Q: Which of the following is the correct formula for price elasticity of demand?

$$\text{Price Elasticity of Demand} = \frac{\%\ \text{change in quantity demanded}}{\%\ \text{change in price}}$$

Q: Which of the following is the correct formula for cross-price elasticity of demand?

$$\text{Cross-Price Elasticity} = \frac{\%\ \text{change in quantity demanded of Good A}}{\%\ \text{change in price of Good B}}$$

Question 1

Suppose the government imposes a price ceiling below the equilibrium price in the market for apartments. Which of the following is the most likely outcome?

Accepted Answer

A shortage of apartments, as quantity demanded exceeds quantity supplied.

Question 2

If the demand for a good is perfectly inelastic, what is the value of its price elasticity of demand?

Accepted Answer

$$0$$

Question 3

A tax is imposed on sellers of a product. Which of the following statements is correct?

Accepted Answer

The supply curve shifts upward by the amount of the tax.

Question 4

Which of the following best describes consumer surplus?

Accepted Answer

The difference between what consumers are willing to pay and what they actually pay.

Question 5

Suppose the cross-price elasticity of demand between two goods is positive. What does this imply?

Accepted Answer

The goods are substitutes.

Question 6

If the government imposes a binding price floor in the wheat market, what will happen?

Accepted Answer

A surplus of wheat will occur.

Question 7

Which of the following is the correct formula for price elasticity of demand?

Accepted Answer

$$	ext{Price Elasticity of Demand} = \frac{\%\ 	ext{change in quantity demanded}}{\%\ 	ext{change in price}}$$

Question 8

A binding rent control is imposed in a city. Which of the following is a likely long-term effect?

Accepted Answer

A decrease in the quality and quantity of available apartments.

Question 9

If the supply of a good is perfectly elastic, what does the supply curve look like?

Accepted Answer

A horizontal line.

Question 10

Suppose the government wants to raise tax revenue without causing a large deadweight loss. Which type of good should it tax?

Accepted Answer

A good with inelastic demand.

Question 11

Which of the following is true about the incidence of a tax?

Accepted Answer

The side of the market that is less elastic bears more of the tax burden.

Question 12

If the government imposes a $$2$$ per unit tax on a good, and the price paid by buyers increases by $$1.50$$, what can you conclude about the relative elasticities?

Accepted Answer

Demand is less elastic than supply.

Question 13

Which of the following best describes producer surplus?

Accepted Answer

The difference between the price sellers receive and the minimum price they are willing to accept.

Question 14

Suppose the government removes a binding price floor in the labor market. What is the likely effect?

Accepted Answer

Unemployment will decrease.

Question 15

If the income elasticity of demand for a good is negative, what type of good is it?

Accepted Answer

An inferior good.

Question 16

Which of the following is the correct formula for cross-price elasticity of demand?

Accepted Answer

$$	ext{Cross-Price Elasticity} = \frac{\%\ 	ext{change in quantity demanded of Good A}}{\%\ 	ext{change in price of Good B}}$$

Question 17

A binding price ceiling is imposed on gasoline. Which of the following is a likely consequence?

Accepted Answer

Long lines and black markets for gasoline.

Question 18

Suppose the government wants to maximize total surplus in a market. Which of the following policies should it pursue?

Accepted Answer

Allow the market to reach equilibrium without price controls.

Question 19

If the government imposes a tax on a good with perfectly inelastic demand, what is the deadweight loss?

Accepted Answer

$$0$$

Microeconomics: Core Concepts, Market Structures, and Policy Interventions

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