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Exam 5: Elasticity

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Question 201

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Elasticity along a demand curve that is linear is always equal to the slope of the line.

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Question 202

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Suppose the government places a large tax on the profits of companies that manufacture and sell cigarettes. Which statement is the MOST valid?

A) Much of the tax burden will be borne by shareholders in the form of lower profits because buyers will not be willing to pay higher prices.
B) Much of the tax burden will have no effect on quantity supplied because the supply curve is perfectly inelastic, even in the long run.
C) Much of the tax burden will be passed on to consumers in the form of higher prices because demand is inelastic.
D) Much of the tax burden will be absorbed by tobacco farmers because there are few manufacturers to whom they sell their crops.

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Question 203

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Increasing prices has no effect on total revenue if a product's demand curve is

If demand is elastic, the tax incidence falls more heavily on the _____, and deadweight loss is relatively _____.

A negative cross elasticity of demand means that two goods are _____, while a negative income elasticity of demand means that a good is a(n) _____ good.

If the income elasticity of demand for ramen noodles is -0.2, ramen noodles are a(n) _____ good.

If the average price of new homes increased by 15% last year, and, as a result, home builders increased the quantity supplied of new homes by 10%, the price elasticity of supply is _____, and the supply of new homes is _____.

In general, tax incidence falls more on the seller if demand for the product taxed is price elastic and falls more on the buyer if demand is price inelastic.

Holding all else constant, if the percentage change in quantity demanded is less than the percentage change in price, then

A tax that falls in percentage of income as income rises is a regressive tax.

Suppose the demand for toxic waste disposal is very elastic. The government imposes an excise tax on waste disposal. The deadweight loss associated with the production of toxic waste disposal will be

(Figure: Impact of Tax on Market Equilibrium) Based on the graph, how much is the deadweight loss created by the tax?

A firm increases its price for a good and total revenues increase. From this, we can conclude that its demand is

Rank the following products in order of price elasticity of demand from highest to lowest and explain: electricity, a Tesla, toothpaste.

In the market period, the price elasticity of supply is

A grocery store announced a 50% decrease in the price of local honey. Sales increased by 200%. Based on the information, the price elasticity of honey is

In general, the flatter the supply curve is, the

The time frames for the short run and the long run differ by industry.

An excise tax _____ consumer surplus and _____ producer surplus.

Which event describes a short-run adjustment for a gas station?