Question 1

The inverse demand function for video games is p =240 - 2q and the inverse supply function is p = 3 +q.When the government imposes a $6 tax on each video game purchased,

Accepted Answer

A)  consumer's surplus falls by more than producer's surplus. 
B)  producer's surplus falls by more than consumer's surplus. 
C)  consumer's surplus and producer's surplus fall by the same amount. 
D)  consumer's surplus falls and producer's surplus increases. 
E)  producer's surplus falls and consumer's surplus increases. 
A)  consumer's surplus falls by more than producer's surplus. 
B)  producer's surplus falls by more than consumer's surplus. 
C)  consumer's surplus and producer's surplus fall by the same amount. 
D)  consumer's surplus falls and producer's surplus increases. 
E)  producer's surplus falls and consumer's surplus increases. A

Question 2

The supply curve slopes up and to the right.If the demand curve shifts upward to a new curve which is everywhere higher than the old curve (but possibly of different slope)and if the supply curve does not shift,then the equilibrium price and quantity must necessarily increase.

Accepted Answer

A) True 
 B)False  True

Question 3

The price elasticity of demand for a certain agricultural product is constant (over the relevant range of prices)and equal to -2.The supply elasticity for this product is constant and equal to 3.Originally the equilibrium price of this good was $45 per unit.Then it was discovered that consumption of this product was unhealthy.The quantity that would be demanded at any price fell by 100%.The percent change in the long-run equilibrium consumption of this good was

Accepted Answer

A)  -100%. 
B)  -64%. 
C)  -20%. 
D) -60%. 
E)  There is not enough information to determine the answer. 
A)  -100%. 
B)  -64%. 
C)  -20%. 
D) -60%. 
E)  There is not enough information to determine the answer. D

Question 4

The demand curve for rutabagas is a straight line with slope 23 and the supply curve is a straight line with slope 2.Suppose that a new tax of $3 per sack of rutabagas is introduced.

Accepted Answer

A)  The total number of rutabagas purchased increases. 
B)  The price paid by demanders rises by the same amount as the price received by suppliers falls. 
C)  The price received by suppliers falls by more than the price paid by demanders rises. 
D)  The price paid by demanders rises by more than the price received by suppliers falls. 
E)  The price paid by demanders rises by more than $3. 
A)  The total number of rutabagas purchased increases. 
B)  The price paid by demanders rises by the same amount as the price received by suppliers falls. 
C)  The price received by suppliers falls by more than the price paid by demanders rises. 
D)  The price paid by demanders rises by more than the price received by suppliers falls. 
E)  The price paid by demanders rises by more than $3.

Question 5

Suppose that King Kanuta,whom you met in your workbook,demands that each of his subjects give him 2 coconuts for every coconut that they consume.The king puts all of the coconuts that he collects in a large pile and burns them.The supply of coconuts is given by S(ps)=100ps,where ps is the price received by suppliers.The demand for coconuts by the king's subjects is given by D(pd)=6,000 -100pd,where pd is the price paid by consumers.In equilibrium,the price received by suppliers will be

Accepted Answer

A)  $30. 
B)  $18. 
C)  $90. 
D)  $27. 
E)  None of the above 
A)  $30. 
B)  $18. 
C)  $90. 
D)  $27. 
E)  None of the above

Question 6

If the supply is perfectly elastic,then an upward shift of the demand curve will lead to a higher price and a higher quantity in equilibrium.

Accepted Answer

A) True 
 B)False

Question 7

The price elasticity of demand for a certain agricultural product is constant (over the relevant range of prices)and equal to -1.50.The supply elasticity for this product is constant and equal to 4.Originally the equilibrium price of this good was $15 per unit.Then it was discovered that consumption of this product was unhealthy.The quantity that would be demanded at any price fell by 11%.The percent change in the long-run equilibrium consumption of this good was

Accepted Answer

A)  -11%. 
B)  -8%. 
C)  -2%. 
D)  -12%. 
E)  There is not enough information to determine the answer. 
A)  -11%. 
B)  -8%. 
C)  -2%. 
D)  -12%. 
E)  There is not enough information to determine the answer.

Question 8

The demand function for abalone is q = 30 -9p and the supply function is q = 6p.Suddenly the yuppies discover abalone.The quantity demanded at every price doubles.The supply function,however,remains the same as before.What is the effect on the equilibrium price and quantity?

Accepted Answer

A)  The price doubles and the quantity remains constant. 
B)  The quantity doubles and the price remains constant. 
C)  Both price and quantity double. 
D)  Both price and quantity increase but neither doubles. 
E)  None of the above. 
A)  The price doubles and the quantity remains constant. 
B)  The quantity doubles and the price remains constant. 
C)  Both price and quantity double. 
D)  Both price and quantity increase but neither doubles. 
E)  None of the above.

