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Houston ECON 2302 – As long as neither supply nor demand

Test on Chapters 1-6TRUE/FALSE : Write the WORD True of False in the blank. Each correct answer is worth 2 points.________ 1.As long as neither supply nor demand is perfectly elastic, both suppliers and demanders willpay part of any tax.________ 2.If a tax is imposed on buyers and prices do not instantaneously adjust, a surplus is created.________ 3.Trade leads to increased productivity because trade allows people to specialize.________ 4.The theory of comparative advantage concludes that people can produce more by specializingthan by doing everything themselves.________ 5.A commodity tax increases gains from trade.________ 6.An increase in supply causes a temporary surplus at the old equilibrium price.________ 7.In addition to monetary incentives, economists also believe people respond to incentives likefame, power, reputation, and love.________ 8.If a 3.67 percent increase in price causes a 1.97 percent decrease in quantity demanded, thentotal revenue must fall following an increase in price.________ 9.With a subsidy, the price paid by the buyers exceeds the price received by the sellers.________ 10. A higher opportunity cost of producing a good increases the supply of that good.________ 11. If the price of granite countertops rises, we would expect the demand for quartz countertops (asubstitute product for granite) to decrease.MULTIPLE CHOICE: Choose the best answer. Write its letter in the blank beside the question number.Each correct answer is worth 5 points.________ 1.The yearly shortage of Super Bowl tickets implies that the price of Super Bowl tickets is:A) set at the equilibrium price since they always sell out.B) above the equilibrium price.C) below the equilibrium price.D) not set by supply and demand, but instead set by the NFL.________ 2.Coke and Pepsi are substitute soft drinks. Which of the following would cause the demandcurve for Pepsi to shift to the left?A) a new Pepsi ad campaign that increases the popularity of PepsiB) the price of Coke decreasesC) the price of Pepsi decreasesD) the cost of making Pepsi rises_________ 3. Which of the following mostly likely has a perfectly inelastic supply curve?A) seeds for fruit treesB) health insuranceFigure: Tax on SellersC) prehistoric cave paintingsD) Star Wars movies________ 4. Refer to the Figure: Tax on Sellers. Theimposition of a per-unit tax on sellersshifts the supply curve from S0 to S1. Withthe tax, buyers pay ________ and sellersreceive ________.A) $6; $3B) $6; $6C) $3; $6D) $3; $4$________ 5. How much tax is collected?Figure: Consumer Surplus________ 6.Refer to the figure. Calculate the dollaramount of consumer surplus being earnedin this market when the price is $30 andthere are 300 units consumed.A) $4,500B) $9,000C) $18,000D) $450_________________ 7.Which of the areas in the Figure:Deadweight Loss represent the area ofgovernment revenue resulting from a $2tax?A) B + CB) B + EC) C + FD) E + Figure________ 8.A subsidy is a:A) reverse tax.B) means of shifting the supply curveleft.C) form of tax increase.D) movement along the supply curve.Figure: Demand and Supply with Subsidy_________ 9. Refer to Figure: Supply and Demand withSubsidy. Suppose a subsidy allows sellersto receive their product at the price of $8with a quantity of 400 units. What is thedollar amount of the subsidy per unit of thegood?A) $1B) $6C) $2D) $100Use the following table for questions 10 and 11.Table: Equilibrium AdjustmentPrice$108642Quantity Demanded100120130140150Quantity Supplied160145130115100_________10. Refer to the Table: Equilibrium Adjustment. If the price in the free market is $8, then a:A) surplus of 25 units would exist, and price would tend to fall.B) surplus of 25 units would exist, and price would tend to rise.C) shortage of 25 units would exist, and price would tend to rise.D) shortage of 25 units would exist, and price would tend to fall.________11. Refer to the Table: Equilibrium Adjustment on the preceding page. The equilibrium price is:A) $2.B) $4.C) $6.D) $8._________12. What would cause the supply curve to shift to the right?A)B)C)D)________13.an increase in taxes on firms’ outputan increase in the price of inputs used to produce the outputa decrease in the number of firms that produce the outputa decrease in the wages paid to union workers who produce the outputTable: Demand CurvesDemand CurveABCDQd at P = $90100100100100Qd at P = $10097969498In the table, which demand curve is most price elastic over the range of prices considered?A) demand curve AB) demand curve BC) demand curve CD) demand curve D________14. Suppose a new study predicts that the price of hybrid cars is expected to decrease in the nearfuture. As a result, we would expect:A) consumers to increase demand for hybrid cars today.B) producers to increase supply of hybrid cars today.C) no change in either demand or supply of hybrid cars today.D) producers to decrease supply of hybrid cars today.________15. A new per unit tax on yacht production decreases the supply of yachts. If yachts areelastically demanded, what will happen to total revenues from yacht production?A) They will rise.B) They will fall.Figure Market EqulibriumC) They will remain the same.D) They will change in an indeterminate direction._________16. Refer to Figure: Market Equilibrium). At a price of$3, quantity supplied is ______ and quantitydemanded is ______, leading to a _______.A) 6; 2; surplus of 4 unitsB) 2; 6; shortage of 8 unitsC) 2; 4; surplus of 2 unitsD) 4; 2; shortage of 2 units

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