Microeconomics Final Exam Review

Microeconomics Final Exam Review The sum of all the individual supply curves for a product is called? a. total supply b. market supply c. aggregate supply d. total output A market supply curve shows how the total quantity supplied of a good varies as a. technology varies b. price varies c. input prices vary d. demand varies Today, producers changed their expectation about the future. This change a. can cause a movement along a supply curve b. can affect future supply, but not today's supply c. can affect today's supply d. cannot affect either today's supply or future supply Funsters, Inc., the largest toy company in the country, sells its most popular doll for $15. It has just learned that its leading competitor, Toysorama, is mass-producing an excellent copy and plans to flood the market with their $5 doll in 6 weeks. Funster should a. "fight fire with fire" by decreasing supply of its doll for 6 weeks and then increasing the supply. b. increase the supply of their doll now before the other doll hits the market. c. increase the price of their now. d. discontinue their doll. Which space represents an increase in equilibrium price and an indeterminate change in equilibrium quantity? a. an increase in demand and an increase in supply b. an increase in demand and a decrease in supply c. a decrease in demand and an increase in supply d. a decrease in demand and a decrease in supply What will happen to the equilibrium price and quantity of new cars if the price of gasoline rises, the price of steel rises, public transportation becomes cheaper and more comfortable, and auto-workers negotiate higher wages? a. Price will fall and the effect on quantity is ambiguous. b. Price will rise and the effect on quantity is ambiguous. c. Quantity will fall and the effect on price is ambiguous. d. Quantity will rise and the effect on price is ambiguous. Which of the following is likely to have the most price inelastic demand? a. mint-flavored toothpaste b. toothpaste c. Colgate mint-flavored toothpaste d. a generic mint-flavored toothpaste The price elasticity of demand for eggs a. is computed as the percentage change in quantity demanded of eggs divided by the percentage change in price of eggs. b. will be lower if there is a new invention that is a close substitute for eggs. c. will be higher if consumers consider eggs to be a luxury good. d. All of the above are correct. Suppose that quantity rises by 10% as a result of a 15% decrease in price. The price elasticity of demand for this good is a. inelastic and equal to 0.67. b. elastic and equal to 0.67. c. inelastic and equal to 1.50. d. elastic and equal to 1.50. If the price elasticity of demand for aluminum foil is 1.45, then a 2.4% decrease in the price of aluminum foil will increase the quantity demanded of aluminum foil by a. 1.66%, and aluminum foil sellers' total revenue will increase as a result b. 1.66%, and aluminum foil sellers' total revenue will decrease as a result c. 3.48%, and aluminum foil sellers' total revenue will increase as a result d. 3.48%, and aluminum foil sellers' total revenue will decrease as a result Total revenue a. always increases as price increases. b. increases as price increases, as long as demand is elastic c. decreases as price increases, as long as demand is inelastic. d. remains unchanged as price increases when demand is unit elastic. In which of the following situations will total revenue increase? a. Price elasticity of demand is 1.2, and the price of the good decreases. b. Price elasticity of demand is 0.5, and the price of the good increases. c. Price of elasticity of demand is 3.0, and the price of the good decreases. d. All of the above are correct. If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is a. 0.63, and supply is elastic b. 0.63, and supply is inelastic c. 1.60, and supply is elastic. d. 1.60, and supply is inelastic Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10% of their land, then a. consumers of wheat would buy more wheat. b. wheat farmers would suffer a reduction in their total revenue. c. wheat farmers would experience an increase in their total revenue d. the demand for wheat would decrease. Price controls are usually enacted a. as a means of raising revenue for public purposes. b. when policymakers believe that the market price of a good or service is unfair to buyers or sellers. c. when policymakers detect inefficiencies in the market. d. All of the above are correct. When a binding price ceiling is imposed on a market a. price no longer serves as a rationing device. b. the quantity supplied at the price ceiling exceeds the quantity that would have been supplied without the price ceiling. c. all buyers benefit d. All of the above are correct. A price floor is a. a legal minimum on the price at which a good can be sold. b. often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price floor. c. a source of inefficiency in the market. d. All of the above are correct. If a tax is levied on the sellers of a product, then there will be a(n) a. downward shift of the demand curve b. upward shift of the demand curve c. movement up and to the left along the demand curve. d. movement down and to the right along the demand. A tax on the buyers of popcorn a. increase the size of the popcorn market b. decrease the size of the popcorn market c. has no effect on the size of the popcorn market. d. many increase, decrease, or have no effect on the size of the popcorn market. Suppose the demand for macaroni is inelastic and the supply of macaroni is elastic, and 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 a. burden of both taxes would fall more heavily on the buyers than on the sellers b. burden of the macaroni tax fall more heavily on the sellers than on the buyers, and the burden of the cigarette tax wold fall more heavily on the buyers than on the sellers. c. burden of 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. burden of both taxes would fall more heavily on the sellers than on the buyers. A drought in California destroys many red grapes. As result of the drought, the consumers surplus in the market for red grapes a. increases, and the consumer surplus in the market for red wine increases. b. increases, and the consumer surplus in the market for red wine decreases. c. decreases, and the consumers surplus in the market for red wine increases. d. decreases, and the consumer surplus in the market for red wine decreases. Olaf would be willing to pay $35 to attend to a dog show, but he buys a ticket for $20. Olaf values the dog show at a. $15 b. $20 c. $35 d. $50 Ally mows lawns for a living. Ally's out-of-pocket expense (for equipment, gasoline, and so on) plus the value that she places on her own time amount to her a. producer surplus b. producer deficit c. cost of mowing lawns d. profit Which of the following equations is NOT valid? a. Consumer surplus = value of buyers - amount paid by buyers b. Producer surplus = amount received by sellers - cost to sellers c. Total surplus = value to buyers - amount paid by buyers + amount received by sellers - cost of sellers d. total surplus = value to sellers - cost to sellers At the equilibrium price of a good, the good will be purchased by those buyers who a. value the good more than price. b. value the good less than price. c. have the money to buy the good. d. consider the good a necessity. Total surplus in a market will increase when the government a. imposes a binding price floor or a binding price ceiling on that market. b. imposes a tax on that market c. Both a and b are correct. d. Neither a nor b is correct. Which of the following statements is NOT correct? a. An invisible hand leads buyers and sellers to an equilibrium that maximizes total surplus. b. Market power can cause markets to be inefficient. c. Externalities can cause markets to be inefficient. d. The invisible hand can remedy most if not all types of market failures. Suppose a tax of $0.50 per unit on a good creates a deadweight loss of $100. If the tax is increased to $2.50 per unit, the deadweight loss from the new tax would be a. $200 b. $250 c. $500 d. $2,500 Unlike the supply of raw land, the supply of improvements a. is perfectly inelastic. b. has an elasticity that is greater than zero. c. cannot be taxed, even if an attempt were made to tax it. d. is exempt from taxation under current law. Which of the following statement is correct? a. Government should tax good with either positive or negative externalities. b. Government should tax goods with negative externalities and subsidize goods with positive externalities. c. Government should subsidize goods with either positive or negative externalities. d. Government should tax goods with positive externalities and subsidize goods with negative externalities.