ECON 251 EXAM 1 - PURDUE QUESTIONS AND ANSWERS 2026

ECON 251 EXAM 1 - PURDUE

What effect does availability of substitutes inputs have on supply
elasticity? - ANSWERS-1. easier to find inputs = more elastic supply
2.harder to find inputs = less elastic supply


What effect does time have on supply elasticity? - ANSWERS-1.
more time = more elastic supply
2. less time = less elastic supply


Marginal Benefit > Marginal Cost - ANSWERS-increase in quantity


Marginal Benefit < Marginal Cost - ANSWERS-decrease in quantity


Marginal Benefit = Marginal Cost - ANSWERS-allocative efficiency


Price Ceiling - ANSWERS-maximum price at which a good can
legally be sold


Price Floor - ANSWERS-minimum price at which a good can legally
be sold


Where do price ceilings need to be set in order to be effective? -
ANSWERS-below equilibrium, if true then price ceiling's will always
create shortages

, Where do price floors need to be set in order to be effective? -
ANSWERS-above equilibrium, if true then price floor's will always
create a surplus


pc - ANSWERS-price consumers pay after a tax


ps - ANSWERS-price sellers receive after a tax


excise tax - ANSWERS-per unit tax


What do taxes create? - ANSWERS-inefficiency


tax = - ANSWERS-price paid by buyers - price received by sellers


Tax Incidence - ANSWERS-division of the burden of a tax between
buyers and sellers in a market


Who pays more of the tax? - ANSWERS-whoever is less elastic


Where does the other amount of total surplus go?(not DWL) -
ANSWERS-government, tax revenue