Q&A Hero

Q: Which of the following statements is concerned with equity rather than efficiency? a. Imposing a tax on a good reduces the incentive to buy that good. b. The burden of a new sales tax typically increases prices. c. Deadweight loss is the lost social welfare from a tax. d. Tax rates on middle-class households are too high and should be reduced. e. Taxes cause producers and consumers to lose surplus.

Q: Questions about the equity of a tax are concerned mostly witha. efficiency. b. tax revenue. c. fairness.d. deadweight loss.e. elasticity.

Q: Which of the following statements is concerned with efficiency rather than equity? a. Sales taxes on food are regressive and should be eliminated. b. Income taxes should be raised on low-income families so that everyone pays. c. The United States should implement a wealth tax on upper-income households. d. Excise taxes tend to raise prices for consumers. e. The overall tax system in the United States should be much more progressive.

Q: Another name for social welfare isa. total surplus. b. combined equity. c. collective good.d. common benefit.e. net per-capita gain.

Q: The price-quantity combination found where the supply and demand curves intersect is a unique combination that is efficient because a. producers can sell as much as they want. b. total surplus is maximized. c. tax revenue is sufficient to pay for government services. d. consumers can buy as much as they want. e. new products are being introduced.

Q: A market has reached an efficient outcome when a. producers are able to produce and sell as much as they like. b. total surplus is minimized. c. producer surplus is greater than consumer surplus. d. consumers are able to purchase as much as they like. e. total surplus is maximized.

Q: Consider the market for socks. The current price of a pair of plain white socks is $5.00. Two consumers, Jeff and Samir, are willing to pay $7.25 and $8.00, respectively, for a pair of plain white socks. Two sock manufacturers are willing to sell plain white socks for as little as $4.00 and $4.15 per pair. What is the total producer and consumer surplus (i.e., social welfare) in this market?a. $7.10 b. $5.25 c. $1.85d. $23.40e. $4.50

Q: Consumer surplus plus producer surplus equalsa. deadweight loss. b. economic profit. c. social welfare.d. tax revenue.e. market distortions.

Q: Social welfare is measured as the sum of a. tax revenue and deadweight loss. b. deadweight loss and consumer surplus. c. producer surplus and tax revenue. d. consumer surplus and tax revenue. e. consumer surplus and producer surplus.

Q: Social welfare (i.e., the sum of producer and consumer surplus) is maximized when a. the government taxes most goods and services. b. very few consumers and producers exist within a market. c. the market reaches its equilibrium price and quantity. d. supply and demand are perfectly inelastic. e. the government imposes price controls.

Q: Producer surplus is depicted by the area a. above market price and below the supply curve. b. between the supply curve and the demand curve. c. below market price and above the supply curve. d. above market price and below the demand curve. e. above the demand curve and below the supply curve.

Q: When looking at a graph, the area above the supply curve and below market price is defined asa. consumer surplus. b. producer surplus. c. producer benefit.d. business profit.e. tax revenue.

Q: When looking at a supply and demand graph, you would find producer surplus a. above the demand curve and below the supply curve. b. below the demand curve and above market price. c. to the right of equilibrium quantity and above market price. d. above the demand curve and above the supply curve. e. below market price and above the supply curve.

Q: What happens to the amount of consumer surplus and producer surplus when the supply of scarves suddenly declines (shifts left)? a. Producer surplus declines and consumer surplus is unchanged. b. Consumer surplus declines and producer surplus is unchanged. c. Consumer surplus declines and producer surplus declines. d. Consumer surplus is unchanged and producer surplus is unchanged. e. Producer surplus increases and consumer surplus increases.

Q: When looking at a graph, the area under the demand curve and above market price is defined asa. tax revenue. b. spending surplus. c. consumer benefit.d. producer surplus.e. consumer surplus.

Q: When looking at a supply and demand graph, you would find consumer surplus a. above the demand curve and below the supply curve. b. below the demand curve and above market price. c. to the right of equilibrium quantity and above market price. d. above the demand curve and above the supply curve. e. below market price and above the supply curve.

