Answer the microeconomics questions below.

Econ 1101: Principles of Microeconomics Questions 2-4 consider the market for coal. For each of the following situations, determine what happens to the equilibrium quantity (Qcoal) and equilibrium price (Pcoal) of coal 1. New cheap sources of natural gas are discovered. Natural gas and coal are alternative sources of fuel to produce electricity. a) Qcoal 1 and Pcoal 1. b) Qcoal | and pcoal c ) Qcoal , and Pcoal 1. d ) Qcoal | and pcoal J . 2. Unions successfully organize all the coal mines in the U.S., raising coal miner wages. a) Qcoal and pcoal T. b) Qcoal | and Pcoal . c) Qcoal , and Pcoal J. d) Qcoal | and Pcoal J. 3. Two things happen: (i) A new source of natural gas is discovered and (ii) unions raise coal miner wages. a) Qcoal , and we can't tell what happens to Pcoal. b) Qcoal | and we can't tell what happens to Pcoal c) Pcoal 1 and we can't tell what happens to Qcoal. d) pal | and we can't tell what happens to Qcoal. 4. Suppose smidgets are an inferior good and incomes rise. a) Qsmidget 1 and Psmidget 1. b) Qsmidget J and Psmidget 1. c) Qsmidget 1 and Psmidget J. d) Qsmidget | and Psmidget I. 5. Two things happen in the smidget market. (i) Incomes rise (smidgets are inferior) and (ii) there is a technological advance in the amount of labor needed to make smidgets. a) Qsmidget 1 and we can't tell what happens to Psmidget b) Qsmidget | and we can't tell what happens to psmidget c) psmidget 1 and we can't tell what happens to Qsmidget. d) psmidget | and we can't tell what happens to Qsmidget.6. 10. Which of the following would increase quantity supplied, decrease quantity demanded, and increase the price that consumer pay? a) the imposition of a binding price floor b) the removal of a binding price floor c) the passage of a tax levied on producers d) the repeal of a tax levied on producers An increase in the supply of a good will decrease the total revenue producers receive if a) the demand curve is inelastic b) the demand curve is elastic c) the supply curve is inelastic d) the supply curve is elastic Over time, technological advance increases consumers' incomes and reduces the price of air pods. Ceteris paribus, each of these forces increases the amount consumers spend on air pods if the income elasticity of demand is greater than and if the price elasticity of demand is greater than a) zero, zero b) zero, one 0) one, zero d) one, one In an industry, (1) demand is unit elastic and (2) supply is perfectly elastic. If a tax is imposed in this industry, bear the entire burden of the tax and equilibrium quantity (Pick an answer to fill in the blanks.) a) Buyers, decreases. b) Buyers, is unchanged. c) Sellers, decreases. d) Sellers, is unchanged. For the following pair of goods, 1) CardiB's music and 2) rap music recordings in general, which would you expect to have more elastic demand? a) Rap music in general b) CardiB's music c) Both should have same elasticity d) None of the above You are the Independent System Operator (ISO) in an electricity market that runs by auction. You have received the bid information in the table below for a double auction. Each buyer's bid is an offer to buy one unit of electricity. Each seller's bid is an offer to sell one unit of electricity. Buyers Bid Sellers Bid (Offer to buy in $ ) (Offer to sell in $) Grumpy 1 Mickeys 17 Sleepy 3 Minnie 15 Bashful 20 Daffy 5 Sneezy 10 Donald 10 Happy 3 Goofy 16 12. What price clears the market? a) 1 b ) 3 c) 20 d) 10 e ) 2 13. Who purchases electricity in the market clearing allocation? a) Grumpy b) Happy, Sleepy, Bashful and Sneezy c) Bashful d) Bashful and Sneezy e) Sneezy and Happy O - N WA O O VO D D S S Q Q 0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10 Dridget Market Gribbet Market There are two markets in Funland: the dridget market (demand and supply on the left) and the gribbet market (demand and supply on the right). Suppose initially there is a $3 dridget tax and no tax on gribbets. w14. Tax revenue collected with a $3 dridget tax equals a) 3 b) 4.5 c) 9 d) 12 e) 15 15. The deadweight loss in total surplus in the dridget market from the $3 tax compared to total surplus with no taxes equals a) O b) 3 c) 4.5 d) 6 e) 4 16. In the initial situation with no tax on gribbets, consumer surplus in the gribbet market equals a) 18 b) 6 c) 12 d) 24 e) 10. 17. Economists in Funland propose a tax reform that lowers the dridget tax from $3 to $1, and raises the gribbet tax from $0 to $1. Under this plan, the combined deadweight loss of taxation across both markets equals a) -1 b) 2 c) 4.5 d) 5 e) 3 18. True or False regarding the new tax plan from the previous question: Now that two markets are being taxed under the new tax plan, the combined deadweight loss is actually larger in absolute value than in the original situation when only dridgets were taxed. a) True b) False c) There is not enough information 19. True or False again about the new tax plan: The new tax package will lower overall tax revenue collected, so Funland will have to cut government spending. a) True b) False c) There is not enough information 20. A $1 per unit tax levied on consumers of a good is equivalent to a) a $1 per unit tax levied