# AP Econ Section 9 Micro

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1 Name: Date: _ ID: A AP Econ Section 9 Micro Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Gas prices recently increased by 25%. In response, purchases of gasoline decreased by 5%. Based on this data, the price elasticity of demand for gas is: a. 5. b. 2. c d e According to the substitution effect, a decrease in the price of a product leads to an increase in the quantity of the product demanded because buyers: a. have more real income. b. purchase more substitute goods. c. experience a decrease in their purchasing power. d. purchase more complementary goods. e. purchase more of the now relatively less expensive good. 3. The income effect of a price change is the effect on the consumption of a good due to a change in: a. income when all prices change in the same proportion. b. purchasing power caused by a change in the price of the good. c. income caused by a change in the price of labor. d. income sufficient to offset the effect of a price change. e. disposable income caused by a change in the marginal tax rates. 4. Assume that as the price of cauliflower falls, the income effect causes consumers to buy less cauliflower. We can conclude that cauliflower is: a. an inferior good. b. a luxury good. c. a normal good. d. expensive. e. a large component of consumer budgets. 5. A perfectly price-inelastic demand curve is: a. horizontal. b. downward-sloping. c. upward-sloping. d. vertical. e. more elastic at the top of the demand curve, and less elastic at the bottom of the curve. 1

2 Figure 47-2: Demand for Notebook Computers 6. (Figure 47-2: Demand for Notebook Computers) The seller's total revenue at point V equals the: a. area 0TVN. b. area 0PSVN. c. distance 0T. d. distance NV. e. area SUV. 2

3 7. In reference to the graph, which of the following statements is correct? a. The demand curve is less elastic when the price increases from \$4 to \$6 than when it increases from \$6 to \$8. b. The demand curve is more elastic when the price increases from \$4 to \$6 than when it increases from \$6 to \$8. c. The demand curve has the same elasticity when the price increases from \$4 to \$6 as when it increases from \$6 to \$8. d. The demand curve is unit-elastic when the price increases from \$4 to \$6 and when it increases from \$6 to \$8. e. The demand curve is the least elastic near the price of \$10 and the most elastic near the price of \$4. 3

4 Figure 47-4: Linear Demand Curve II 8. (Figure 47-4: Linear Demand Curve II) If price was initially set at \$8 and then increased to \$10, one would find that total revenue: a. decreases, as the price effect is dominated by the quantity effect. b. increases, as the price effect dominates the quantity effect. c. stays the same, as both the price and quantity effects remain unchanged. d. stays the same, but the price effect is dominated by the quantity effect. e. decreases, as the quantity effect is dominated by the price effect. 9. If you know the cross-price elasticity between two goods is positive, then you know the two goods are: a. substitutes. b. complements. c. normal goods. d. inferior goods. e. necessities. 10. If an increase in income leads to an increase in the demand for a good, then the good is said to be: a. normal. b. a luxury. c. inferior. d. a staple or necessity. e. substitutable. 11. We note that when the price of pretzels increases, the demand for tortilla chips decreases, so we can assume that these two goods are: a. unrelated goods. b. inferior goods. c. complementary goods. d. substitute goods. e. staple goods. 4

5 12. The price elasticity of supply is computed as the percentage change in: a. quantity supplied divided by the percentage change in quantity demanded. b. quantity supplied divided by the percentage change in price. c. price divided by the percentage change in quantity supplied. d. quantity supplied divided by the percentage change in consumer income. e. quantity supplied divided by the percentage change in price of a related good. 13. For which of the following pairs of goods is the cross-price elasticity of demand most likely to be large and greater than zero? a. chocolate cake and strawberry cake b. cake and frosting c. pizza and breadsticks d. airplane tickets and hotel rooms e. electricity and air conditioning units This table shows some Atlanta college students' willingness to pay to see The Nutty Nutcracker, by the Atlanta Ballet. Student Willingness to Pay Lois \$100 Miguel 90 Narum 65 Oscar 50 Pat 15 Table 49-2: Consumer Surplus 14. (Table 49-2: Consumer Surplus) If the price of a ticket to see The Nutty Nutcracker is \$75 and there is no other market for tickets, the total consumer surplus for the five students is: a. \$190. b. \$125. c. \$40. d. \$0. e. \$150. 5