Q: For a given good, a sellers willingness to sell is, by definition, the a. minimum price the seller would accept for the good. b. amount of cash the seller needs to cover cash flow requirements. c. amount the seller asks for at the start of a negotiation. d. intensity of the sellers personal attachment to the good. e. same as the consumers willingness to pay.

Q: Sammys Bakery and Presleys Sweetshop both sell cupcakes. The market price of one chocolate cupcake is $2.50. Sammys is willing to sell a cupcake for as little as $1.65; Presleys is willing to sell a cupcake for as little as $1.75. What is the total producer surplus for the two firms? a. $0.75 d. $2.50 b. $1.60 e. $3.40 c. $0.85

Q: LDT Products, Inc., designs and sells flannel jackets. The company is willing to sell a mens flannel jacket for as little as $45. Its main competitor is MK Outriggers, which is willing to sell the same mens flannel jacket for as little as $40. The current market price of that type of jacket is $57. What is the total producer surplus for the two firms?a. $95 b. $12 c. $17d. $29e. $5

Q: When the price of a good decreases and all else is held constant a. producer surplus increases. b. both consumer surplus and producer surplus decrease. c. both consumer surplus and producer surplus increase. d. producer surplus decreases. e. consumer surplus decreases.

Q: When the price of a good increases and all else is held constant a. both consumer surplus and producer surplus decrease. b. both consumer surplus and producer surplus increase. c. consumer surplus decreases. d. producer surplus decreases. e. producer surplus increases.

Q: All else held constant, a decrease in the price of a good would necessarilya. increase social welfare. b. decrease producer surplus. c. decrease consumer surplus.d. increase demand for the good.e. increase producer surplus.

Q: The difference between the willingness to sell a good and the price a producer receives is also known asa. producer profit. b. producer surplus. c. consumer waste.d. tax revenue.e. producer benefit.

Q: Producer surplus is defined as the a. difference between the willingness to pay for a good and the willingness to sell it. b. difference between the price the seller receives and the willingness to sell it. c. difference between the willingness to pay for a good and the price paid to get it. d. quantity of units that consumers want to buy at the market price. e. total revenue earned from producing and selling some good.

Q: Producer surplus is the difference between a. supply and demand. b. the price the producer receives and the willingness to sell a good. c. the willingness to pay for a good and the willingness to sell a good. d. the willingness to pay for a good and the amount that is paid to get it. e. the price paid for a good and the amount of the good produced.

Q: For a given good, a consumers willingness to pay is, by definition, the a. same as the sellers willingness to sell. b. amount of cash the consumer has on hand for purchase of the good. c. amount the consumer offers at the start of a negotiation. d. intensity of the consumers desire for the good. e. maximum price the consumer would pay for the good.

Q: Another name for a consumers willingness to pay is thea. limiting cost. b. expense cap. c. hidden budget.d. reservation price.e. maximum outlay.

Q: Use the following graph to answer the following questions. In the figure, which combination of areas represents the social welfare?a. A + D b. B + C c. D + Ed. A + Be. C + D

Q: Jung is willing to pay $85 for a new jacket that sells for $70. Eddie is willing to pay $65 for that same jacket. What is the total consumer surplus for Jung and Eddie?a. $30 b. $15 c. $20d. $25e. $155

Q: Priscilla is willing to pay $65 for a new pair of shoes. Pandora is willing to pay $50 for the same shoes. The shoes have a price of $45. What is the total consumer surplus for Priscilla and Pandora?a. $15 b. $20 c. $5d. $25e. $35

Q: Holding all else constant, when the price of a good decreases a. producer surplus increases. b. consumer surplus increases. c. both consumer surplus and producer surplus increase. d. consumer surplus decreases. e. both consumer surplus and producer surplus decrease.

Q: Holding all else constant, when the price of a good increases a. consumer surplus increases. b. producer surplus decreases. c. both producer surplus and consumer surplus increase. d. both consumer surplus and producer surplus decrease. e. consumer surplus decreases.

Q: All else held constant, an increase in the price of a good would necessarilya. increase social welfare. b. decrease producer surplus. c. decrease consumer surplus.d. increase consumer surplus.e. increase the supply of the good.