Question 9

The inverse demand function for eggs is p = 84 - 9q,where q is the number of cases of eggs.The inverse supply is p = 7 + 2q.In the past,eggs were not taxed,but now a tax of 33 dollars per case has been introduced.What is the effect of the tax on the quantity of eggs supplied?

Accepted Answer

A)  Quantity drops by 2 cases. 
B)  Quantity drops by 3 cases. 
C)  Quantity drops by 6 cases. 
D)  Quantity drops by 4 cases. 
E)  None of the above. 
A)  Quantity drops by 2 cases. 
B)  Quantity drops by 3 cases. 
C)  Quantity drops by 6 cases. 
D)  Quantity drops by 4 cases. 
E)  None of the above.

Question 10

The quantity q of grapefruits demanded at price p is given by q = 30 - 3p and the supply schedule by q =6p.The government imposes a quantity tax at some rate t,which it collects from buyers.What is the smallest tax rate that will result in no grapefruits being bought or sold?

Accepted Answer

A)  10% 
B)  3.33% 
C)  3.67% 
D)  11.50% 
E)  13% 
A)  10% 
B)  3.33% 
C)  3.67% 
D)  11.50% 
E)  13%

Question 11

The demand curve,which is a downward-sloping straight line,crosses the supply curve,which is an upward-sloping straight line.If a tax is introduced where sellers must pay a tax of $2 per unit sold,then the equilibrium price paid by demanders will rise by more than $1 if the absolute value of the slope of the demand curve is greater than the absolute value of the slope of the supply curve.

Accepted Answer

A) True 
 B)False

Question 12

The demand function for orange juice is q =269 - 9p and the supply function is q = 9 +4p,where q is the number of units sold per year and p is the price per unit,expressed in dollars.The government decides to support the price of orange juice at a price floor of $24 per unit by buying orange juice and destroying all that it has purchased.How many units must the government destroy per year?

Accepted Answer

A)  52 
B)  56 
C)  25 
D)  61 
E)  57 
A)  52 
B)  56 
C)  25 
D)  61 
E)  57

Question 13

If a quantity tax is collected from competitive suppliers of a good,placing a tax on the good causes the price paid by consumers to increase more than if the tax had been collected directly from the buyers.

Accepted Answer

A) True 
 B)False

Question 14

In a crowded city far away,the civic authorities decided that rents were too high.The long-run supply function of two-room rental apartments was given by q = 14 + 5p,and the long-run demand function was given by q =329 - 5p,where p is the rental rate in crowns per week.The authorities made it illegal to rent an apartment for more than 25 crowns per week.To avoid a housing shortage,the authorities agreed to pay landlords enough of a subsidy to make supply equal to demand.How much would the weekly subsidy per apartment have to be to eliminate excess demand at the ceiling price?

Accepted Answer

A)  6.50 crowns 
B)  10 crowns 
C)  13 crowns 
D)  26 crowns 
E)  19.50 crowns 
A)  6.50 crowns 
B)  10 crowns 
C)  13 crowns 
D)  26 crowns 
E)  19.50 crowns

Question 15

The demand function for corn is q =200 - p and the supply function is q = 50 + .5p.The government sets the price of corn at $150 and agrees to purchase and destroy any excess supply of corn at that price.How much money does it cost the government to buy this corn?

Accepted Answer

A)  $11,250 
B)  $18,750 
C)  $7,500 
D)  $10,750 
E)  $14,500 
A)  $11,250 
B)  $18,750 
C)  $7,500 
D)  $10,750 
E)  $14,500

Question 16

The quantity q of apricots demanded at price p is given by q = 36 - 4p and the supply schedule by q= 2p.The government imposes a quantity tax at some rate t,which it collects from buyers.What is the smallest tax rate that will result in no apricots being bought or sold?

Accepted Answer

A)  6.67% 
B)  9% 
C)  6% 
D)  10.50% 
E)  12% 
A)  6.67% 
B)  9% 
C)  6% 
D)  10.50% 
E)  12%

Question 17

The demand function for x is D(p)= 65 -2p and the supply function is S(p)=20+p.The price that should be set to restrict the quantity supplied to 30 units is closest to

Accepted Answer

A)  $5. 
B)  $10. 
C)  $15. 
D)  $50. 
E)  $55. 
A)  $5. 
B)  $10. 
C)  $15. 
D)  $50. 
E)  $55.

Question 18

Supply and demand theory shows us that the burden of a sales tax is shared equally by suppliers and demanders whether the tax is collected from the sellers or collected from the buyers.

