Question 1

If the price elasticity of demand for a good is less than one in absolute terms,we say consumers of this good

Accepted Answer

A) are not very sensitive to price. 
B) are not very sensitive to the quantity they demand. 
C) are very sensitive to price. 
D) are elastic. 
A) are not very sensitive to price. 
B) are not very sensitive to the quantity they demand. 
C) are very sensitive to price. 
D) are elastic.

Question 2

If the demand curve for a good is horizontal and the price is positive,then a leftward shift of the supply curve results in

Accepted Answer

A) a price of zero. 
B) an increase in price. 
C) a decrease in price. 
D) no change in price. 
A) a price of zero. 
B) an increase in price. 
C) a decrease in price. 
D) no change in price.

Question 3

For a given positively sloped supply curve,the price increase to consumers resulting from a specific tax imposed on sellers will be

Accepted Answer

A) greater the more price elastic demand is. 
B) greater the less price elastic demand is. 
C) equal to the entire tax when demand is perfectly elastic. 
D) equal to half of the tax whenever demand is unit elastic. 
A) greater the more price elastic demand is. 
B) greater the less price elastic demand is. 
C) equal to the entire tax when demand is perfectly elastic. 
D) equal to half of the tax whenever demand is unit elastic.

Question 4

Explain why the price elasticity of demand changes along a linear demand curve.

Accepted Answer

The price elasticity of demand

Question 5

A horizontal demand curve for a good could arise because consumers

Accepted Answer

A) are irrational. 
B) are not sensitive to price changes. 
C) view this good as identical to another good. 
D) have no equivalent substitutes for this good. 
A) are irrational. 
B) are not sensitive to price changes. 
C) view this good as identical to another good. 
D) have no equivalent substitutes for this good.

Question 6

In the case of a specific tax the resulting price received by producers depends on

Accepted Answer

A) the tax rate. 
B) the price elasticity of supply. 
C) the price elasticity of demand. 
D) All of the above. 
A) the tax rate. 
B) the price elasticity of supply. 
C) the price elasticity of demand. 
D) All of the above.

Question 7

Which of the following goods probably has the lowest (absolute value)short-run price elasticity of demand?

Accepted Answer

A) fresh fruit 
B) frozen dinners 
C) cars 
D) refrigerators 
A) fresh fruit 
B) frozen dinners 
C) cars 
D) refrigerators

Question 8

A competitive equilibrium is described by

Accepted Answer

A) a price only. 
B) a quantity only. 
C) the excess supply minus the excess demand. 
D) a price and a quantity. 
A) a price only. 
B) a quantity only. 
C) the excess supply minus the excess demand. 
D) a price and a quantity.

Question 9

Suppose the demand function for a good is expressed as Q = 100 - 4p.If the good currently sells for $10,then the price elasticity of demand equals

Accepted Answer

A) -1.5. 
B) -0.67. 
C) -4. 
D) -2.5. 
A) -1.5. 
B) -0.67. 
C) -4. 
D) -2.5.

Question 10

Suppose the market for grass seed can be expressed as:
Demand: QD = 100 - 2p
Supply: QS = 3p
Price elasticity of supply is constant at one.If the demand curve is changed to Q = 10 - .2p,price elasticity of demand at any given price is the same as before.Yet the incidence of a tax falling on consumers will be higher.Why?

Accepted Answer

With the same vertical intercept,the ste

Question 11

If a good is not produced,then there is no demand for it.

Accepted Answer

A) True 
 B)False

Question 12

Suppose the demand for widgets is given by QD = 100 - 5p - pd + 2Y,where Y is average consumer income,p is the price of lemons,and pd is the price of doodads.According to this equation,widgets are an inferior good.

Accepted Answer

A) True 
 B)False

Question 13

The supply and demand for wheat are given by
QS= 20 + 100p
QD = 4000 - 100p +10Y
Where Y is the average consumer income.
a.Compute the partial derivative of quantity demand with respect to changes in average consumer income.
b.Solve for the equilibrium price and quantity as functions of the consumer income.
c.Compute the derivatives of the equilibrium price and quantity with respect to income.

Accepted Answer

a.10
b.200p = 3980 + 10Y
p*(Y)

Question 14

When comparing elasticities between two different linear demand curves,the curve that is flatter has greater price elasticity at every given price.

Accepted Answer

A) True 
 B)False

Question 15

Because demand curves slope downward according to the Law of Demand,the price elasticity of demand is a negative number.

Accepted Answer

A) True 
 B)False

Question 16

Suppose that the long-run world demand and supply elasticities of crude oil are -0.906 and 0.515,respectively.The current long-run equilibrium price is $30 per barrel and the equilibrium quantity is 16.88 billion barrels per year.
a.Derive the (linear)long-run demand and supply equations.
b.Suppose the long-run supply curve you derived above consists of competitive supply plus the quantity of OPEC supply.If the long-run competitive supply (not including OPEC's production)is:
QS = 7.78 + 0.29p,
what must be OPECʹs level of production in this long-run equilibrium to maintain the price of $30?

