A consumer's willingness to pay reflects: - The maximum price at which he or she would buy the good or service Suppose the United States removes sugar quotas and the market price of sugar drops. If the demand curve for candy bars is downward-sloping, in the candy bar market we would expect: - The consumer surplus to increase The total producer surplus for a good can be calculated in all of the following ways EXCEPT as: - The area below the supply curve for the good up to the quantity of the good sold If the market for grapefruit is in equilibrium without any outside intervention to change the equilibrium price: - Consumer and producer surplus are maximized Suppose a competitive market has a downward-sloping demand curve and a horizontal supply curve. If the supply curve shifts downward, equilibrium price will ________, equilibrium quantity will ________, consumer surplus will _________, and producer surplus will _________. - Decrease; increase; increase; not change Peanut butter is an inferior good. If there is an increase in income, total surplus in the peanut butter market: - Will decrease The price of elasticity of demand can be found by: - Comparing the percentage change in quantity demanded to the percentage change in price Gas prices recently increased by 25%. In response, purchase of gasoline decreased by 5%. According to this finding, the price elasticity of demand for gas is: - 0.2 . 05/.25= .2 Use the following information to calculate the price elasticity of demand for hotel rooms: if P= 135, Qd= 8600 if P= 165 Qd= 7400 The price elasticity of demand for hotel rooms (by midpoint method) is? - 0.75 Use of the midpoint method to calculate the price elasticity of demand eliminates the problem of computing - Different elasticities, depending on whether price decreases or increases A major state university in the South recently raised the tuition by 12%. An economics professor at this university asked his students, "How many of you will transfer to another university because of the increase in tuition?" One student in about 300 said that he or she would transfer. Based on this information, the price elasticity of demand for education at this university is: - Highly Inelastic You design websites for local businesses. You charge $200 per website, and currently sell 12 websites per month. Your costs are rising (including the opportunity cost of your time), so you consider raising the price to $250. The law of demand says that you won't sell as many websites if you raise your price. Suppose the price elasticity of demand for your websites estimated by midpoint method is 1.8. Is the demand elastic or inelastic? How many fewer websites would you expect? How much will your revenue fall, or might it increase? - Elastic, 8, fall Using the midpoint method, calculate the elasticity of supply for web-design services when the price per hour rises from $100 to $150 and the number of hours transacted increases from 300,000 to 500,000. Is the supply elastic, inelastic, or unit-elastic? - 1.25, elastic According to data from the U.S. Department of Energy, sales of the fuel-efficient Toyota Prius hybrid fell from 158,574 vehicles sold in 2008 to 139,682 in 2009. Over the same period, according to data from the U.S. Energy Information Administration, the average price of regular gasoline fell from $3.27 to $2.35 per gallon. Using the midpoint method to perform the calculation, the cross-price elasticity of demand between Toyota Priuses and regular gasoline is _____. Based on this estimate of the cross-price elasticity, the two goods _______. - 0.4; are substitutes The most likely reason that the government implements a ________ is because it feels the price is too hight for __________. - Price ceiling; Consumers Hugo Chávez was the president of Venezuela. Venezuela is a major producer of oil products, which remain the keystone of Venezuela's economy. Suppose President Chávez wanted to increase his popularity with the citizens of Venezuela and enacted a government policy to reduce the price of gasoline sold at state-owned gas stations to 50% of the previous price. Assuming a downward-sloping demand curve for gasoline, in theory, this policy would result in the quantity of gasoline demanded to be _____ the quantity of gasoline supplied. - Greater than When the government removes a binding price floor: - Quantity demanded will increase and quantity supplied will decrease When the minimum wage increases - Unemployment among unskilled workers increases In many European countries high minimum wages have led to high levels of unemployment and underemployment, and two a two-tier labor system. In the formal labor market, workers have good jobs that pay at least the minimum wage. In the informal, or black market for labor, workers have poor jobs and receive less than the minimum wage.