Econ Practice Part 2

Suppose you manage a Seven Eleven and are in charge of ordering products, while the home office sets the prices. In your area, the income elasticity of demand for beef jerky is –0.5. Because of local factory closings, you expect local incomes to decrease by 20% on average in the next month. As a result, you should stock _____ beef jerky.

• 20% less

• 5% more

• 10% more

• 10% less

A perfectly elastic supply curve is:

• horizontal.

• downward sloping.

• upward sloping.

• vertical.

A perfectly inelastic supply curve is:

• horizontal.

• downward sloping.

• upward sloping.

• vertical.

The price elasticity of supply for a good is 2 if a _____ in price leads to a 4% decrease in the quantity supplied.

• 2% increase

• 2% decrease

• 4% decrease

• 4% increase

The long-run price elasticity of supply of automobiles is _____ the short-run price elasticity of supply of automobiles.

• less than

• greater than

• equal to

• not comparable to

The price elasticity of supply of foods low in saturated fats is lower in the short run than in the long run because:

• in the short run, inputs are more readily available to produce these foods than in the long run.

• in the short run, food producers have a limited time to respond to changes in demand.

• in the short run, prices tend to stay constant.

• in the long run, supply is perfectly inelastic.

The supply curve for a good will be more elastic if:

• spending on the good accounts for a large share of a consumer's income.

• the good is a luxury item.

• production inputs are readily available at a relatively low cost.

• there is very little time for producers to respond to a price change.

An excise tax that the government collects from the consumers of a good:

• shifts the supply curve upward.

• decreases tax revenue for the government.

• shifts the demand curve downward.

• shifts the demand curve upward.

If an excise tax is imposed on new SUVs and collected from consumers, the:

• demand curve will shift downward by the amount of the tax.

• supply curve will shift downward by the amount of the tax.

• equilibrium quantity supplied will increase relative to the pretax level.

• supply curve will shift upward by the amount of the tax.

The incidence of a tax:

• is a measure of the revenue the government receives from it.

• refers to who writes the check to the government.

• refers to who really bears the burden of the tax.

• is a measure of the deadweight loss generated by the tax.