ECO 2023 Exam 2

If the government raises the excise tax on gasoline by $1, then in the gasoline market the consumer surplus will ______ and the producer surplus will ______.

A. decrease : decrease B. increase : decrease
C. increase : increase
D. decrease : increase

A. decrease : decrease

A 2% increase in the price of good X causes a 4% decrease in the quantity demanded of good Y. Goods X and Y must be

A.substitutes
B. normal.
C. complements.
D. inferior.

C. Complements

If the price elasticity of demand for pineapple is 1.5, a 3% increase in the price of pineapple will lead to a

A. 4.5% increase in the quantity demanded of pineapple.
B. 2% decrease in the quantity demanded of pineapple.
C. 4.5% decrease in the quantity demanded of pineapple.
D. 2% increase in the quantity demanded of pineapple.

C. 4.5% decrease in the quantity demanded of pineapple.

The number of seats in a football stadium is fixed at 60,000. The city decides to impose a ticket tax of $5 per ticket. In response, the team management raises the ticket price from $40 to $45 and still sells all 60,000 tickets. The tax caused a change
in government revenue of ______.

A. $0
B. $5
C. $2,400,000
D. $300,000

D. $300,000

Suppose the price of good X increases from $28 to $34, and this causes your quantity demanded for good X to fall from 78 to 72. At the same time, your quantity demanded for good Y rises from 57 to 63. What is the cross price elasticity for goods X and Y? Enter a number such as 1.23, using two decimal places.

0.5200

Which is most likely to have an inelastic demand?

A. a luxury good
B. an inexpensive good
C. a good with many substitutes
D. a good with many complements

B. an inexpensive good

The price elasticity of demand for a good with many substitutes tends to be more _________. Please enter elastic or inelastic.

elastic

Consider a market that is in equilibrium. If the government implements a binding quantity restriction we would expect the market price to ___ and the quantity sold to _____.

A. decrease : decrease
B. decrease : increase
C. increase : increase
D. increase : decrease

D. increase : decrease

The income tax system in a country requires each citizen to pay 10% of income on earnings up to $40,000, and then pay 20% on any earnings over $40,000. If an individual has an income of $89820, then what is his average tax rate, in percentage terms? Enter a whole number such as 18.23, with two decimal places and no percent sign.

15.55

Suppose that in the market for cars there is a decrease in supply. This would cause a ___________ in consumer surplus and a _____ in total surplus.

A. decrease : decrease
B. increase : decrease
C. increase : increase
D. decrease : increase

A. decrease : decrease

The difference between the price a firm is willing to sell a good for and the price they actually sell the good for is called

A. consumer surplus
B. producer surplus
C. total surplus
D. deadweight loss

B. producer surplus

The elasticity of supply for many goods tends to be more ____ in the long run than the short run. Please enter elastic or inelastic.

elastic

To increase total revenue, firms should lower price on goods whose demand is more ________. Please enter inelastic or elastic.

elastic

The income tax system in a country requires each citizen to pay 10% of income on earnings up to $40,000, and then pay 20% on any earnings over $40,000. If an individual has an income of $73215, then how much total tax will he pay? Enter a whole number such as 323.45, using two decimal places and no dollar sign.

10643.0000

Firms that produce goods with many substitutes are most likely to find that:

A. lowering price leaves total revenues unchanged.
B. lowering price decreases total revenues.
C. raising price leaves total revenues unchanged.
D. lowering price increases total revenues.

D. lowering price increases total revenues.

John is willing to pay $97 for a good and he finds the price at the store is actually $57. What is his consumer surplus? Enter a whole number such as 76, with no dollar sign.

40.00

When a firm changes the price of its good from $19 to $26, it finds that the quantity demanded for its good changes from 90 to 55. Using the midpoint method, what is the elasticity of demand? Enter a whole number such as 0.91 or 2.34 using two decimal places.

1.55

A market is operating efficiently if:

A. total surplus is maximized.
B. producer surplus is maximized.
C. consumer surplus is maximized.
D. dead weight loss is maximized.

A. total surplus is maximized.

Income elasticity is defined as the percentage change in ___ for a given percentage change in ____.

A. price : income
B. income : price
C. quantity demanded : income
D. income : quantity demanded

C. quantity demanded : income

Consider the market for pizza in a large city. If the number of pizza restaurants increases and the price elasticity of demand for pizza is 1.2, then the equilibrium price of pizza will ___ and total pizza revenue will __.

A. decrease : decrease
B. increase : increase
C. decrease : increase
D. increase : decrease

C. decrease : increase

The number of seats in a football stadium is fixed at 60,000. The city decides to impose a ticket tax of $5 per ticket. In response, the team management raises the ticket price from $40 to $45 and still sells all 60,000 tickets. The tax caused a change in total consumer surplus of ______.

A. $0
B. -$5
C. -$2,400,000
D. -$300,000

D. -$300,000

Suppose Congress wants to prevent the price of gorilla glue from rising above $3 per tube. Which policy should they use to achieve this goal?

A. a quantity restriction
B. a price floor
C. a price ceiling
D. an excise tax

C. a price ceiling

The cross price elasticity of demand measures:

A. the percentage change in the price of good 1 for a given percentage change in the quantity of good 2
B. the percentage change in the price of good 1 for a given percentage change in the price of good 2
C. the percentage change in the quantity demanded of good 1 for a given percentage change in the price of good 2
D. the percentage change in the quantity demanded of good 1 for a given percentage change in the price of good 1

C. the percentage change in the quantity demanded of good 1 for a given percentage change in the price of good 2

Suppose a 9% increase in the price of corn leads to a 3% decrease in the quantity demanded of corn. The elasticity for corn, with respect to price, is

A. 3
B. 6
C. 1/3
D. 1/6

C. 1/3

Consider a market that is in equilibrium. If the government implements a per unit tax on the sale of the good we would expect the market price to ___ and the quantity sold to _____.

A. decrease : decrease
B. increase : increase
C. increase : decrease
D. decrease : increase

C. increase : decrease

A proportional tax system is one in which:

A. lower income earners pay a higher percentage of their income in tax.
B. each person pays the same percentage of their income in tax.
C. each person pays the same dollar amount of tax.
D. higher income earners pay a higher percentage of their income in tax.

B. each person pays the same percentage of their income in tax.

If the government imposes a binding price ceiling on a good, then which of the following will not occur:

A. consumer surplus may increase or decrease.
B. total surplus will remain constant.
C. the quantity of the good transacted will decrease.
D. producer surplus will decrease.

B. total surplus will remain constant.

What do a binding price ceiling and a binding price floor have in common?

A. they both result in excess demand for the good
B. they both result in a deadweight loss
C. they both result in excess supply of the good
D. they both result in an increase in total surplus

B. they both result in a deadweight loss

If a given percentage change in the price of a good causes a larger percentage change in the quantity demanded of the good then the demand for the good is

A. inelastic.
B. elastic.
C. unitary elastic.
D. perfectly elastic.

B. elastic.

The income tax system in a country requires each citizen to pay 10% of income on earnings up to $40,000, and then pay 20% on any earnings over $40,000. If an individual has an income of $65319, then what is his marginal tax rate, in percentage terms? Enter a whole number such as 22.56, using two decimal places and no percent sign.

20