Economics 172 Name:
Fall 2007 Quiz 2
1) The rising price of oil has it made feasible
to extract oil out of oily sand in
A) a
higher price elasticity of supply in the long run. This is the answer
B) a
higher price elasticity of supply in the short run.
C) a
higher price elasticity of demand in the short run. This has nothing to do with
demand elasticity.
D) an
inelastic long-run supply of oil.
2) If a government wants to maximize revenues
from a tax it should
A) impose
it on sellers. Who the government taxes has
nothing to do with the amount the government receives.
B) impose
it on consumers.
C) choose
a good with a relatively elastic demand. The more elastic demand the more consumers can avoid the tax
by not purchasing the good.
D) choose
a good with a relatively inelastic demand. The more inelastic the demand the less consumers can respond
to the higher price by buying less of the good, so this is the answer.
3) Suppose the demand curve is perfectly
inelastic and the supply curve is upward sloping. The price sellers receive
after a specific tax is imposed on sellers
A) is
less than before the tax.
B) is higher than before the
tax.
C) is unchanged. If demand is perfectly inelastic,
consumers always buy the same amount and therefore pay the entire burden of the
tax. Sellers therefore get the same price they received before.
D) depends
on the supply elasticity.
4) In the mid 1980s, the salaries of accounting
professors with Ph.D.s increased dramatically. This resulted in an increase in
enrollments in Ph.D. accounting programs. Since a Ph.D. degree in accounting
may take at least four years to complete, the short-run elasticity of supply of
accounting professors is
This question is the same as question 1, so B
A) greater than the
long-run-elasticity of supply.
B) less than the long-run
elasticity of supply.
C) equal
to the long-run elasticity of supply.
D) equal
to the short-run elasticity of demand.
5) The cross price elasticity of demand between
two goods will be positive if
The formula is %chQdx/%chPy. If positive, an increase in the price of good
y leads to more purchases of good x, so they are substitutes.
A) the
two goods are complements.
B) the
two goods are substitutes.
C) the
two goods are luxuries.
D) one
of the goods is a luxury and the other is a necessity.