1. Choose the BEST answer.

Determining the price elasticity of demand involves all of the following factors, but NOT

 

A.luxuries versus necessities.

B.slope of the supply curve.

C.availability of substitutes.

 

 

1. Choose the BEST answer.

Elasticity is relevant when trying to understand

 

A. how a change in quantity demanded affects price and how a change in quantity supplied affects price.

B. how a change in price affects quantity supplied, how a change in price affects quantity demanded, and how raising a tax on a good affects the revenue from the tax.

C. the burden of taxes on consumers.

 

 

1. Choose the BEST answer.

Using the midpoints method, calculate the price elasticity of demand of Good X using the following information: When the price of good X is $50, the quantity demanded of good X is 400 units. When the price of good X rises to $60, the quantity demanded of good X falls to 300 units.

 

A. The price elasticity of demand for good X = 0.64.

B. The price elasticity of demand for good X = 1.23.

C. The price elasticity of demand for good X = 1.57.

 

1. Choose the BEST answer.

When the demand for a good or service does NOT vary when there is a change in price, the good is ________?

 

E. perfectly inelastic

D. unitarian

C. perfectly elastic

 

1. Choose the BEST answer.

If consumers find cola and iced tea good substitutes, then it is likely that

 

A. the goods’ price elasticities of demand are less than one.

B. the goods’ cross price elasticities are greater than zero.

C. the goods’ income elasticities are less than zero.

 

1. Choose the BEST answer.

If wage increases by 10%, a(n) ________ worker is likely to supply 7% more labor because elasticity of labor supply is assumed to be ________.

 

A. adult; elastic.

B. adult; inelastic.

C. teenager; elastic.

 

1. Choose the BEST answer.

You are the manager of the public transit system. You are informed that the system faces a deficit, but you cannot cut service, which means you cannot cut costs. Your only hope is to increase revenue by increasing fares. You are advised that the estimated price elasticity of demand, several years after the price change, will be about −1.5. Select the statement that best describes the results of raising the fare in the long run.

 

A. Total revenue falls, since demand changes and becomes price elastic.

B. Total revenue will fluctuate as the demand fluctuates.

C. Total revenue rises immediately, since demand will remain price inelastic.

 

 

8.Choose the BEST answer.

Suppose you are in charge of sales at a pharmaceutical company, and your firm has a new drug that causes bald men to grow hair. Assume that the company wants to earn as much revenue as possible from this drug. If the elasticity of demand for your company’s product at the current price is 1.4, what would you advise the company to do?

 

A. lower the price

B. raise the price

C. keep the price the same

 

9.Choose the BEST answer.

A government decides to set a price ceiling on bread so that bread is affordable to the poor. The conditions of demand and supply are given in the table below. What is the equilibrium price before the price ceiling? What will the excess supply or the shortage be if the price ceiling is set at $2.40?

Price Qd Qs

$1.60 9,000 5,000

$2.00 8,500 5,500

$2.40 8,000 6,400

$2.80 7,500 7,500

$3.20 7,000 9,000

$3.60 6,500 11,000

$4.00 6,000 15,000

 

A. $2.80; 1,600 excess supply

B. $2.80; 1,600 shortage

C. $2.40; 1,600 shortage

 

10.Choose the BEST answer.

Price ceilings attempt to make consumer prices ________.

 

lower

higher

at equilibrium

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11.Choose the BEST answer.

A price ceiling creates ________ when it is set ________ the equilibrium price.

 

A. excess supply -- below

B. excess demand -- below

C. excess demand -- above

 

12.Choose the BEST answer.

A price floor attempts to keep prices ________.

 

A. at the equilibrium price

B. lower than the equilibrium price

C. higher than the equilibrium price

 

13.Choose the BEST answer.

When supply is elastic and demand is inelastic, the tax incidence falls on the ________.

 

A. producer

B. government

C. consumer

 

14.Choose the BEST answer.

The demand for cigarettes is highly inelastic. This suggests that the incidence of a higher tax on cigarettes will fall primarily on:

 

A. Cigarette consumers.

B. Cigarette sellers.

C. Government.

 

15.Choose the BEST answer.

Which of the following example(s) describe a regressive tax?

 

A.Social Security tax rate of 6.2% on earned income below $117,000 and 0% on income earned above $117,000

B. Income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income households

C. Medicare payroll tax of 2.9% of income for everyone, regardless of how much they earn

 

16.Choose ALL that apply.

Property taxes are:

A. generally considered to be regressive

B. generally considered to be progressive

C. imposed based on ownership of assets such as real estate and autos.

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Status NEW Posted 12 Jul 2017 12:07 AM My Price 20.00

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