Market Interventions Flashcards
A men’s tie store sold an average of 30 ties per day when the price was $5 per tie. The same store sold 60 of the same ties per day when the price was $3 per tie. In this case, the absolute value of the price elasticity of demand, using the midpoint method, is:
a. equal to 1.
b. greater than 3.
c. greater than 1 but less than 3.
d. greater than zero but less than 1.
greater than 1 but less than 3.
All of the following are costs associated with the imposition of a tax except:
a. equilibrium pricing.
b. tax revenues received from taxpayers.
c. deadweight loss.
d. administrative cost.
equilibrium pricing.
A hotel has a capacity of 100 rooms. Which of the following statements best describes the elasticity of supply for rooms at this hotel?
a. The supply is elastic at quantities above 100 rooms but inelastic at quantities below 100 rooms.
b. The elasticity of supply is equal to 1 in the short run but infinitely elastic in the long run.
c. The elasticity of supply is zero in the short run because the short-run supply curve is vertical.
d. The supply is infinitely elastic in the short run but perfectly inelastic in the long run.
The elasticity of supply is zero in the short run because the short-run supply curve is vertical.
A higher tax rate is more likely to increase tax revenue collected if the price elasticity of demand:
a. is low, but the price elasticity of supply is high.
b. and supply are both high.
c. is high, but the price elasticity of supply is low.
d. and supply are both low.
and supply are both low.
A men’s tie store sold an average of 30 ties per day when the price was $5 per tie but sold 50 of the same ties per day when the price was $3 per tie. The absolute value of the price elasticity of demand, using the midpoint method, is:
a. greater than zero but less than 1.
b. greater than 3.
c. equal to 1.
d. greater than 1 but less than 3.
equal to 1.
An attorney supplies 40 hours of work per week when her fee is $100 per hour but supplies 60 hours of work per week when her fee rises to $120 per hour. Using the midpoint formula, her elasticity of supply is equal to:
a. 2.2.
b. 0.8.
c. 1.
d. 0.45.
2.2.
All of the following are characteristics of elastic demand except:
a. a large number of substitutes.
b. short periods of adjustment.
c. goods with elastic demand that are nonessential, such as takeout food.
d. goods with elastic demand that are specific brands of goods.
short periods of adjustment.
A demand curve that is perfectly inelastic is:
a. upward-sloping.
b. vertical.
c. horizontal.
d. downward-sloping.
vertical.
A linear demand curve:
a. has a constant price elasticity of demand.
b. has price elasticity of supply that is positive.
c. can have both elastic and inelastic price elasticities of demand.
d. has price elasticity of demand equal to one.
can have both elastic and inelastic price elasticities of demand.
A good is likely to have an inelastic demand curve if:
a. the consumer has significant time to respond to the price change.
b. the good accounts for a large share of consumer income.
c. the good is a luxury.
d. the good has few available substitutes.
the good has few available substitutes.
Along the lower end of a linear demand curve, the price elasticity of demand will be:
a. price elastic.
b. negative.
c. price inelastic.
d. price unit elastic.
price inelastic.
A demand curve that is perfectly inelastic is:
a. downward-sloping.
b. vertical.
c. upward-sloping.
d. horizontal.
vertical.
A major state university in the South recently raised tuition by 12%. An economics professor at this university asked his students, “Because of the increase in tuition, how many of you will transfer to another university?” One student out of about 300 said that he would transfer. Based on this information, the price elasticity of demand for education at this university is:
a. highly elastic.
b. highly inelastic.
c. 1.
d. 0.
highly inelastic.
A 20% price increase that generates a 20% decrease in quantity demanded is a(n) ________ response.
a. elastic
b. perfectly elastic
c. unit elastic
d. inelastic
unit elastic
A group of dairy farmers are trying to raise milk prices by 10%. If the price elasticity of demand for milk is 0.75 and the price elasticity of supply for milk is 0, by how much should farmers reduce their milk production to obtain the 10% increase?
a. 13%
b. 7.5%
c. 10%
d. 15%
7.5%
Analysis of excise taxes on markets allows us to conclude that:
a. when the price elasticity of demand is lower than the price elasticity of supply, an excise tax falls mainly on the producers.
b. when the price elasticity of demand is higher than the price elasticity of supply, an excise tax falls mainly on the consumers.
c. when the price elasticity of supply is equal to zero, an excise tax falls entirely on the consumers.
d. whether the tax is levied on consumers or producers, the equilibrium outcome will be the same.
whether the tax is levied on consumers or producers, the equilibrium outcome will be the same.
