30 Jun ECON1 UCSD Multiple Choice Questions Homework 3
ECON1 UCSD Multiple Choice Questions Homework 3 Help
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Tags: microeconomics economics econ 1 multiple choice questions University of California San Diego Homework 3 Help UCSD ECON Assignment
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Econ 1 Homework 3 Multiple Choice: Please choose the best answer among the following choices. 1. Consider the product of gasoline. Its PES is estimated at 1.6. Which of the following would be true? a) Gasoline’s supply is inelastic b) Gasoline’s demand is elastic c) Its supply curve is a vertical line d) Its supply curve is a steep, upward sloping line e) None of the above 2. Think about the market for health care. According to research, the PED is about -0.4 and the IED is between 1.3 and 1.8. What can we conclude from this information? a) The demand curve would be flat and downward sloping b) Health care is a normal good c) Health care is an inferior good d) The demand curve would be steep and upward sloping e) None of the above 3. Consider the following goods: gas cars and electric cars. Which of the following is likely true about the CPED of these two goods? a) It is greater than 0 b) It is less than 0 c) It is elastic d) It has zero consumer surplus e) None of the above 4. Consider a study of the telecommunications industry in Mexico. According to the data, the lack of competition in the industry leads to consumer surplus being $25 billion lower per year than if there was more competition. What does this number mean? a) Tells us the decline in the amount of money people spend on telecommunications per year b) Tells us the increase in the price that people need to pay for telecommunications per year c) Tells us the decline in the consumption of telecommunications per year d) Tells us the decline in the net benefit to consumers of this industry per year due to the lack of competition e) None of the above 5. Which of the following is FALSE about consumer surplus? a) It is partly determined by the maximum price people will pay for an item 1 b) c) d) e) It is partly determined by the price buyers must pay for the item It is partly determined by the amount of quantity supplied It can only be positive since no one will purchase an item if the price is above their WTP It is the area below the demand curve and above the price buyers pay Short Answer: Please answer the questions as best you can. You will be graded primarily on the quality of your answer rather than the amount you write. In terms of quality, the most important is to use the concepts and knowledge presented in lecture. Be sure to label the graphs. 6. (8 Points) Think about the market for parking spaces in downtown LA. There is little flexibility in terms of changing the number of parking spaces provided. On the other hand, there are many substitutes for parking in the city such as taking the train or parking just outside the city and taking a bus. a. Please draw the market for parking spaces in downtown LA. b. If a tax is applied on parking spaces, what happens to the quantity? c. Who pays most of the tax burden? 7. (5 Points) Suppose the California legislature passed a sweeping law to increase the number of regulations for building homes such as increasing the parking requirements and setback requirements. Suppose there is a housing tax. What effect would this law have on the tax burden for buyers? 8. (7 Points) Consider the following market for flash drives. 2 Price Quantity supplied Quantity demanded $65 3,000 0 $60 2,750 250 $55 2,500 500 $50 2,250 750 $45 2,000 1,000 $40 1,750 1,250 $35 1,500 1,500 $30 1,250 1,750 $25 1,000 2,000 $20 750 2,250 $15 500 2,500 $10 250 2,750 $5 0 3,000 $0 0 3,250 a. What is the consumer surplus in the equilibrium? b. Suppose there is an increase in the cost of producing flash drives such that the quantity supplied decreases by 1,500 units for each price. What is the consumer surplus for the new equilibrium? 9. (10 Points) 3 Consider the market for paper towels where the supply curve is upward sloping and the demand curve is downward sloping. (Hint: Draw the graphs to answer the questions below.) a. Suppose there is an effective price ceiling applied on this market. What happens to the consumer surplus as a result? b. Suppose there is an effective price floor applied on this market. What happens to the consumer surplus as a result? 4 …
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