Help with any or all would be great!! Thanks! 1. If the government passed a rent

Question

Help with any or all would be great!! Thanks!

1. If the government passed a rent control law that was binding in an area that had previously not experienced one, it would create an artificial (blank), that would result in an (blank) of resources, and (blank) quality.

a. Shortage, under-allocation, decreased

b. Surplus, over-allocation, increased

c. No effect, no effect, no effect

d. Shortage, over-allocation, increased

2. If the government passed a minimum wage law requiring a $5 hourly wage in an area that had a market equilibrium labor price of $7, it would result in:

a. Shortage

b. Surplus

c.Equilibrium

d. None of the above

3. For certain, a specific effect of a tax on an inelastic good is:

a. Decreased producer surplus

b. Decreased consumer surplus

c. Deadweight loss

d. B and C

4. Equilibrium’s point is based upon the intersection of the producer’s supply curve driven by the (blank), and the consumer’s demand curve based on their (blank):

a. Marginal cost, marginal benefit

b. Marginal benefit, marginal cost

c. Surplus, surplus

d. Surplus, shortage

5. If a good’s demand declines as consumers’ incomes rise, that good is considered a:

a. Giffen good

b. Normal good

c. Inferior good

d. Luxury good

6. If a good’s demand declines from 10 to 9, when price increases from $1 to $2, that good is:

a. Inelastic

b. Elastic

c. Perfectly elastic

d. Unit elastic

7. Which of these is the most elastic?

a. Coffee

b. Tea

c. Black coffee

d. Starbuck’s frappucino deluxe with five shots espresso to two parts milk with caramel and a little hint of jasmine and the tears of a Himalayan yeti because why not

8. Applied question: Dani’s work has raised her income from $100 a week to $110 a week. Her consumption of coffee has increased from 3 cups a week to 4 cups a week. What is the income elasticity of her coffee demand using the midpoint (arc) elasticity equation? (Type your answer below and round to two decimals if necessary)

9. Jake values a baseball game at 10 utils, a coffee at 1 util, a dinner date at 15 utils, and having a full gas tank at 6 utils. Sarah values a dinner date at 20 utils, Coffee at 2 utils, a hiking trip at 15 utils, and a cross fit workout at 8 utils. Which of the following statements is true?

a. Sarah enjoys dinner dates more than Jake?

b. Jake enjoys baseball more than a full gas tank.

c. Sarah enjoys dinner dates more than her other interests.

d. B and C

10. The law of diminishing marginal utility states:

a. The more you have of something the less each additional unit gets you pleasure

b. You can’t always get what you want, but if you try sometimes…

c. Celebrity endorsements increase interest at first in a product, until more people buy it

d. Life is fair

11. Which of these is an example of network externality?

a. An online game where you play with others dependent upon more and more subscribers

b. An online app store for a phone platform that gets more apps as more people buy that phone os

c. A and B

d. None of the above

12. Yuri bought an oil stock at $8. This was right before the oil glut, and now his stock is worth $2. Yuri is refusing to sell it because he wants his $8 back. This is an example of:

a. Sunk costs

b. Anchoring

c. A and B

d. None of the above

Explanation / Answer

(1) (a)

A rent control fixes the maximum rent below the market rent, so quantity demanded of housing rises but quantity supplied of housing falls, leading to a shortage and eventually, lower quality of housing at lower price (rent).

(2) (d)

Minimum wage is less than current market wage, so it is not binding and has no effect on labor market at all.

(3) (d)

A tax always results in deadweight loss. Also, when demand of good is inelastic, higher tax (leading to higher price) will have less effect on quantity demanded, but the quantity will fall to some amount for sure, and market price will rise. This will result in lower consumer surplus.

(4) (a)

Supply curve is often called Marginal cost, and demand curve is often called marginal benefit curve.

(5) (c)

(6) (a)

Price elasticity = % Change in quantity demanded / % Change in price

= [(9 - 10) / 10] / [(2 - 1) / 1] = [-1 / 10] / [1 / 1] = - 0.1

Since absolute value of elasticity is less than 1, demand is inelastic.

Note: First 6 questions are answered.

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