Q: The difference between the willingness to pay for a good and the amount that is paid to get it is also known asa. consumer expenditure. b. surplus spending. c. consumer benefit.d. producer profit.e. consumer surplus.

Q: Consumer surplus is the difference between a. supply and demand. b. the price the producer receives and the willingness to sell a good. c. the willingness to pay for a good and the willingness to sell a good. d. the willingness to pay for a good and the amount that is paid to get it. e. the price paid for a good and the amount of the good produced.

Q: CHAPTER 5: Market Outcomes and Tax IncidenceConsumer surplus is defined as thea. difference between the willingness to pay for a good and the willingness to sell it.b. total revenue earned from producing and selling some good.c. difference between the willingness to pay for a good and the price paid to get it.d. quantity of units that consumers want to buy at the market price.e. difference between the price the seller receives and the willingness to sell it.

Q: When the price of softballs is high, a ________ in price will raise total revenue. When the price is low, the seller should ________ the price to increase total revenue.a. decrease; raise b. rise; raise c. decrease; decreased. rise; decreasee. decrease; not change

Q: As we move right along a demand curve, the price elasticity of demanda. becomes more inelastic. b. becomes more elastic. c. does not change.d. becomes infinite.e. moves closer to zero.

Q: As we move left along the demand curve, the price elasticity of demanda. becomes more inelastic. b. becomes more elastic. c. does not change.d. becomes infinite.e. moves closer to zero.

Q: In a typical demand curve, the price elastic portion of demand is found in the ________ region and the price inelastic portion of demand is found in the ________ region of the graph.a. middle; lower b. lower; upper c. upper; lowerd. middle; middlee. None of these choices are correct.

Q: From the accompanying table, we can see that the demand curve for ice skates by hockey players will be ________ the demand curve for recreational skaters.Price of Ice SkatesQuantity Demanded (hockey players)Quantity Demanded (recreational skaters)$109570$208560$407545$506525$6060 5a. steeper than b. flatter than c. unrelated tod. the same ase. the inverse of

Q: Cell phone companies found that when they raised the price of connecting to wireless hot spots, demand decreased more than proportionally among casual users but decreased less than proportionally among businesspeople. This is because wireless connectivity is a(n) ________ good for casual users but a(n) ________ good for businesspeople.a. elastic; inelastic b. luxury; necessity c. normal; inferiord. inelastic; elastice. inferior; normal

Q: Lee says that he will always spend $20 a week on lattes. Lees demand for lattes is pricea. inelastic. b. elastic. c. perfectly inelastic.d. perfectly elastic.e. unitary elastic.

Q: Assume that the market for pencils is in equilibrium and that demand is very price elastic. The popularity of digital tablets and electronic pens increases and demand for pencils declines. The equilibrium change in quantity demanded isa. zero. b. relatively small. c. proportional to the shift in demand.d. relatively large.e. infinite.

Q: The local bakery calculates the price elasticity of demand for its cinnamon rolls to be -1.25. This tells the owners that demand is ________ and price is ________ to the buyer. a. inelastic; less important than the quantity b. elastic; more important than the quantity c. unitary elastic; on the same level as quantity d. perfectly inelastic; everything e. perfectly elastic; meaningless

Q: When would oil producers see the largest percentage decline in the quantity demanded for oil due to an increase in the price of oil today?a. tomorrow b. in 6 months c. in 2 yearsd. in 8 yearse. in 15 years

Q: There was a more than proportional decrease in quantity demanded for cupcakes when the local baker raised the price by 20 percent. The price elasticity of demand for cupcakes isa. inelastic. b. elastic. c. perfectly inelastic.d. perfectly elastic.e. unitary elastic.

Q: Sellers of bottled water find that whether the price falls or rises, the quantity bought by consumers remains unchanged every week. The price elasticity of demand for bottled water isa. inelastic. b. elastic. c. perfectly inelastic.d. perfectly elastic.e. unitary elastic.

Q: The Sunny Softball league found that when it changed its ticket prices from $10 to $5, there was a more than proportional but not infinite increase in attendance. The price elasticity of demand isa. perfectly inelastic. b. inelastic. c. elastic.d. perfectly elastic.e. unitary elastic.

