If a consumer places a value of $15 on a particular good and if the price of the good is $17, then
a. the consumer has consumer surplus of $2 if he or she buys the good.
b. the consumer does not purchase the good.
c. the market is not a competitive market.
d. there is going to be downward pressure on the price of the good.
____ 11. Suppose there is an early freeze in Florida that reduces the size of the orange crop. What happens to consumer
surplus in the market for oranges?
a. It increases.
b. It decreases.
c. It is not affected by this change in market forces.
d. We would have to know whether the demand for oranges is elastic or inelastic to make
this determination.
____ 12. Producer surplus is
a. measured using the demand curve for a good.
b. always a negative number for sellers in a competitive market.
c. the amount a seller is paid minus the cost of production.
d. the opportunity cost of production minus the cost of producing goods that go unsold.
____ 13. Producer surplus is the area
a. under the supply curve.
b. between the supply and demand curves.
c. below the price and above the supply curve.
d. under the demand curve, and above the price.
Figure 7-10
____ 14. Refer to Figure 7-10. At the equilibrium, total consumer surplus is represented by the area
a. A.
b. A + B + C.
c. D + E + F.
d. A + B + C + D + E + F.
____ 15. Refer to Figure 7-10. At the market-clearing equilibrium, total producer surplus is represented by the area
a.
b.
c.
d.
F.
F + G.
D + E + F.
D + E + F + G + H.
____ 16. Refer to Figure 7-10. At the market-clearing equilibrium, total surplus is represented by the area
a.
b.
c.
d.
A + B + C.
A + B + D + F.
A + B + C + D + E + F.
A + B + C + D + E + F + G + H.
____ 17. It does not matter whether a tax is levied on the buyers or the sellers of a good because
a. sellers always bear the full burden of the tax.
b. buyers always bear the full burden of the tax.
c. buyers and sellers will share the burden of the tax.
d. None of the above is correct; the incidence of the tax does depend on whether the buyers
or the sellers are required to pay the tax.
____ 18. 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.
Figure 8-5
____ 19. Refer to Figure 8-5. When a tax is imposed in this market, the price buyers effectively pay is
a. $10.
b. $16.
c. $22.
d. between $10 and $16.
____ 20. Refer to Figure 8-5. When a tax is imposed in this market, the price sellers keep after the tax is
a. $6.
b. $10.
c. $16.
d. between $6 and $10.
____ 21. Refer to Figure 8-5. When the government imposes a tax in this market, tax revenue is
a. $600.
b. $900.
c. $1,500.
d. $3,000.
____ 22. The price elasticity of demand measures how much
a. quantity demanded responds to a change in price.
b. quantity demanded responds to a change in income.
c. price responds to a change in demand.
d. demand responds to a change in supply.
____ 23. If demand is inelastic, then
a. buyers do not respond much to a change in price.
b. buyers respond substantially to a change in price, but the response is very slow.
c. buyers do not alter their quantities demanded much in response to advertising, fads, or
general changes in tastes.
d. the demand curve is very flat.
____
24. The demand for Chocolate Chip Cookie Dough ice cream is likely quite elastic because
a.
b.
c.
d.
____
ice cream must be eaten quickly.
this particular flavor of ice cream is viewed as a necessity by many ice-cream lovers.
the market is broadly defined.
other flavors of ice cream are good substitutes for this particular flavor.
25. A perfectly elastic demand implies that
a. buyers will not respond to any change in price.
b. any rise in price above that represented by the demand curve will result in a quantity demanded of zero.
c. quantity demanded and price change by the same percent as we move along the demand curve.
d. price will rise by an infinite amount when there is a change in quantity demanded.
____ 26. When demand is inelastic, a decrease in price will cause
a. an increase in total revenue.
b. a decrease in total revenue.
c. no change in total revenue, but an increase in quantity demanded.
d. no change in total revenue, but a decrease in quantity demanded.
Figure 5-6
____ 27. Refer to Figure 5-6. A decrease in price from $15 to $10 leads to
a. a decrease in total revenue of $10, so the price elasticity of demand is greater than 1 in this
price range.
b. a decrease in total revenue of $10, so the price elasticity of demand is less than 1 in this
price range.
c. a decrease in total revenue of $20, so the price elasticity of demand is less than 1 in this
price range.
d. a decrease in total revenue of $20, so demand is elastic in this price range.
