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macroeconomics

Exploring Macroeconomics 7th Edition Robert L. Sexton - Solutions

Which of the following statements is true?a. The price elasticity of supply measures the relative change in the quantity supplied that results from a change in price.b. If the supply price elasticity is greater than 1, it is elastic; if it is less than 1, it is inelastic.c. Supply tends to be more
If the demand for gasoline is highly inelastic and the supply is highly elastic, and then a tax is imposed on gasoline, it will be paida. largely by the sellers of gasoline.b. largely by the buyers of gasoline.c. equally by the sellers and buyers of gasoline.d. by the government.
For a given increase in price, the greater the elasticity of supply, the greater the resultinga. decrease in quantity supplied.b. decrease in supply.c. increase in quantity supplied.d. increase in supply.
If people spent three times as much on restaurant meals and four times as much on DVDs as their incomes doubled, would restaurant meals or DVDs have a greater income elasticity of demand?
As people’s incomes rise, why will they spend an increasing portion of their incomes on goods with income elasticities greater than 1 (DVDs) and a decreasing portion of their incomes on goods with income elasticities less than 1 (food)?
If the cross-price elasticity of demand between potato chips and popcorn was positive and large, would popcorn makers benefit from a tax imposed on potato chips?
How does the income elasticity of demand tell you whether a good is normal? Inferior?
How does the cross-price elasticity of demand tell you whether two goods are substitutes? Complements?
Which of the following statements is true?a. The cross-price elasticity of demand is the percentage change in the demand of one good divided by the percentage change in the price of another good.b. If the sign on the cross-price elasticity is positive, the two goods are substitutes; if it is
If good X has a negative cross-price elasticity of demand with good Y and good X also has a negative income elasticity of demand, thena. X is a substitute for Y, and X is a normal good.b. X is a substitute for Y, and X is an inferior good.c. X is a complement for Y, and X is a normal good.d. X is a
If the income elasticity of demand for good A is 0.5 and the income elasticity of demand for good B is 1.5, thena. both A and B are normal goods.b. both A and B are inferior goods.c. A is a normal good, but B is an inferior good.d. A is an inferior good, but B is a normal good.
Assume that both you and Art, your partner in a picture-framing business, want to increase your firm’s total revenue.You argue that in order to achieve this goal, you should lower your prices; Art, on the other hand, thinks that you should raise your prices. What assumptions are each of you
If demand for some good was perfectly price inelastic, how would total revenue from its sales change as its price changed?
Why is a linear demand curve more price elastic at higher price ranges and more price inelastic at lower price ranges?
Why does total revenue vary directly with price if demand is relatively price inelastic?
Why does total revenue vary inversely with price if demand is relatively price elastic?
If demand was relatively inelastic in the short run, but elastic in the long run, a price increase would _____________________ total revenue in the short run and _____________________ total revenue in the long run.a. increase; increaseb. increase; decreasec. decrease; increased. decrease; decrease
Which of the following is a true statement?a. Total revenue is the price of the good times the quantity sold.b. If demand is price elastic, total revenue will vary inversely with a change in price.c. If demand is price inelastic, total revenue will vary in the same direction as a change in price.d.
A straight-line demand curve woulda. have the same elasticity along its entire length.b. have a higher elasticity of demand near its top than near its bottom.c. have a higher elasticity of demand near its bottom than near its top.d. be relatively inelastic at high prices, but relatively elastic at
When the local symphony recently raised the ticket price for its summer concerts in the park, the symphony was surprised to see that its total revenue had actually decreased. The reason was that the elasticity of demand for tickets wasa. unit elastic.b. unit inelastic.c. inelastic.d. elastic.
Why is the price elasticity of demand for turkeys likely to be lower, but the price elasticity of demand for turkeys at a particular store at Thanksgiving likely to be greater than at other times of the year?
Why is the price elasticity of demand for products at a 24-hour convenience store likely to be lower at 2:00 a.m.than at 2:00 p.m.?
Why would a tax on a particular brand of cigarettes be less effective at reducing smoking than a tax on all brands of cigarettes?
