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Lecture 1

EC 110 Lecture 1: Econ Review 2 answersExam

Course Code
EC 110
Kent Zirlott

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2. An excise tax of $11 placed on bicycles will shift the demand curve (EXCISE TAX DOESN’T SHIFT
A. to the left by more than $11
B. to the right by $11
C. to the left by $11
D. not at all, but the supply curve will shift left by $11
13. What is the shape of the demand curve for a good that has very few substitutes?
A. relatively flat
B. perfectly horizontal
C. relatively vertical
D. cannot be determined from the information given above
10. Economists use the concept of price elasticity of demand to
A. measure how much buyers respond to changes in the price of a good
B. measure how much sellers respond to changes in the price of a good
C. measure how much worse off consumers are when the price of a good increases
D. measure how much buyers respond to changes in their incomes
43. When the price of a Starbucks latte is $5, the quantity demanded is 100 lattes per day. When the price
is $7, the quantity demanded is 80 lattes per day. Using the midpoint method, the price elasticity of
demand for Starbucks lattes is
A. 0.22
B. 0.67
C. 1.33
D. 1.50
11. Suppose a tax is levied on books. If the sellers end up bearing most of the tax burden, we know that
A. demand is more inelastic than supply.
B. demand is more elastic than supply.
C. government has required that consumers pay the tax, i.e. a sales tax.
D. government has required that sellers pay the tax, i.e. an excise tax.
3. Sheldon loves strawberry Nestle Quik and he would be willing to pay more for the drink mix than he
now currently pays. Suppose that Sheldon has a change in his tastes such that he values strawberry Nestle
Quik more than before. If the market price is the same as before, then
A. Sheldons consumer surplus would be unaffected.
B. Sheldon’s consumer surplus would increase.
C. Sheldon’s consumer surplus would decrease.
D. Sheldon would be wise to switch to Ovaltine.
5. If the government levies a $5 tax per tablet computer on buyers of tablet computers, then the price paid
by buyers of tablet computers would likely
A. increase by more than $5.
B. increase by exactly $5.
C. increase by less than $5.
D. decrease by $5.
12. Suppose a good has a positive income elasticity of demand, such as 0.99. This implies the good is
A. a normal good.
B. a luxury.
C. a necessity.
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