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A price ceiling is the maximum allowable price set by government, and it causes a shortage if effective.
A price floor is a minimum allowable price set by government, and it causes a surplus if effective.
The minimum wage is an example of a price ceiling.
Rent control for apartments in New York City is an example of a price ceiling.
All of the following are forms or examples of price control except free market interactions.
A price ceiling would result in a(n) shortage.
A price floor would result in a(n) surplus.
Which of the following statements about the minimum wage is false? The minimum wage causes a shortage of unskilled labor.
In the case of a price floor, there is a redistribution of income from consumers to producers.
Which of the following is not a likely result of a price floor? A persistent shortage
Deadweight loss is a loss of producer and consumer surplus from lost sales.
Suppose that a consumer's total benefit is $4 for consuming one cup of ice cream and $7 for consuming two cups of ice cream. The consumer's willingness to pay for the second cup of ice cream is 7-4=$3
Deadweight loss occurs in both a price floor and a price ceiling.
A price floor that is higher than the equilibrium market price results in a decrease in consumer surplus.
Which of the following makes consumers unambiguously worse off? Only a price floor
Who are unambiguously worse off in the case of a price ceiling? Sellers
A price floor for a product results in a deadweight loss.
Regarding price floors on prices, the result of a higher-than-equilibrium market price is a gain in producer surplus and a loss in consumer surplus for those who still trade.
Consumer surplus is the difference between what consumers would be willing to pay and what they have to pay added together for all units purchased.
The area between the demand curve and the price line is called consumer surplus.
On a supply and demand diagram, consumer surplus is the area below the demand curve and above price.
Other things being equal, if the price of a good rises, the consumer surplus of that good falls.
Suppose Austin is willing to pay $5 for one more burger but he actually pays $2 for it. The consumer surplus for Austin to consume that additional burger is 2-5= $3.
Suppose Kim is willing to pay $5 for her first ice cream sundae, $4 for a second ice cream sundae, and $2 for a third. If Kim is able to buy all three ice cream sundaes for $2 each, she has realized a consumer surplus of 6-11=$5
Suppose a firm receives $10 for selling one additional unit of its product but that additional unit costs the firm $1 to produce. The producer surplus for the additional unit of product is 10-1=$9
Producer surplus is the difference between the market price and the minimum amount of money a producer will accept for his or her product.
Other things being equal, when the market price increases, the producer surplus increases.
The difference between the market price of a good and a producer's marginal cost of every unit of the good sold is called Producer surplus
When demand is inelastic: consumers are not very responsive to changes in price.
Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop? 3.0
If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to: rise and the equilibrium quantity to stay the same.
A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result: total revenue will decrease
The price elasticity of demand for tickets to local baseball games is estimated to be equal to 0.89. In order to boost ticket revenues, an economist would advise: increasing the price of game tickets because demand is inelastic
A 10 percent decrease in the price of potato chips leads to a 30 percent increase in the quantity of soda demanded. It appears that: cross-price elasticity of demand for soda is -3
If cola and iced tea are good substitutes for consumers, then it is likely that: their cross price elasticities are greater than zero.
Youth smoking seems to be more __________ than adult smoking—that is, the quantity of youth smoking will fall by a greater percentage than the quantity of adult smoking in response to a given percentage increase in price. elastic
A horizontal demand curve or supply curve would be called: Perfectly elastic
A perfectly inelastic demand curve or supply curve means... Correct Answer There is no change in quantity demanded or supplied in response to a change in price
If demand is ___, then a given % rise in price will cause a smaller % fall in quantity demanded so that total revenue (Price × Quantity) rises. Inelastic
A company discovers a new technology that allows it to substantially reduce its cost of production. The demand for the product is inelastic. Consumers will in general experience: A price decrease
How a tax burden is divided between consumers and producers is called tax incidence. Consumers bear most of the tax burden when: Supply is more elastic than demand.
Good X has a high price elasticity of demand; it is most likely that good X has a lot of substitutes.
To say that gasoline has a low price elasticity of demand is to say the quantity demanded of gasoline is not sensitive to changes in gasoline prices.
A perfectly inelastic demand curve has a price elasticity equal to zero.
If the price of a product increases by 10 percent and the quantity demanded decreases by 15 percent, then the product has an elastic demand.
Suppose the price elasticity of demand for apples is 2.1 and the price elasticity of demand for housing is 0.62. In comparing price elasticities of demand, it is proper to say that the demand for apples is more elastic than the demand for housing.
f the price elasticity of demand is equal to 2, a 1 percent increase in price will cause the quantity demanded to ____ by ____ percent. decrease; 2
Assume that the price elasticity of demand equals 0.4 (ed = 0.4). Given a 10 percent increase in price, there will be a 4 percent decrease in the quantity demanded
For demand to be unit elastic, the percentage change in quantity demanded must be equal to the associated percentage change in price.
For demand to be inelastic, the percentage change in quantity demanded must be less than the associated percentage change in price.
When a tax is assessed on producers, the product price typically does not rise by the full amount of the tax.
Suppose that the government imposes a tax on the consumption of soda drinks, which of the following would have the least impact on the producers of soda drinks? Perfectly inelastic demand
Suppose that the revenue of a product increases when its price decreases. Then demand for the product must be elastic.
A product with an elastic demand means that consumers are relatively sensitive to a change in the price of the product.
If the price elasticity of demand is 5.3, demand is said to be elastic.
If a 1 percent change in price results in a 4 percent change in quantity demanded, then the price elasticity of demand is 4.
If the price elasticity of demand for computers is greater than 1, then an increase in computer prices will lower total revenue.
A perfectly elastic demand curve has a price elasticity of infinity.
When the demand curve is a vertical line, demand is perfectly inelastic.
A horizontal demand curve is perfectly elastic.
The price elasticity of demand is expressed as the percentage change in the quantity demanded divided by the percentage change in the price.
For demand to be elastic, the percentage change in quantity demanded must be greater than the associated percentage change in price.
The measurement for the price elasticity of demand is unit free.
A product with an inelastic demand means that consumers are relatively insensitive to a change in the price of the product.
If demand is perfectly inelastic, then the quantity demanded does not change when price changes.
If some product has an elastic demand, then we can expect total revenue to rise if price falls.
Total revenue will decrease if price rises and demand is elastic.
The elasticity of demand changes along a linear, downward-sloping demand curve.
If a 1 percent increase in price causes a 5 percent decrease in the quantity demanded, then the price elasticity of demand is 5.
Along a downward-sloping, straight-line demand curve, total revenue is greatest where demand is unit elastic.
If the government imposes a excise tax on a good, then the deadweight loss of the tax is the reduction in the sum of the consumer surplus and producer surplus.
If the demand for bananas has a high price elasticity, then a 5 percent decrease in the price of bananas will result in a more than 5 percent increase in the quantity demanded.
Suppose a 1 percent in the price of a good results in the quantity demanded changing by 0.2 percent. Then you know the price elasticity of demand is 0.2.
If a 1 percent decrease in the price of breakfast cereals results in a 2 percent increase in the quantity demanded for breakfast cereals, then the price elasticity of the demand for breakfast cereals is 2.
The price elasticity of demand measures a buyer's responsiveness to a change in price.
The local public transportation system recently raised rates and was surprised to be faced with declining revenue. What can be accurately concluded? The demand for public transportation is elastic.
When the government imposes a tax that must be paid by producers, economic theory indicates that the government's tax revenue comes from producers and consumers, though probably not in equal parts.
Created by: Jennatu
 

 



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