What factors tend to make demand curves more price elastic?
What is the relationship between the price elasticity of demand and the slope at a given point on a demand curve?
What is the difference between a relatively price elastic demand curve and a relatively price inelastic demand curve?
How is the price elasticity of demand calculated?
What question is the price elasticity of demand designed to answer?
Demand curves for goods tend to become more inelastica. when more good substitutes for the good are available.b. when the good makes up a larger portion of a person’s income.c. when people have less time to adapt to a given price change.d. when any of the above is true.e. in none of the above
The long-run demand curve for gasoline is likely to bea. more elastic than the short-run demand curve for gasoline.b. more inelastic than the short-run demand curve for gasoline.c. the same as the short-run demand curve for gasoline.d. more inelastic than the short-run supply of gasoline.
Price elasticity of demand is said to be greatera. the shorter the period of time consumers have to adjust to price changes.b. the longer the period of time consumers have to adjust to price changes.c. when there are fewer available substitutes.d. when the elasticity of supply is greater.
Which of the following would tend to have the most elastic demand curve?a. Automobilesb. Chevrolet automobilesc. (a) and (b) would be the samed. None of the above
Which of the following will not tend to increase the elasticity of demand for a good?a. An increase in the availability of close substitutesb. An increase in the amount of time people have to adjust to a change in the pricec. An increase in the proportion of income spent on the goodd. All of the
When demand is inelastic,a. price elasticity of demand is less than 1.b. consumers are not very responsive to changes in price.c. the percentage change in quantity demanded resulting from a price change is less than the percentage change in price.d. all of the above are correct.
Demand is said to be _____________________ when the quantity demanded is not very responsive to changes in price.a. independentb. inelasticc. unit elasticd. elastic
Price elasticity of demand is defined as the _____________________ change in quantity demanded divided by the _____________________ change in price.a. total; percentageb. percentage; marginalc. marginal; percentaged. percentage; percentagee. total; total
Refer to the following supply and demand curve diagram.a. Starting from an initial equilibrium at E, what shift or shifts in supply and/or demand could move the equilibrium price and quantity to each of points A through I?b. Starting from an initial equilibrium at E, what would happen if both a
What would happen to the equilibrium price and quantity exchanged in the following cases?a. An increase in income and a decreasing price of a complement, for a normal goodb. A technological advance and lower input pricesc. An increase in the price of a substitute and an increase in income, for an
Why do 10:00 a.m. classes fill up before 8:00 a.m. classes during class registration? Use supply and demand curves to help explain your answer.
Why do price floors and price ceilings both reduce the quantity of goods traded in those markets?
Giving in to pressure from voters who charge that local theater owners are gouging their customers with ticket prices as high as $10 per movie, the city council of a Midwestern city imposes a price ceiling of $2 on all movies. What effect is this likely to have on the market for movies in this
What would be the impact of a price floor set above the equilibrium price for dairy products? below the equilibrium price?
What would be the impact of a rental price ceiling set above the equilibrium rental price for apartments? below the equilibrium rental price?
Use supply and demand curves to showa. simultaneous increases in supply and demand, with a large increase in supply and a small increase in demand.b. simultaneous increases in supply and demand, with a small increase in supply and a large increase in demand.c. simultaneous decreases in supply and
Beginning from an initial equilibrium, draw the effects of the changes in the following list in terms of the relevant supply and demand curves.a. An increase in the price of hot dogs on the hamburger marketb. A decrease in the number of taxicab companies in New York City on cab tripsc. Effect of El
Using supply and demand curves, show the effect of each of the following events on the market for wheat.a. The Midwestern United States (a major wheat-producing area) suffers a flood.b. The price of corn decreases (assume that many farmers can grow either corn or wheat).c. The Midwest has great
The secondary effects of an action that may occur after the initial effects are called ________________.
An increase in the minimum wage would tend to create ________________ unemployment for low-skilled workers.
The quality of rent-controlled apartments would tend to ________________ over time.
Rent controls distort market signals and lead to ________________ of rent-controlled apartments.
A price ________________ is a legally established maximum price; a price ________________ is a legally established minimum price.