Q: No matter the price, I will always buy five gallons of ice cream a week. I love ice cream! This statement reflects a price elasticity of demand that isa. perfectly elastic. b. elastic. c. unitary.d. inelastic.e. perfectly inelastic.

Q: Kenji tells the manager at Moos Ice Cream that he wont buy any ice cream cones costing more than $2, but he will buy a limitless number at any price less than $2. His price elasticity of demand for ice cream cones isa. perfectly inelastic. b. inelastic. c. unitary elastic.d. elastic.e. perfectly elastic.

Q: When quantity demanded and price increase by 10 percent, you know that price and quantity are ________ to the consumer.a. equally important b. everything c. nothingd. relatively importante. relatively unimportant

Q: If a business finds that demand for its good is very price elastic, it knows that a. price is very important. b. price is unimportant. c. price is unrelated. d. the effect of price is less important than the impact of the quantity consumers buy. e. the quantity consumers buy is unimportant.

Q: To keep the percentage change in quantity demanded equally proportional to the percentage change in price when the prices rise by 5 percent, a consumer would need to ________ quantity demanded by ________.a. increase; 5 percent b. decrease; 5 percent c. increase; 10 percentd. decrease; 10 percente. increase; 2 percent

Q: Demand is almost always more price elastic in the long run because a. peoples preferences change. b. newer versions of a good or service replace older ones. c. production of the good or service stops. d. more options become available and people can make different choices. e. government regulations increase.

Q: When the price elasticity of demand is elastic, a consumer is a. completely unresponsive to a change in price. b. relatively unresponsive to a change in price. c. unaffected by a change in price. d. relatively responsive to a change in price. e. completely responsive to a change in price.

Q: When the demand curve is vertical a. the price elasticity of demand is negative. b. the price elasticity of demand is positive. c. the demand for the good is perfectly elastic. d. the price elasticity of demand is equal to zero. e. the price elasticity of demand is equal to -1.

Q: When the demand curve is perfectly horizontal the demand curve hasa. zero elasticity. b. a large, but not infinite, elasticity. c. perfect elasticity.d. a small, but nonzero, elasticity.e. negative elasticity.

Q: Suppose that the price elasticity of demand is -0.80 for aspirin. We could then say that the demand for aspirin is a. elastic. b. inelastic. c. unitary elastic. d. infinitely elastic. e. unable to be determined with the provided information.

Q: Which of the following statements are true about demand and the price elasticity of demand? a. When the demand curve has a negative slope, the price elasticity of demand is infinite. b. When the demand curve has a negative slope, the price elasticity of demand is zero. c. When the demand curve has a negative slope, the price elasticity of demand is positive. d. When the demand curve has a negative slope, the price elasticity of demand is negative. e. When the demand curve has a negative slope, the price elasticity of demand is positive.

Q: When the price elasticity of demand is -0.6, then a ________ increase in price leads to a ________ in quantity demanded.a. 10 percent; 6 percent increase b. 10 percent; 6 percent decrease c. 6 percent; 6 percent increased. 1 percent; 6 percent decreasee. 6 percent; 1 percent decrease

Q: When the quantity demanded is less sensitive to a change in price, then the absolute value of the price elasticity of demand is a. smaller. b. larger. c. close to infinity. d. close to 1. e. unaffected by the change in sensitivity.

Q: If the price elasticity of demand is - 4.0, a 5 percent decrease in price will increase quantity demanded bya. 0.8 percent. b. 1.25 percent. c. 20 percent.d. 80 percent.e. 125 percent.

Q: The price elasticity of demand is alwaysa. positive. b. negative. c. equal to -1.d. equal to zero.e. equal to infinity.

Q: Refer to the accompanying table. When the price drops from $5 to $3, price elasticity of demand for sushi (using the midpoint method) at an income of $30,000 isPrice (per roll)Quantity Demanded (income = $10,000/year)Quantity Demanded (income = $30,000/year)$159$248$337$426$515a. 0.71. b. 0.67. c. 0.10.d. 0.33.e. - 0.67.

