ECON 202 4Th Quiz Key

ECON 202 – 4th Quiz – Key

1. Suppose the price of a box of pop tarts is $3. If Michael is willing to pay $4 for that box of pop tarts, his consumer surplus is: $1.

2. Suppose that the price of beer goes up due to a higher alcohol tax added. Quantity demanded for beer will ______and consumer surplus will ______. decrease; decrease

3. Suppose that in a month the price of oranges increases from $.75 to $1. At the same time, the quantity of oranges demanded decreases from 100 to 80. The price elasticity of demand for oranges (calculated using the initial value formula) is: 0.6.

4. The difference between the maximum amount that a consumer is willing to pay for a product and the price that is paid for the product describes: consumer surplus.

5. If the demand for tennis shoes increases and a firm's supply curve is upward sloping, then: producer surplus increases.

6. The price elasticity of supply is a measure of the responsiveness of: the quantity supplied to the changes in price.

7. If the demand curve is a vertical line, it means that: regardless of price, the quantity demanded is a constant amount.

8. The total revenue of Grandma's Fudge Factory is equal to: price of fudge times quantity sold.

9. Suppose that Victoria and her friends are running a fundraiser by selling donuts. They want to know what will happen to their revenue if they increase the price of each donut from $0.80 to $1. What concept do they need to apply to find out their expected revenue? price elasticity of demand

10. Suppose that the elasticity of demand for newspapers is 2.0 and quantity demanded decreases by 40%. What must the percentage increase in price have been? 20%

11. Suppose that when a particular firm decreases its price its total revenue decreases. What kind of demand does this particular firm face? Demand is price inelastic.

12. Suppose that David buys the same number of energy drinks every weekend no matter what happens to the price of the energy drinks. What does this suggest about David's demand for energy drinks? It is perfectly inelastic.

13. If a product has only a few acceptable substitutes, demand for the product is most likely to be: inelastic.

14. Which of the following products has the most elastic demand? Raspberry Mocha Kona coffee blend at Starbuck's

15. The income elasticity of demand is: the percentage change in quantity demanded divided by the percentage change in income. 16. An electrician licensing program in the state of North Carolina requires each electrician to obtain a license and renew it each year. Which of the following is a result of having the licensing program in NC? a decrease in total surplus.

17. On the above graph, area ACD is: total social surplus.

18. The above shows a market for taxi cab medallions (without which one cannot legally operate a cab service). If the number of medallions is reduced from Q2 to Q1, the producer surplus is represented by area(s): B+E+G.

19. With a quantity constraint of Q1, the dead weight loss is area: C+F.