If supply decreases and demand increases, the equilibrium price will ________________ and the equilibrium quantity will be ________________.
If demand decreases and supply increases, but the decrease in demand is greater than the increase in supply, the equilibrium quantity will ________________.
A decrease in supply results in a(n) ________________ equilibrium price and a(n) ________________ equilibrium quantity.
An increase in demand results in a(n) ________________ equilibrium price and a(n) ________________ equilibrium quantity.
Why is the law of unintended consequences so important in making public policy?
What is the law of unintended consequences?
Why does rent control often lead to condominium conversions?
What may happen to the amount of discrimination against groups such as families with children, pet owners, smokers, or students when rent control is imposed?
What predictable effects result from price floors such as the minimum wage?
How is the minimum-wage law an example of a price floor?
What predictable effects result from price ceilings such as rent control?
How is rent control an example of a price ceiling?
Which of the following will most likely occur with a 20 percent increase in the minimum wage?a. higher unemployment rates among experienced and skilled workersb. higher unemployment rates among young and low-skilled workersc. lower unemployment rates for young and low-skilled workersd. the price
A current surplus is due to a price floor. If the price floor is removed,a. price would increase, quantity demanded would increase, and quantity supplied would increase.b. price would increase, quantity demanded would decrease, and quantity supplied would decrease.c. price would decrease, quantity
A current shortage is due to a price ceiling. If the price ceiling is removed,a. price would increase, quantity supplied would increase, and quantity demanded would decrease.b. price would increase, quantity supplied would decrease, and quantity demanded would increase.c. price would decrease,
If a price floor was set at the current equilibrium price, which of the following would cause a surplus as a result?a. an increase in demandb. a decrease in demandc. an increase in supplyd. a decrease in supplye. either (b) or (c)
Which of the following is true?a. A price ceiling reduces the quantity exchanged in the market, but a price floor increases the quantity exchanged in the market.b. A price ceiling increases the quantity exchanged in the market, but a price floor decreases the quantity exchanged in the market.c.
If the equilibrium price of wheat is $3 per bushel and then a price floor of $2.50 per bushel is imposed by the government,a. there will be no effect on the wheat market.b. there will be a shortage of wheat.c. there will be a surplus of wheat.d. the price of wheat will decrease.
If demand for peanut butter increases and supply decreases, what will happen to equilibrium price and quantity?
If both buyers and sellers of grapes expect grape prices to rise in the near future, what will happen to grape prices and sales today?
When both supply and demand shift, what added information do we need to know in order to determine in which direction the indeterminate variable changes?
What would have to be true for both supply and demand to shift in the same time period?
Why are evening and weekend long-distance calls cheaper than weekday long-distance calls?
Assuming the market is already at equilibrium, what happens to the equilibrium price and quantity as a result of a supply increase?
Does an increase in supply create a shortage or surplus at the original price?
What happens to the equilibrium price and quantity as a result of a demand increase?
Does an increase in demand create a shortage or surplus at the original price?
Which of the following are true statements?a. Changes in demand will cause a change in the equilibrium price and/or quantity, ceteris paribus.b. Changes in supply will cause a change in the equilibrium price and/or quantity, ceteris paribus.c. Supply and demand curves can shift simultaneously in
If both supply and demand decreased, but supply decreased more than demand, the result would bea. a higher price and a lower equilibrium quantity.b. a lower price and a lower equilibrium quantity.c. no change in the price and a lower equilibrium quantity.d. a higher price and a greater equilibrium
If you observed the price of a good decreasing and the quantity exchanged decreasing, it would be most likely caused by a(n)a. increase in demand.b. decrease in demand.c. increase in supply.d. decrease in supply.
If you observed the price of a good increasing and the quantity exchanged decreasing, it would be most likely caused by a(n)a. increase in demand.b. decrease in demand.c. increase in supply.d. decrease in supply.
