Exam 2: Market Forces: Demand and Supply

American Tennishoe, Inc., is concerned because Congress has proposed an excise tax of $1 on each pair of tennis shoes sold in the United States. They are lobbying against the tax through an advertising campaign that says the tax will raise the price of tennis shoes by $1. Use supply and demand graphs to show how much of the tax will actually be passed on to consumers.

Which of the following are least likely to be substitutes?

An excise tax of $1.00 per gallon of gasoline placed on the suppliers of gasoline in a market with downward sloping demand and upward sloping supply would raise the equilibrium price

Suppose supply decreases and demand increases. What effect will this have on the quantity?

Good X is an inferior good if a decrease in income leads to

Graphically, a decrease in advertising will cause the demand curve to:

Suppose the demand for X is given by Q_x^d = 100 - 2P_X + 4P_Y + 10M + 2A, where P_X represents the price of good X, P_Y is the price of good Y, M is income and A is the amount of advertising on good X. Based on this information, we know that good X is a

Apples and oranges are substitutes. A freeze in Florida destroys most of the orange crop. What would you expect to happen to the market for the following: a. Oranges? b. Apples? c. Orange juice?

Suppose the market demand for good X is given by Q_X^d = 20 - 2P_X. If the equilibrium price of X is $5 per unit then consumers' expenditure on X is

Given a linear demand function of the form Q_X^d = 100 - 0.5P_X, find the inverse linear demand function.

A floor price is

Consider a market characterized by the following inverse demand and supply functions: P_X = 10 - 2Q_X and P_X = 2 + 2Q_X. Compute the equilibrium price and quantity in this market.

In a competitive market, the market demand is Q^d = 60 - 6P and the market supply is Q^s = 4P. A price floor of $9 will result in a

Other things held constant, the lower the price of a good

You are an economic advisor to the Treasurer of the United States. Congress is considering increasing the sales tax on gasoline by $.03 per gallon. Last year motorists purchased 10 million gallons of gas per month. The demand curve is such that every $.01 increase in price decreases sales by 100,000 gallons per month. You also know that for every $.01 increase in price, producers are willing to provide 50,000 more gallons of gasoline to the market. The legislature has stated that the $.03 tax will increase government revenues by $300,000 per month and raise the price of gasoline by $.03 per gallon. Is this correct?

Suppose good X is a normal good. Then a decrease in income would lead to

In a competitive market, the market demand is Q^d = 70 - 3P and the market supply is Q^s = 6P. A price ceiling of $4 will result in a

Consider a market characterized by the following inverse demand and supply functions: P_X = 10 - 2Q_X and P_X = 2 + 2Q_X. Compute the number of units exchanged and the price at which those units will be exchanged when there is an $8 per unit price floor.

Which of the following is probably not a normal good?

The law of supply states that, holding all else constant, as the price of a good falls: