question archive 1)Which of the following is not a determinant of the price elasticity of demand for a good? a
1)Which of the following is not a determinant of the price elasticity of demand for a good? a
Subject:EconomicsPrice: Bought3
1)Which of the following is not a determinant of the price elasticity of demand for a good?
a. the time horizon
b. the steepness or flatness of the supply curve for the good
c. the definition of the market for the good
d. the availability of substitutes for the good
2) Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because
a. buyers tend to be much less sensitive to a change in price when given more time to react.
b. buyers tend to be much more sensitive to a change in price when given more time to react.
c. buyers will have substantially more real income over a ten-year period.
d. the quantity supplied of gasoline increases very little in response to an increase in the price of gasoline.
3)The price elasticity of demand for bread
a. is computed as the percentage change in quantity demanded of bread divided by the percentage change in price of bread.
b. depends, in part, on the availability of close substitutes for bread.
c. reflects the many economic, social, and psychological forces that influence consumers' tastes for bread.
d. All of the above are correct.
4. Holding all other forces constant, if increasing the price of a good leads to an increase in total revenue, then the demand for the good must be
a. unit elastic.
b. inelastic.
c. elastic.
d. None of the above is correct because a price increase always leads to an increase in total revenue.
5. Frequently, in the short run, the quantity supplied of a good is
a. impossible, or nearly impossible, to measure.
b. not very responsive to price changes.
c. determined by the quantity demanded of the good.
d. determined by psychological forces and other non-economic forces.
6. If the price elasticity of supply is 1.2, and a price increase led to a 5% increase in quantity supplied, then the price increase is about
a. 0.24%.
b. 4.2%.
c. 6%.
d. 6.2%.
Scenario 1
Suppose the government is concerned about firms in the United States importing illegal caviar. As a result, the government increases border patrols to catch illegal shipments. U.S. Customs agents perform DNA testing on the caviar to determine if it comes from endangered species of fish. If so, the government destroys the caviar.
7. Refer to Scenario 1. What would we expect to observe in the caviar market?
a. Equilibrium prices and quantities will increase.
b. Equilibrium prices will increase by more if the demand for caviar is elastic than if demand is inelastic.
c. Total revenues to caviar firms will increase if the demand for caviar is inelastic.
d. All of the above are correct.
8. OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to
a. an inelastic demand for oil and a reduction in the amount of oil supplied.
b. a reduction in the amount of oil supplied and a world-wide oil embargo.
c. a world-wide oil embargo and an elastic demand for oil.
d. a reduction in the amount of oil supplied and an elastic demand for oil.
9. The federal government is concerned about obesity in the United States. Congress is considering two plans. One will ban the production and sale of "junk food." The other will increase nutritioneducation programs and include substantial advertising campaigns to encourage healthy eating habits. The junk-food ban program
a. and the education program will reduce the quantity of junk food sold and raise the price.
b. and the education program will reduce the quantity of junk food sold and lower the price.
c. will reduce the quantity of junk food sold and raise the price. The education program will reduce the quantity of junk food sold and lower the price.
d. will reduce the quantity of junk food sold and lower the price. The education program will reduce the quantity of junk food sold and raise the price.
10. Suppose a freeze in Florida significantly reduces the supply of oranges this year. As a result, would you expect the total revenue from the sale of orange juice to rise or fall? Explain.
ANSWER:
· Oranges are an input into the production of orange juice therefore, the increase in the price of oranges will reduce the supply of orange juice.
· When the price of orange juice rises, total revenue may rise or fall. If the demand for orange juice is inelastic, then total revenue will rise. On the other hand, if the demand for orange juice is elastic, then total revenue will fall
11. Which of the following is not a function of prices in a market system?
a. Prices have the crucial job of balancing supply and demand.
b. Prices send signals to buyers and sellers to help them make rational economic decisions.
c. Prices coordinate economic activity.
d. Prices ensure an equal distribution of goods and services among consumers.
12. If a tax is levied on the buyers of a product, then the supply curve will
a. not shift.
b. shift up.
c. shift down.
d. become flatter.
This figure shows the market demand and market supply curves for good Z.
13. Refer to Figure above. Suppose a tax of $3 per unit is imposed on this market. What will be the new equilibrium quantity in this market?
a. less than 8 units
b. 8 units
c. between 8 units and 10 units
d. greater than 10 units
14. Refer to Figure above. Suppose a tax of $3 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed?
a. $16
b. between $16 and $20
c. between $20 and $22
d. $22
15. Refer to Figure above. Suppose a tax of $6 per unit is imposed on this market. How much will buyers pay per unit after the tax is imposed?
a. $16
b. between $16 and $20
c. between $20 and $22
d. $22
16. Refer to Figure above. Suppose a tax of $6 per unit is imposed on this market. Which of the following is correct?
a. Buyers and sellers will share the burden of the tax equally.
b. Buyers will bear more of the burden of the tax than sellers will.
c. Sellers will bear more of the burden of the tax than buyers will.
d. Any of the above is possible.
17. Which of the following causes the price paid by buyers to be different than the price received by sellers?
a. a binding price floor
b. a binding price ceiling
c. a tax on the good
d. All of the above are correct.
18. The price received by sellers in a market will increase if the government decreases a
a. binding price floor in that market.
b. binding price ceiling in that market.
c. tax on the good sold in that market.
d. None of the above is correct.
19. Which of the following causes a shortage of a good?
a. a binding price floor
b. a binding price ceiling
c. a tax on the good
d. None of the above is correct.
20. Suppose the demand for macaroni is inelastic, the supply of macaroni is elastic, the demand for cigarettes is inelastic, and the supply of cigarettes is elastic. If a tax were levied on the sellers of both of these commodities, we would expect that the burden of
a. both taxes would fall more heavily on the buyers than on the sellers.
b. the macaroni tax would fall more heavily on the sellers than on the buyers, and the burden of the cigarette tax would fall more heavily on the buyers than on the sellers.
c. the macaroni tax would fall more heavily on the buyers than on the sellers, and the burden of the cigarette tax would fall more heavily on the sellers than on the buyers.
d. both taxes would fall more heavily on the sellers than on the buyers.