Assume that airline travel is a normal good. Higher incomes woulda. increase both the price and the quantity of airline travel.b. decrease both the price and quantity of airline travel.c. increase the price and decrease the quantity of airline travel.d. decrease the price and increase the quantity
An increase in the expected future price of a good by consumers would, other things being equal,a. increase the current price and increase the current quantity exchanged.b. increase the current price and decrease the current quantity exchanged.c. decrease the current price and increase the current
Other things equal, a decrease in consumer income woulda. increase the price and increase the quantity of autos exchanged.b. increase the price and decrease the quantity of autos exchanged.c. decrease the price and increase the quantity of autos exchanged.d. decrease the price and decrease the
Assume the following information for the demand and supply curves for good Z.a. Draw the corresponding supply and demand curves.b. What are the equilibrium price and quantity traded?c. Would a price of $9 result in a shortage or a surplus? How large?d. Would a price of $3 result in a shortage or a
The market for baseball tickets at your college stadium, which seats 2,000, is the following:a. What is the equilibrium price?b. What is unusual about the supply curve?c. At what prices would a shortage occur?d. At what prices would a surplus occur?e. Suppose that the addition of new students (all
If a price is above the equilibrium price, explain the forces that bring the market back to the equilibrium price and quantity.If a price is below the equilibrium price, explain the forces that bring the market back to the equilibrium price and quantity.
When asked about the reason for a lifeguard shortage that threatened to keep one-third of the city’s beaches closed for the summer, the Deputy Parks Commissioner of New York responded that “Kids seem to want to do work that’s more in tune with a career. Maybe they prefer carpal tunnel
The following table shows the hypothetical monthly demand and supply schedules for cans of macadamia nuts in Hawaii.a. What is the equilibrium price of macadamia nuts in Hawaii?b. At a price of $7 per can, is there equilibrium, a surplus, or a shortage? If it is a surplus or shortage, how large is
The following graph shows three market supply curves for cantaloupe. Compared to point A, which point representsa. an increase in quantity supplied?b. an increase in supply?c. a decrease in quantity supplied?d. a decrease in supply? Price D E A S B Quantity of Cantaloupes per Year S
What would be the effects of each of the following on the supply of coffee worldwide? In each case, identify the responsible determinant of supply.a. Freezing temperatures wipe out half of Brazil’s coffee crop.b. Wages of coffee workers in Latin America rise as unionization efforts succeed.c.
What would be the effect of each of the following on the supply of salsa in the United States? In each case, identify the responsible determinant of supply.a. Tomato prices skyrocket.b. Congress places a 26 percent tax on salsa.c. Ed Scissorhands introduces a new, faster vegetable chopper.d. J. Lo,
Using the graph below, answer the following questions:a. What is the shift from S1 to S2 called?b. What is the movement from A to B called?c. What is the movement from B to A called?d. What is the shift from S2 to S1 called? P B S P2 P A 0 Q Q2 Q3
If the price of corn rose,a. what would be the effect on the supply of corn?b. what would be the effect on the supply of wheat?
The following table shows the supply schedules for Rolling Rock and two other petroleum companies. Armadillo Oil and Pecos Petroleum. Assuming these three companies make up the entire supply side of the oil market, complete the market supply schedule and draw the market supply curve on a graph.
The following table shows the supply schedule for Rolling Rock Oil Co. Plot Rolling Rock’s supply curve on a graph. Price Quantity Supplied (dollars per barrel) (barrels per month) $5 10,000 10 15,000 15 20,000 20 25,000 25 30,000
Show the impact of each of the following events on the oil market.a. OPEC becomes more effective in limiting the supply of oil.b. OPEC becomes less effective in limiting the supply of oil.c. The price for natural gas (a substitute for heating oil) rises.d. New oil discoveries occur in Alaska.e.
Felix is a wheat farmer who has two fields he can use to grow wheat. The first field is right next to his house and the topsoil is rich and thick. The second field is 10 miles away in the mountains and the soil is rocky. At current wheat prices, Felix just produces from the field next to his house
Using the graph below, answer the following questions.a. What is the shift from D1 to D2 called?b. What is the movement from B to A called?c. What is the movement from A to B called?d. What is the shift from D2 to D1 called? P P P2 A B C 0 Q Q2 Q3 D D Q

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