Accepted Answer

a.First derive the slope of the demand c

Question 17

Suppose a market is supplied by domestic producers and and an international supply.The domestic (inverse)supply curve is given by the p = 5 + 2Q,and the foreign supply curve is given by p = 15.Draw the total supply curve.On a second graph,draw the total supply curve if the government imposes a quota of 10 on foreign supply.

Accepted Answer

Without a quota,the supply cur

Question 18

A rightward shift of the supply curve will lead to a(n)

Accepted Answer

A) decrease in equilibrium price. 
B) excess supply at the old equilibrium price. 
C) increase in quantity demanded. 
D) All of the above. 
A) decrease in equilibrium price. 
B) excess supply at the old equilibrium price. 
C) increase in quantity demanded. 
D) All of the above.

Question 19

Assume the supply function of ice cream is written as: Qs = 100 + 20P - 10Pm,where Qs is the quantity supplied,P is price of ice cream,and Pm is the price of milk ($/gallon).If milk price is held fixed at $4/gallon,what is the slope of supply function for ice cream?

Accepted Answer

A) -10 
B) 10 
C) -20 
D) 20 
A) -10 
B) 10 
C) -20 
D) 20

Question 20

It is appropriate to use the supply-and-demand model if,in a market,

Accepted Answer

A) everyone is a price taker with full information about the price and quality of the good. 
B) firms sell identical products. 
C) costs of trading are low. 
D) All of the above. 
A) everyone is a price taker with full information about the price and quality of the good. 
B) firms sell identical products. 
C) costs of trading are low. 
D) All of the above.

If the price elasticity of demand for a good is less than one in absolute terms,we say consumers of this good

If the demand curve for a good is horizontal and the price is positive,then a leftward shift of the supply curve results in

For a given positively sloped supply curve,the price increase to consumers resulting from a specific tax imposed on sellers will be

Explain why the price elasticity of demand changes along a linear demand curve.

A horizontal demand curve for a good could arise because consumers

In the case of a specific tax the resulting price received by producers depends on

Which of the following goods probably has the lowest (absolute value)short-run price elasticity of demand?

A competitive equilibrium is described by

Suppose the demand function for a good is expressed as Q = 100 - 4p.If the good currently sells for $10,then the price elasticity of demand equals

If a good is not produced,then there is no demand for it.

Suppose the demand for widgets is given by Q_D= 100 - 5p - p_d+ 2Y,where Y is average consumer income,p is the price of lemons,and p_d is the price of doodads.According to this equation,widgets are an inferior good.

When comparing elasticities between two different linear demand curves,the curve that is flatter has greater price elasticity at every given price.

Because demand curves slope downward according to the Law of Demand,the price elasticity of demand is a negative number.

A rightward shift of the supply curve will lead to a(n)

Assume the supply function of ice cream is written as: Qs = 100 + 20P - 10Pm,where Qs is the quantity supplied,P is price of ice cream,and Pm is the price of milk ($/gallon).If milk price is held fixed at $4/gallon,what is the slope of supply function for ice cream?

It is appropriate to use the supply-and-demand model if,in a market,

Introduction

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 2: Supply and Demand

If the price elasticity of demand for a good is less than one in absolute terms,we say consumers of this good

If the demand curve for a good is horizontal and the price is positive,then a leftward shift of the supply curve results in

For a given positively sloped supply curve,the price increase to consumers resulting from a specific tax imposed on sellers will be

Explain why the price elasticity of demand changes along a linear demand curve.

A horizontal demand curve for a good could arise because consumers

In the case of a specific tax the resulting price received by producers depends on

Which of the following goods probably has the lowest (absolute value)short-run price elasticity of demand?

A competitive equilibrium is described by

Suppose the demand function for a good is expressed as Q = 100 - 4p.If the good currently sells for $10,then the price elasticity of demand equals

If a good is not produced,then there is no demand for it.

Suppose the demand for widgets is given by QD = 100 - 5p - pd + 2Y,where Y is average consumer income,p is the price of lemons,and pd is the price of doodads.According to this equation,widgets are an inferior good.

When comparing elasticities between two different linear demand curves,the curve that is flatter has greater price elasticity at every given price.

Because demand curves slope downward according to the Law of Demand,the price elasticity of demand is a negative number.

A rightward shift of the supply curve will lead to a(n)

Assume the supply function of ice cream is written as: Qs = 100 + 20P - 10Pm,where Qs is the quantity supplied,P is price of ice cream,and Pm is the price of milk ($/gallon).If milk price is held fixed at $4/gallon,what is the slope of supply function for ice cream?

It is appropriate to use the supply-and-demand model if,in a market,

Introduction

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Suppose the demand for widgets is given by Q_D= 100 - 5p - p_d+ 2Y,where Y is average consumer income,p is the price of lemons,and p_d is the price of doodads.According to this equation,widgets are an inferior good.