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QUESTIONS PAGE------ 1 2 3 4 5 6 7 8
1. To determine whether two goods are luxuries or substitutes, you would use:
a. cross price elasticity
b. elasticity of supply
c. elasticity of demand
d. income elasticity
2. To determine whether a good is a luxury or a necessity, you would use:
a. cross price elasticity
b. elasticity of supply
c. elasticity of demand
d. income elasticity
3. What is not a reason for taxation we discussed in class
a. re-pricing
b. redistribution
c. restitution
d. revenue
4. In terms of income earned, sales tax on a new car is considered a(n)
a. progressive tax
b. regressive tax
c. proportional tax
d. excise tax
5. A tariff is:
a. a tax that government places in imported goods.
b. a quantity limitation placed on imports
c. an all-out restriction on imports.
d. a government-imposed procedural rule limiting imports.
6. If an increase in the price of a product from $1.00 to $1.50 per unit leads to a decrease in the quantity demanded from 100 to 90 units, then demand is:
a. elastic and total revenue will increase.
b. inelastic and total revenue will decrease.
c. unitary elastic.
d. elastic and total revenue will decrease.
e. inelastic and total revenue will increase.
7. If your income increases by 20% and, as a result, the quantity of tacos demanded increased by 10%, you may conclude that
a. tacos are inferior gods
b. tacos are luxuries
c. tacos are necessities
d. you like tacos more than burritos
8. Suppose good x costs $2.00 and good y costs $4. If you receive 100 utils by consuming the next unit of good x and 400 utils by consuming the next unit of good y, according to consumer theory, you would
a. consume one more unit of good x and one less unit of good y
b. consume one more unit of good y and one less unit of good x
c. do nothing. Your utility is maximized at your current level of consumption
d. need more information
9. Which is not a cost of taxation?
a. The loss of consumer and producer surplus
b. The administrative costs of collecting the tax
c. The revenue paid to the government
d. The cost of the good being taxed
10. If a excise tax of $600 was placed on Corvettes, and the ED = 1 and the ES = 2,
how much of the tax does is the consumer burdened with?
a. $600
b. $400
c. $200
d. $100
Use the graph below to answer questions 11 – 13
11. The elasticity of demand at point C is
a. 1
b. ½
c. 2/3
d. 2
12. At which point is total revenue maximized?
a. A
b. B
c. C
d. D
e. E
13. As you move down the demand curve,
a. elasticity increases
b. elasticity decreases
c. elasticity is constant
d. elasticity increases then decreases
14. Which of the following good classifications is in the correct order from most inelastic to most elastic
a. food, Big Mac, McDonalds hamburger, fast food
b. Big Mac, McDonalds hamburger, fast food, food
c. food, fast food, McDonalds hamburger, Big Mac
d. fast food, food, Big Mac, McDonalds hamburger
15. Suppose the price of pork increases from $2.00 to $2.25. As a result, the quantity of chicken demanded goes from 1000 lbs. to 1200 lbs. You can conclude
a. the cross-price elasticity is positive and pork and chicken are compliments.
b. the cross-price elasticity is negative and pork and chicken are compliments.
c. the cross-price elasticity is positive and pork and chicken are substitutes
d. the cross-price elasticity is negative and pork and chicken are substitutes.
.
16. If an economist observed that higher hot dog prices lead to an decrease in the demand for chili, she would most likely conclude:
a. chili and hotdogs are complements.
b. chili and hotdogs are substitutes.
c. chili and hotdogs are both inferior goods
d. chili and hotdogs are both normal goods.
17. A good whose consumption decreases when income increases is generally called:
a. a normal good.
b. an inferior good.
c. a substitute good.
d. a complementary good.
18. If marginal utility is positive, then
a. Total utility is increasing
b. Total utility in decreasing
c. Total utility is maximized
d. Total utility is equal to zero
19. Total utility is maximized when
a. Marginal utility is positive
b. Marginal utility is negative
c. Marginal utility is zero
d. Marginal utility is 1
20. It is estimated that a 5% decline in income will reduce health care purchases by 2.5% and reduce dental service purchases by 8%. From this information, one can conclude that:
a. health care is a necessity and dental services are a luxury.
b. health care is a luxury and dental services are necessities.
c. both health care and dental services are necessities.
d. both health care and dental services are luxuries.
Answer each question completely.
Use the graph below to answer questions
21. Calculate consumer surplus and producer surplus before the tax is implemented.
22. What is the market price and quantity before the tax?
23. What is the size of the tax?
24. What is the market price and quantity after the tax?
25. What is the revenue received by the producer after the tax has been paid?
26. Calculate consumer surplus and producer surplus after the tax has been implemented.
27. What is the deadweight loss associated with the tax?
28. What is the government revenue associated with the tax on iPods?
29. What is the percentage of the tax burden borne on consumers?
30. What is the percentage of the tax burden borne on producers?
31. Which curve is more elastic? Explain your answer.
Use the table below to answer questions
Complete the table above.
32. Suppose you have $15 to spend. What combination of goods would you purchase in order to maximize your total utility?
33. What is the total utility you receive from the combinations of goods in question
34. If you have an unlimited income, how many double cheeseburgers would you eat? Explain your answer.
Use the graph below to answer questions
35. Illustrate a price ceiling of $3.00 on the market for milk.
36. Does the price ceiling create a shortage or a surplus? By how much?
37. What are the costs and benefits associated with this price ceiling?
(Who benefits and who loses)
A. Use the table below to calculate how much income tax you would have to pay if your annual income is $380,000.
B. Is this a regressive, progressive, or flat tax? Explain your answer.