Q: If the price elasticity of demand for Good A is - 0.2 and the price increases from $2.25 to $2.75, the percentage change in the quantity demanded of Good A is a. -100 percent. b. 100 percent. c. 4.0 percent d. - 4.0 percent. e. unknown because not enough information is provided.

Q: A producer knows that the price elasticity for his product is -0.5. He wants to increase quantity demanded by 30 percent. By what percentage does he need to change the price?a. 10 percent b. 6 percent c. - 9.5 percentd. - 60 percente. - 6 percent

Q: If the cross-price elasticity between Good A and Good B is -1.5 and the percentage change in quantity demanded of Good B is 15 percent, what is the percentage change in the price of Good A?a. -10 percent b. - 0.10 percentc. -11.50 percentd. -1 percente. 11.50 percent

Q: In the accompanying table, assume that the price of ice skates increases from $10 to $20 per pair. Using the midpoint method, what is the price elasticity of demand for ice skates for hockey players?Price of Ice SkatesQuantity Demanded (hockey players)Quantity Demanded (recreational skaters)$109570$208560$407545$506525$606010a. - 6.00 b. 0.67 c. 0.11d. - 0.16e. 3.00

Q: Celine runs a sporting goods store and knows that the price elasticity of demand for her sports clothing line is -1.5. She is planning to lower prices by 10 percent. The percentage change in quantity demanded will bea. 15 percent. b. 0.15 percent. c. 6.66 percent.d. 0.06 percent.e. 8.50 percent.

Q: Zumba classes sell 20 participant spots at a price of $4.50 each. When the instructor raised the prices to $5.50, 10 people attended the class. From the midpoint method, the price elasticity of demand for Zumba isa. - 0.50. b. -3.33. c. -2.50.d. 0.20.e. - 0.20.

Q: If the elasticity of demand for Good A is -3, a 33 percent decrease in quantity demanded of Good A results from a(n) ________ in the price of Good A.a. 99 percent decrease b. 99 percent increase c. 11 percent decreased. 11 percent increasee. 33 percent decrease

Q: At a price of $5/hour, Karina wants to hire three workers. When the price rises to $7/hour, she wants to hire only two workers. Karinas price elasticity of demand for workers isa. - 0.83. b. -1.20. c. - 0.33.d. - 0.40.e. - 0.10.

Q: At a price of $2, the quantity demanded for pens is 12. When the price increases to $3, the quantity demanded for pens is 10. The price elasticity of demand for pens isa. perfectly inelastic. b. inelastic. c. horizontal.d. elastic.e. perfectly elastic.

Q: When the price of scooters drops by 5 percent, the quantity demanded changes by 20 percent. We know that the price elasticity of demand for scooters isa. perfectly inelastic. b. inelastic. c. unitary elastic.d. elastic.e. perfectly elastic.

Q: Nicolette raised her quantity demanded of hockey pucks from 100 to 150 when the price fell from $5 to $3 per puck. Using the midpoint method, her price elasticity of demand isa. 0.80. b. -1.25.c. -1.00.d. 0.40.e. -0.80.

Q: Price elasticity of demand is measured as the a. change in quantity demanded divided by the change in price. b. change in price divided by the change in quantity demanded. c. percentage change in price divided by the percentage change in quantity demanded. d. percentage change in demand divided by the percentage change in income. e. percentage change in quantity demanded divided by the percentage change in price.

Q: When the price increases by 30 percent and the quantity demanded drops by 30 percent, the price elasticity of demand isa. perfectly inelastic. b. inelastic. c. unitary elastic.d. elastic.e. perfectly inelastic.

Q: Suppose that when the price of cereal rises 10 percent, the quantity demanded of cereal falls by 5 percent. Based on this information, what is the approximate price elasticity of demand for cereal?a. 0.5 b. -0.5 c. 2.0d. -2.0e. 0

Q: Which of the following would NOT affect a goods price elasticity of demand? a. whether the good is a necessity b. the proportion of the budget devoted to the good c. the number of substitute goods d. the ease of substituting between the goods e. the cost of producing the good