Q2F08 - Name Test Form A Economics 1 Quiz 2 November 5,...

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Name Test Form A Economics 1 Quiz 2 November 5, 2008 True-False Questions: Fill in Bubble A for True, Bubble B for False. 1. The price elasticity of demand is the ratio of the percentage change in quantity demanded to the percentage change in price as one moves along the demand curve. 2. The excess burden of a sales tax is the loss in buyer and seller profits due to the tax minus the tax revenue raised by the tax. 3. Even though transactions of a good between buyers and sellers impose negative externalities on other parties, a prohibition on those transactions always decreases total social profits. 4. If the production of a good causes a positive externality, a competitive equilibrium in the market for that good may be inefficient. 5. The number of units of a good that would be sold in competitive equilibrium is the same if a $10 per unit sales tax is collected from sellers as it would be if a $10 per unit subsidy were paid to buyers of this good. Multiple Choice Questions 6. The demand curve for a good is downward sloping with a price elasticity of - 0 . 5. A reduction in supply causes the price of the good to increase by 20%. Assuming the demand curve does not change, the total revenue of sellers will (a) increase by about 30%. (b) increase by about 20%. (c) increase by about 10%. (d) not change. (e) will decrease by about 10%.
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Economics 1 2 7. There are 1000 motel rooms in Anaheim. Each motel operator is willing to rent a room for a price of $50 a night or more. None are willing to rent a room if the price is below $50. There are 400 families willing to pay as much as $100 for a motel room in Anaheim, 400 willing to pay as much as $80 for a motel room, and 400 willing to pay as much as $60 for a room. What is the competitive equilibrium price and quantity of motel rooms in Anaheim? (a)
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Q2F08 - Name Test Form A Economics 1 Quiz 2 November 5,...

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