Chapter 7, Elasticity, Microeconomic Policy, and Consumer Theory Video Solutions, 5 Steps to a 5: AP Microeconomics 2020

Problem 1

If the price of corn rises 5 percent and the quantity demanded for corn falls 1 percent, then
(A) $E_{\mathrm{d}}=5$ and demand is price elastic.
(B) $E_{\mathrm{d}}=1 / 5$ and demand is price elastic.
(C) $E_{\mathrm{d}}=5$ and demand is price inelastic.
(D) $E_{\mathrm{d}}=1 / 5$ and demand is price inelastic.
(E) $E_{\mathrm{d}}=5$ and corn is a luxury good.

Anurag Kumar

Numerade Educator

01:26

Problem 2

A small business estimates price elasticity of demand for the product to be 3 . To raise total revenue, owners should
(A) decrease price as demand is elastic.
(B) decrease price as demand is inelastic.
(C) increase price as demand is elastic.
(D) increase price as demand is inelastic.
(E) do nothing; they are already maximizing total revenue.

Andrew Davis

Numerade Educator

04:47

Problem 3

Mrs. Johnson spends her entire daily budget on potato chips, at a price of \$1 each, and onion dip at a price of \$2 each. At her current consumption bundle, the marginal utility of chips is 12 and the marginal utility of dip is 30 . Mrs. Johnson should
(A) do nothing; she is consuming her utility-maximizing combination of chips and dip.
(B) increase her consumption of chips until the marginal utility of chip consumption equals 30 .
(C) decrease her consumption of chips until the marginal utility of chip consumption equals 30 .
(D) decrease her consumption of chips and increase her consumption of dip until the marginal utility per dollar is equal for both goods.
(E) increase her consumption of chips and increase her consumption of dip until the marginal utility per dollar is equal for both goods.

Manasvee Singh

Numerade Educator

Problem 4

A consequence of a price floor is
(A) a persistent shortage of the good.
(B) an increase in total welfare.
(C) a persistent surplus of the good.
(D) elimination of deadweight loss.

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Problem 5

The competitive market equilibrium is at point $\mathrm{C}$. If a per-unit excise tax is imposed on the production of this good, the deadweight loss is
(A) the area BDE.
(B) the area $\mathrm{BADH}$.
(C) the area GDH.
(D) the area DAC.
(E) the area GDAB.

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Problem 6

The competitive market equilibrium is at point $\mathrm{C}$. If a per-unit excise tax is imposed on the production of this good, the revenue collected by the government is
(A) the area BDE.
(B) the area BADH.
(C) the area GDH.
(D) the area DAC.
(E) the area GDAB.

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