6 The table below explains the relationship between the number of reports a firm is willing to prepare and the lowest price in dollars it would be willing to accept to prepare the respective number of reports. Reports Lowest Price Firm Is Willing to Accept 1st \$2 2nd 6 3rd 8 4th 11 5th 15 Table 49-7: Firm's Willingness 15. (Table 49-7: Firm s Willingness) If the price of a report is \$12, what is the value of producer surplus for the firm? a. \$27 b. \$21 c. \$16 d. \$42 e. \$ If an excise tax is imposed on automobiles and collected from consumers,: a. the demand curve will shift downward by the amount of the tax. b. the supply curve will shift upward by the amount of the tax. c. the equilibrium quantity supplied will increase relative to the pre-tax level. d. the equilibrium quantity demanded will increase relative to the pre-tax level. e. the after-tax price paid by consumers will decrease. 17. As part of an anti-obesity program, the government places an excise tax on high-fat foods. We would expect consumers to pay almost all of this tax if demand is: a. inelastic and supply is inelastic. b. inelastic and supply is elastic. c. elastic and supply is elastic. d. elastic and supply is inelastic. e. horizontal and supply is upward sloping. 18. Suppose the government imposes a \$9 per unit tax on Good Z. If the demand curve for Good Z is perfectly elastic and the supply curve is upward-sloping, the price that consumers pay for the good will: a. increase by \$4.50. b. increase by more than \$9. c. increase by \$9. d. not change. e. decrease by less than \$9. 6

7 19. If the government imposes a \$5 excise tax on the sale of leather shoes collected from the supplier and the price of leather shoes does not change: a. the government will receive no tax revenue from the sale of shoes. b. consumers are paying all of the tax. c. producers are paying all of the tax. d. consumers and producers are paying equal amounts of the tax. e. it must be the case that the demand curve is perfectly inelastic. 20. The governor wants to impose a \$1 excise tax on some good he doesn't care which but he does want to minimize the deadweight loss. The deadweight loss will be least when: a. both demand and supply curves are elastic. b. the demand is elastic and supply is inelastic. c. the demand is inelastic and supply is elastic. d. both demand and supply are inelastic. e. demand is unit elastic and supply is perfectly elastic. Figure 50-9: Market for Blue Jeans 21. (Figure 50-9: Market for Blue Jeans) The government recently levied a \$10 tax on the producers of blue jeans. Using the graph, identify the area(s) that represent the loss of producer surplus due to the tax. a. d + e b. e c. d d. d + e + f e. a + b + d + f 22. (Figure 50-9: Market for Blue Jeans) The government recently levied a \$10 tax on the producers of blue jeans. Using the graph, calculate the tax revenue. a. \$1,000 b. \$500 c. \$4,000 d. \$5,000 e. \$2,000 7

8 23. If the market for grapefruit is in equilibrium without any government intervention: a. total surplus is minimized. b. there is some deadweight loss. c. a few mutually beneficial trades are missed. d. the sum of consumer and producer surplus is maximized. e. the price of grapefruit is maximized. 24. The price of popcorn is \$0.50 per box and the price of peanuts is \$0.25 per bag, and you have \$5 to spend. You decide to purchase 8 boxes of popcorn. The maximum quantity of peanuts that you can purchase is bags. a. 4 b. 8 c. 10 d. 12 e. 5 Units of MU candy Units of MU sodas Candy Bars Sodas Table 51-6: Utility from Candy Bars and Sodas 25. (Table 51-6: Utility from Candy Bars and Sodas) Stan is choosing between two goods, candy bars and sodas, and his marginal utility from each is as shown in the table. If he consumes two candy bars and two sodas, his total utility will be equal to: a. 15 utils. b. 33 utils. c. 18 utils. d. 78 utils. e. 8 utils. 26. Steven consumes only two goods, both of which are normal goods. He is maximizing his utility in consumption of both goods. Now assume the price of one of the goods increases. How should Steven's consumption change? a. Steven should consume more of the good that experienced an increase in price and less of the good which did not change in price. b. Steven should consume more of both goods. c. Steven should consume less of the good that experienced an increase in price and more of the good which did not change in price. d. Steven should consume less of both goods. e. Steven should consume the same amount of the good that experienced an increase in price and less of the good which did not change in price. 8

9 27. John consumes only two goods, pizza and pasta. Both goods are normal goods for John. He is currently maximizing his utility in consumption of both goods. Now assume the price of pasta rises. As he adjusts to this event, the marginal utility of pizza: a. and of pasta will rise. b. and of pasta will fall. c. will fall, and the marginal utility of pasta will rise. d. will rise, and the marginal utility of pasta will fall. e. remain constant and the marginal utility of pasta will also remain constant. 28. When a consumer maximizes utility, the marginal utility per dollar spent must be the same for all goods and services in the consumption bundle. This is referred to as: a. least-cost combination rule. b. the law of demand. c. a budget constraint. d. consumption possibilities. e. the optimal consumption rule. 9

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