Accepted Answer

A) True 
 B)False

Question 19

Schrecklich and Lamerde are two obscure modernist painters,who are no longer alive but whose paintings are still enjoyed by persons of dubious taste.The demand function for Schrecklichs is 200 - 4PS - 2PL and the demand function for Lamerdes is 200-3PL -PS,where PS and PL are respectively the price of Schrecklichs and Lamerdes.If the world supply of Schrecklichs is 100 and the world supply of Lamerdes is 70,then the equilibrium price of Schrecklichs is

Accepted Answer

A)  $46. 
B)  $4. 
C)  $25. 
D)  $42. 
E)  $8. 
A)  $46. 
B)  $4. 
C)  $25. 
D)  $42. 
E)  $8.

Question 20

Use supply and demand analysis to examine the following statement: "The practice of giving food stamps is self-defeating.Food stamps effectively lower the price of food.When food becomes available at lower prices,demand will increase thereby forcing the price up to its initial level." Is this reasoning correct? Draw supply and demand curves to illustrate your answer.

Accepted Answer

The subsidy would shift the demand curve

Exam 16:Equilibrium-Part A

The inverse demand function for video games is p =240 - 2q and the inverse supply function is p = 3 +q.When the government imposes a $6 tax on each video game purchased,

The supply curve slopes up and to the right.If the demand curve shifts upward to a new curve which is everywhere higher than the old curve (but possibly of different slope)and if the supply curve does not shift,then the equilibrium price and quantity must necessarily increase.

The demand curve for rutabagas is a straight line with slope 23 and the supply curve is a straight line with slope 2.Suppose that a new tax of $3 per sack of rutabagas is introduced.

If the supply is perfectly elastic,then an upward shift of the demand curve will lead to a higher price and a higher quantity in equilibrium.

The demand function for abalone is q = 30 -9p and the supply function is q = 6p.Suddenly the yuppies discover abalone.The quantity demanded at every price doubles.The supply function,however,remains the same as before.What is the effect on the equilibrium price and quantity?

The inverse demand function for eggs is p = 84 - 9q,where q is the number of cases of eggs.The inverse supply is p = 7 + 2q.In the past,eggs were not taxed,but now a tax of 33 dollars per case has been introduced.What is the effect of the tax on the quantity of eggs supplied?

The quantity q of grapefruits demanded at price p is given by q = 30 - 3p and the supply schedule by q =6p.The government imposes a quantity tax at some rate t,which it collects from buyers.What is the smallest tax rate that will result in no grapefruits being bought or sold?

If a quantity tax is collected from competitive suppliers of a good,placing a tax on the good causes the price paid by consumers to increase more than if the tax had been collected directly from the buyers.

The demand function for corn is q =200 - p and the supply function is q = 50 + .5p.The government sets the price of corn at $150 and agrees to purchase and destroy any excess supply of corn at that price.How much money does it cost the government to buy this corn?

The quantity q of apricots demanded at price p is given by q = 36 - 4p and the supply schedule by q= 2p.The government imposes a quantity tax at some rate t,which it collects from buyers.What is the smallest tax rate that will result in no apricots being bought or sold?

The demand function for x is D(p)= 65 -2p and the supply function is S(p)=20+p.The price that should be set to restrict the quantity supplied to 30 units is closest to

Supply and demand theory shows us that the burden of a sales tax is shared equally by suppliers and demanders whether the tax is collected from the sellers or collected from the buyers.

Demand-Part A

Revealed Preference-Part A

Revealed Preference-Part B

Slutsky Equation-Part A

Slutsky Equation-Part B

Buying and Selling-Part A

Buying and Selling-Part B

Intertemporal Choice-Part A

Intertemporal Choice-Part B

Asset Markets-Part A

Asset Markets-Part B

Uncertainty-Part A

Uncertainty-Part B

Risky Assets-Part A

Risky Assets-Part B

Consumers Surplus-Part A

Consumers Surplus-Part B

Market Demand-Part A

Market Demand-Part B

Equilibrium-Part B

Auctions-Part A

Auctions-Part B

Technology-Part A

Technology-Part B

Profit Maximization-Part A

Profit Maximization-Part B

Cost Minimization-Part A

Cost Minimization-Part B

Cost Curves-Part A

Cost Curves-Part B

Firm Supply-Part A

Firm Supply-Part B

Industry Supply-Part A

Industry Supply-Part B

Monopoly-Part A

Monopoly-Part B

Monopoly Behavior-Part A

Monopoly Behavior-Part B

Factor Markets-Part A

Factor Markets-Part B

Oligopoly-Part A

Oligopoly-Part B

Game Theory-Part A

Game Theory-Part B

Game Applications-Part A

Game Applications-Part B

Behavioral Economics-Part A

Exchange-Part A

Exchange-Part B

Production-Part A

Production-Part B

Welfare-Part A

Welfare-Part B

Externalities-Part A

Externalities-Part B

Information Technology-Part A

Information Technology-Part B

Public Goods-Part A

Public Goods-Part B

Asymmetric Information-Part A

Asymmetric Information-Part B

Filters