on producers of the good 4 b) a $1 per unit subsidy paid to the producers of the good c) a price floor that raises the good price by $1 per unit d) a price ceiling that raises the good price by $1 per unit 21. When the government imposes a binding price floor, it causes a) the supply curve to shift to the left b) the demand curve to shift to the right c) a shortage of the good to develop d) a surplus of the good to develop 22. Suppose a price ceiling is set at point K in this market. a) There is excess supply equal to CE b) There is excess demand equal to MN 0) There is excess supply equal to KL d) There is excess supply equal to KN e) There is excess demand equal to LN 23. In the above gure, in a free market the price is F. Suppose the government raises the price to B by directly purchasing the good in the market. Government spending on the program equals a) The area CEUS b) The area 8080 24. 25. c) The area BENK d) The area ACHLK You observe two pairs of income (Y) and quantity demanded (Qd) for Coke as follows: (Q1, Y1) = (20, 700) and (Q2, Y2) = (15, 500). Suppose price and other determinants of demand for coke stay constant. You are asked to calculate income elasticity of this good which you find is , and that it's a good a) 1/2, inferior b) 6/7, normal c) 6/7, inferior d) 1/2, normal A new kind of consumption good, the "smidget\" is invented in Econland. Suppose the impact of the invention on the widget market is that the price PWidQe' increases while the quantity QWidget remains unchanged. A possible explanation for why this happened is that widgets and smidgets are and the supply curve for widgets is . (Fill in the blanks.) a) complements, perfectly elastic b) complements, perfectly inelastic c) substitutes, unit elastic d) substitutes, perfectly inelastic e) substitutes, perfectly elastic 26. Suppose that when the price of a good falls from $11 to $9, the quantity demanded increases from 3 units to 5 units. From this information, we can say that a) demand is elastic b) demand is inelastic c) demand is unit elastic d) the income elasticity is negative e) the income elasticity is positive Gas Taxes and Gas Prices 8.00 y =1.0449x + 2.347 7.00 S\" o o F\" o o 9' o o Gas Price ($ per gallon) 45 o o .N o o 1.00 0.00 0.00 1.00 2.00 3.00 4.00 5.00 Gas Tax (5 per gallon) 27. The above figure plots average retail gasoline prices and gas tax rates in dollars per gallon for eight countries. Since the slope is approximately one, we can conclude: a) Demand must be unit elastic. b) The income elasticity equals one. c) The supply of gasoline is inelastic. d) Consumers, not producers bear the primary burden of gas taxes. e) None of the above. 28. Which statement is true about the possible effects of a binding price ceiling on total surplus in the market for widgets (compared to the free-market allocation) a) The final quantity bought and sold in the market is higher than in the free market. b) Price is higher than in the free market outcome. c) Total surplus will decrease. d) None of the above Gasoline Market in the US June 2014 and June 2015 Time Period Per Capita Daily Consumption Average Price Per Gallon in of Motor Gasoline Dollars June 2014 1.18 3.70 June 2015 1.25 2.78 A 0.07 0.98 Average of Both Years 1.22 3.24 %A 0.06 = 0.07/1.22 0.28 29. Consider the data in the above table. An estimate of the short-run elasticity of the demand for gasoline in the United States is a) 0.28/006 b) 0.06/O.28 c) 0.06/1 . 1 2 d) 122/324 e) 324/122 30. In estimating the elasticity of demand this way, the logic of comparing June 2014 with June 2015 is: a) There was a change in the price of a substitute over this period causing the demand curve to shift. b) There were no changes in technology over this period so the change from June 2014 to June 2015 is a movement along a fixed supply curve. c) The price change was small over this period, and this makes it possible to more precisely estimate elasticity. d) Consumer tastes for driving vary with the season so comparing June to June holds tastes fixed. Consider the following statements about income elasticity (1) For inferior goods, income elasticity is positive. (2) For necessity goods, income elasticity is above one. (3) When income elasticity for a good is less than one, the share of income spent on the good is higher with higher income. 31. Which of the above statements about income elasticity are true? a) (1) and (2) only b) (2) and (3) only c) (3) only d) (1), (2), and (3) e) None of the above 32. When a good is taxed, the burden of the tax falls mainly on the consumers if a) the tax is levied on consumers b) the tax is levied on producers c) supply is inelastic, and demand is elastic d) supply is elastic, and demand is inelastic 33. An efficient allocation of resources maximizes a) consumer surplus. b) producer surplus. 0) consumer surplus plus producer surplus. d) consumer surplus minus producer surplus 34. A rational decision maker takes an action only if the a) marginal benefit is less than the marginal cost. b) marginal benefit is greater than the marginal cost. c) average benefit is greater than the average cost. d) marginal benefit is greater than both the average cost and the marginal cost