Figure 5-7
____ 28. Refer to Figure 5-7. Total revenue when the price is P1 is represented by the area(s)
a. B + D.
b. A + B.
c. C + D.
d. D.
____ 29. The local pizza restaurant makes such great bread sticks that consumers do not respond much at all to a
change in the price. If the owner is only interested in increasing revenue, he should
a. lower the price of the bread sticks.
b. leave the price of the bread sticks alone.
c. raise the price of the bread sticks.
d. reduce costs.
____ 30. Income elasticity of demand measures how
a. the quantity demanded changes as consumer income changes.
b. consumer purchasing power is affected by a change in the price of a good.
c. the price of a good is affected when there is a change in consumer income.
d. many units of a good a consumer can buy given a certain income level.
___
31. Last year, Joan bought 50 pounds of hamburger when her household’s income was $40,000. This year, her
household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's
income elasticity of demand for hamburger is
a. positive, so Joan considers hamburger to be an inferior good.
b. positive, so Joan considers hamburger to be a normal good and a necessity.
c. negative, so Joan considers hamburger to be an inferior good.
d. negative, so Joan considers hamburger to be a normal good, but not a necessity.
____ 32. Suppose good X has a negative income elasticity of demand. This implies that good X is
a. a normal good.
b. a necessity.
c. an inferior good.
d. a luxury.
____ 33. Muriel's income elasticity of demand for football tickets is 1.50. All else equal, this means that if her income
increases by 20 percent, she will buy
a. 150 percent more football tickets.
b. 50 percent more football tickets.
c. 30 percent more football tickets.
d. 20 percent more football tickets.
____ 34. Suppose the cross-price elasticity of demand between hot dogs and mustard is -2.00. This implies that a 20
percent increase in the price of hot dogs will cause the quantity of mustard purchased to
a. fall by 200 percent.
b. fall by 40 percent.
c. rise by 200 percent.
d. rise by 40 percent.
____ 35. 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.
____ 36. If the quantity supplied is the same regardless of price, then supply is
a. elastic.
b. perfectly elastic.
c. perfectly inelastic.
d. inelastic.
____ 37. Policymakers use taxes
a. to raise revenue for public purposes, but not to influence market outcomes.
b. both to raise revenue for public purposes and to influence market outcomes.
c. when they realize that price controls alone are insufficient to correct market inequities.
d. only in those markets in which the burden of the tax falls clearly on the sellers.
____ 38. A legal minimum price at which a good can be sold is
a. exemplified by rent-control laws.
b. usually intended to enhance efficiency in a market.
c. called a price ceiling.
d. called a price floor.
____ 39. Which of the following is the most likely explanation for the imposition of a price floor in the market for
milk?
a. Policymakers have studied the effects of the price floor carefully and they recognize that
the price floor is advantageous for society as a whole.
b. Buyers and sellers of milk have agreed that the price floor is good for both of them and
have therefore pressured policy makers into enacting the price floor.
c. Buyers of milk, recognizing that the price floor is good for them, have pressured policy
makers into enacting the price floor.
d. Sellers of milk, recognizing that the price floor is good for them, have pressured policy
makers into enacting the price floor.
Figure 6-3
____ 40. Refer to Figure 6-3. In panel (b), with the price floor in effect, there will be
a. a shortage of wheat.
b. equilibrium in the market.
c. a surplus of wheat.
d. an excess demand for wheat.
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: (Tuesday, September 15th)
____ 41. The decrease in total surplus that results from a market distortion, such as a tax, is called a
a. wedge loss.
b. revenue loss.
c. deadweight loss.
d. shrinkage of consumer surplus.
