Question 1

Society can easily fulfill everyone's desires, we just need government to step in and help out.

Accepted Answer

Society cannot easily fulfill everyone's desires because resources and individual preferences are limited and varied. Additionally, governmental intervention may lead to inefficiency and unintended consequences.

Question 2

When demand displays unitary price elasticity at all parts, total revenue is the same at all prices.

Accepted Answer

When demand has unitary price elasticity, the percentage change in quantity demanded is equal to the percentage change in price, meaning total revenue (price multiplied by quantity) remains constant regardless of the price.

Question 3

Use the following to answer questions :
Figure 4-3 
-In Figure 4-3 elasticity of supply is greater than the elasticity of demand (in absolute value)at equilibrium.

Accepted Answer

The answer of Use the following to answer questions :
Figure...

Question 4

Most studies indicate that a 10 percent increase in the minimum wage would reduce employment of teenagers by between 1 and 3 percent.

Accepted Answer

Most studies have found that a 10 percent increase in the minimum wage leads to a small reduction in the employment of teenagers, typically between 1 and 3 percent.

Question 5

Use the following to answer questions :
Figure 4-4 
-The sales tax benefits the suppliers in the market depicted by Figure 4-4 since they now receive $40 per unit in equilibrium, while they had previously only received $30.00 per unit.

Accepted Answer

The statement is incorrect. Sales tax benefits the government by generating revenue, not the suppliers in the market. The increase in price due to sales tax may result in an increase in revenue for the suppliers, but it is not direct benefit from the tax itself.

Question 6

Use the following to answer questions :
Figure 4-3 
-If the government then decides to set a price floor of $20 for the market in Figure 4-3, there is excess supply and 60 units of goods will be purchased.

Accepted Answer

If the government sets a price floor of $20, it will be above the equilibrium price of $15. This will cause a decrease in demand and an increase in supply, resulting in excess supply and a surplus of goods. Therefore, it is unlikely that 60 units of goods will be purchased.

Question 7

Economists distinguish between an increase in the quantity demanded and an increase in demand.

Accepted Answer

An increase in the quantity demanded refers to a movement along the demand curve due to a change in price, while an increase in demand refers to a shift in the entire demand curve due to other factors such as changes in consumer preferences, income, or price of related goods.

Question 8

If the government imposes higher taxes on oil the producers may have to pay part of it.

Accepted Answer

If the government imposes higher taxes on oil, the cost of production and distribution will increase, and it is likely that the producers will have to pay part of it. The exact amount that producers will pay may depend on their contractual agreements and the level of competition in the market. Ultimately, the impact of higher taxes on oil producers will depend on a variety of factors, including market conditions, government policies, and the behavior of consumers.

Question 9

Dollar receipts for sellers of some commodities will be lower at higher prices.

Accepted Answer

For some commodities, demand is elastic, meaning that as prices increase, the quantity demanded decreases significantly, leading to lower total revenue for sellers.

Question 10

A straight-line supply curve has a price elasticity equal to 1 everywhere along it.

Accepted Answer

A straight-line supply curve with a constant slope (i.e. a constant price elasticity) implies that the producer is willing to supply the same quantity of goods at any price along the curve, which is unrealistic. In reality, the price elasticity of supply is likely to vary depending on the cost structure, technology, and other factors affecting the producer's ability and willingness to respond to price changes. Therefore, the supply curve is likely to be more elastic at some points and less elastic at others, depending on the circumstances.

Question 11

Sales of the common necessities of life tend to decrease sharply when there is an increase in their price.

Accepted Answer

While it might seem intuitive that sales would decrease with price increases, the demand for common necessities of life (such as food, water, and basic household supplies) is relatively inelastic. This means that even when prices increase, the quantity demanded doesn't drop sharply because these items are essential for daily living.

Question 12

Use the following to answer questions :
Figure 4-4 
-The elasticity of S'S' in Figure 4-4 at equilibrium is negative.

Accepted Answer

The elasticity of supply (S'S' in this context) at equilibrium refers to how responsive the quantity supplied is to a change in price. Elasticity of supply is typically positive because as the price increases, the quantity supplied usually increases as well, indicating a direct relationship between price and quantity supplied.

Question 13

The more price inelastic the demand for a good, the greater tends to be the incidence on consumers of a per-unit tax.

Accepted Answer

If the demand for a good is inelastic, it means that consumers are not very responsive to changes in price. Therefore, if a per-unit tax is added to the price of the good, consumers are likely to continue purchasing the same amount of the good, but with a higher price. This means that they will bear a greater incidence of the tax, as opposed to the producer or seller. Hence, the statement is true.

Question 14

Use the following to answer questions :
Figure 4-4 
-Suppose the government decides to impose a $20.00 per unit, sales tax shifting the supply curve in Figure 4-4 up to S'S'.Since the suppliers have the more inelastic supply curve, the suppliers bear a greater burden of the sales tax.

Accepted Answer

When the supply curve is more inelastic, it means suppliers are less responsive to price changes. However, the burden of a sales tax falls more on the side of the market (supply or demand) that is less elastic. Therefore, if suppliers have a more inelastic supply curve, consumers would bear a greater burden of the sales tax, not the suppliers.

Question 15

A perfectly price inelastic demand curve must be a vertical line.

Accepted Answer

A perfectly price inelastic demand curve means that the quantity demanded does not change at all, regardless of any changes in price. This would result in a vertical demand curve because the quantity demanded is always the same, no matter the price.

Question 16

Everyone agrees that increasing the minimum wage is the best thing for the economy.

Accepted Answer

Not everyone agrees that increasing the minimum wage is the best thing for the economy. Some argue that it could lead to job loss, increase in prices of goods and services, and hurt small businesses. There are differing opinions on the impact of minimum wage increase on the economy.

Question 17

In general, supply curves become less elastic the longer the time period under consideration.

Accepted Answer

Supply curves typically become more elastic over time because producers have more time to adjust their production and resources in response to changes in market conditions.

Question 18

When all farmers have a small harvest, their total (combined)revenue may actually go up.This shows that the market demand for these agricultural products is relatively price inelastic in this price range.

Accepted Answer

If all farmers have a small harvest, the overall supply of agriculture products will decrease, leading to a relative scarcity in the market. Since the demand for these products is price inelastic, customers will still be willing to pay a high price for them despite the lower supply. This would result in higher revenue for the farmers, despite their small individual harvests.

Question 19

Use the following to answer questions :
Figure 4-3 
-If, for the market depicted in Figure 4-3, the government sets a price ceiling of $25, then the market can't adjust and there is excess supply.

Accepted Answer

A price ceiling set below the equilibrium price causes a shortage, not excess supply, because it increases the quantity demanded while decreasing the quantity supplied.

Quiz 4: Supply and Demand: Elasticity and Applications

Society can easily fulfill everyone's desires, we just need government to step in and help out.

When demand displays unitary price elasticity at all parts, total revenue is the same at all prices.

Use the following to answer questions : Figure 4-3 -In Figure 4-3 elasticity of supply is greater than the elasticity of demand (in absolute value)at equilibrium.

Most studies indicate that a 10 percent increase in the minimum wage would reduce employment of teenagers by between 1 and 3 percent.

Use the following to answer questions : Figure 4-4 -The sales tax benefits the suppliers in the market depicted by Figure 4-4 since they now receive $40 per unit in equilibrium, while they had previously only received $30.00 per unit.

Use the following to answer questions : Figure 4-3 -If the government then decides to set a price floor of $20 for the market in Figure 4-3, there is excess supply and 60 units of goods will be purchased.