Rupp Test 2B Fall 2009
Answer Section
MULTIPLE CHOICE
1. ANS: A
MSC: Applicative
2. ANS: A
MSC: Applicative
3. ANS: B
MSC: Interpretive
4. ANS: C
MSC: Applicative
5. ANS: C
MSC: Applicative
6. ANS: C
MSC: Applicative
7. ANS: B
MSC: Applicative
8. ANS: A
MSC: Interpretive
9. ANS: A
MSC: Interpretive
10. ANS: B
MSC: Interpretive
11. ANS: B
MSC: Applicative
12. ANS: C
MSC: Definitional
13. ANS: C
MSC: Interpretive
14. ANS: B
MSC: Interpretive
15. ANS: C
MSC: Interpretive
16. ANS: C
MSC: Interpretive
17. ANS: C
MSC: Interpretive
18. ANS: B
MSC: Applicative
19. ANS: B
MSC: Applicative
20. ANS: A
MSC: Applicative
21. ANS: D
MSC: Applicative
22. ANS:
MSC:
23. ANS:
MSC:
24. ANS:
TOP:
DIF: 2
REF: 6-1
TOP: Price ceilings, Shortages
DIF: 2
REF: 6-1
TOP: Price ceilings
DIF: 2
REF: 6-1
TOP: Rent control
DIF: 2
REF: 6-2
TOP: Tax, Equilibrium price
DIF: 2
REF: 6-2
TOP: Tax
DIF: 2
REF: 6-2
TOP: Tax burden
DIF: 2
REF: 6-2
TOP: Tax, Equilibrium price
DIF: 2
REF: 6-2
TOP: FICA taxes
DIF: 2
REF: 7-1
TOP: Price, Value
DIF: 2
REF: 7-1
TOP: Price, Value
DIF: 2
REF: 7-1
TOP: Consumer surplus, Shifts of curves
DIF: 2
REF: 7-2
TOP: Producer surplus
DIF: 2
REF: 7-2
TOP: Producer surplus
DIF: 2
REF: 7-3
TOP: Consumer surplus
DIF: 2
REF: 7-3
TOP: Producer surplus
DIF: 2
REF: 7-3
TOP: Total surplus
DIF: 2
REF: 8-1
TOP: Tax incidence
DIF: 2
REF: 8-1
TOP: Tax incidence
DIF: 2
REF: 8-1
TOP: Tax, Equilibrium price
DIF: 2
REF: 8-1
TOP: Tax, Equilibrium price
DIF: 2
REF: 8-1
TOP: Tax, Government
A
DIF: 1
REF: 5-1
Definitional
A
DIF: 2
REF: 5-1
Definitional
D
DIF: 2
REF: 5-1
Price elasticity of demand, Substitutes
TOP: Price elasticity of demand
TOP: Inelastic demand
MSC: Interpretive
25. ANS:
MSC:
26. ANS:
MSC:
27. ANS:
MSC:
28. ANS:
MSC:
29. ANS:
MSC:
30. ANS:
MSC:
31. ANS:
TOP:
32. ANS:
MSC:
33. ANS:
MSC:
34. ANS:
MSC:
35. ANS:
MSC:
36. ANS:
MSC:
37. ANS:
MSC:
38. ANS:
MSC:
39. ANS:
MSC:
40. ANS:
MSC:
B
DIF: 2
REF: 5-1
Interpretive
B
DIF: 2
REF: 5-1
Applicative
C
DIF: 2
REF: 5-1
Applicative
A
DIF: 2
REF: 5-1
Applicative
C
DIF: 2
REF: 5-1
Interpretive
A
DIF: 1
REF: 5-1
Definitional
C
DIF: 2
REF: 5-1
Inferior goods, Income elasticity of demand
C
DIF: 1
REF: 5-1
Interpretive
C
DIF: 2
REF: 5-1
Applicative
B
DIF: 2
REF: 5-1
Applicative
A
DIF: 1
REF: 5-2
Definitional
C
DIF: 2
REF: 5-2
Definitional
B
DIF: 2
REF: 6-0
Interpretive
D
DIF: 1
REF: 6-1
Definitional
D
DIF: 2
REF: 6-1
Interpretive
C
DIF: 2
REF: 6-1
Applicative
41. ANS: C
MSC: Definitional
DIF: 1
REF: 8-1
TOP: Perfectly elastic demand
TOP: Inelastic demand, Total revenue
TOP: Inelastic demand, Total revenue
TOP: Demand curve, Total revenue
TOP: Inelastic demand, Total revenue
TOP: Income elasticity of demand
MSC: Interpretive
TOP: Income elasticity of demand
TOP: Income elasticity of demand
TOP: Cross-price elasticity of demand
TOP: Price elasticity of supply
TOP: Perfectly inelastic supply
TOP: Taxes
TOP: Price floors
TOP: Price floors
TOP: Price floors, Surpluses
TOP: Deadweight losses