ASU ECN 212 Exam 2 Questions With
Detailed Answers 2026-2027 Update.
Elasticity - Answer The ability to change/adapt
Perfectly Inelastic Supply - Answer When the quantity supplied of a good is fixed, regardless of
price, the price elasticity of supply is zero and the supply curve is vertical
The _______ the supply curve, the more elastic it is - Answer Flatter or more horizontal
The _______ the supply curve, the more inelastic it is. - Answer Steeper or more vertical.
Income Elasticity of Demand: Inferior goods have ________ numbers. - Answer Negative.
Income Elasticity of Demand: Normal goods have ________ numbers. - Answer Positive.
Cross-Price Elasticity of Demand: Substitutes have ________ numbers. - Answer Positive.
Cross-Price Elasticity of Demand: Complements have ________ numbers. - Answer Negative.
Price Floor - Answer Government imposed price minimum. (Example: Minimum wage.)
What does a price floor result in? - Answer A surplus.
Unbinding Price Floor is: - Answer Lower than the equilibrium price and does not affect the
market.
Price Ceiling: - Answer Government imposed maximum on a price. (Example: Rent control.)
Price Ceiling results in: - Answer Shortage.
Unbinding Price Ceiling: - Answer Higher than the equilibrium price, doesn't affect the market.
A tax on sellers will shift the ______ curve by the amount of the tax?
, Will it go up or down? - Answer Supply; Up
A tax on the buyers will shift the ______ curve by the amount of the tax?
Will it go up or down? - Answer Demand; Down.
Incidence of a tax/ - Answer How the burden is shared among buyers and sellers.
Consumer Surplus - Answer The difference between what a consumer is willing to pay for a
good and what they actually pay for the good.
(Example: If you go to the store expecting to pay $5 for something and the price is $3, you have
a surplus of $2)
Producer Surplus - Answer The difference between the actual price a producer receives and
the minimum price they would accept. (Example: If they are willing to sell something for $5 but
the consumer is willing to buy it for $3, the producer has made a $2 surplus.)
Total Surplus - Answer Consumer Surplus + Producer Surplus
Externalities - Answer The impact on someone that does not participate in the action or
transaction. Can be positive or negative.
Internalizing the Externality: - Answer Altering incentives so that people take account of the
external affects of their actions. (Example: Taxing cigarettes to reduce the affects of secondhand
smoke on bystanders.)
How does the government respond to negative externalities? - Answer Taxes and/or
Regulation.
How does the government respond to positive externalities? - Answer Subsidies and/or Tax
Benefits.
Market Failure - Answer When a private market cannot ensure efficient production of a good
or service.
Rival Good: - Answer If one person's use of a good diminishes another person's use of it.
(Example: If someone eats a slice of pizza, there is less pizza available for everyone else.)
Detailed Answers 2026-2027 Update.
Elasticity - Answer The ability to change/adapt
Perfectly Inelastic Supply - Answer When the quantity supplied of a good is fixed, regardless of
price, the price elasticity of supply is zero and the supply curve is vertical
The _______ the supply curve, the more elastic it is - Answer Flatter or more horizontal
The _______ the supply curve, the more inelastic it is. - Answer Steeper or more vertical.
Income Elasticity of Demand: Inferior goods have ________ numbers. - Answer Negative.
Income Elasticity of Demand: Normal goods have ________ numbers. - Answer Positive.
Cross-Price Elasticity of Demand: Substitutes have ________ numbers. - Answer Positive.
Cross-Price Elasticity of Demand: Complements have ________ numbers. - Answer Negative.
Price Floor - Answer Government imposed price minimum. (Example: Minimum wage.)
What does a price floor result in? - Answer A surplus.
Unbinding Price Floor is: - Answer Lower than the equilibrium price and does not affect the
market.
Price Ceiling: - Answer Government imposed maximum on a price. (Example: Rent control.)
Price Ceiling results in: - Answer Shortage.
Unbinding Price Ceiling: - Answer Higher than the equilibrium price, doesn't affect the market.
A tax on sellers will shift the ______ curve by the amount of the tax?
, Will it go up or down? - Answer Supply; Up
A tax on the buyers will shift the ______ curve by the amount of the tax?
Will it go up or down? - Answer Demand; Down.
Incidence of a tax/ - Answer How the burden is shared among buyers and sellers.
Consumer Surplus - Answer The difference between what a consumer is willing to pay for a
good and what they actually pay for the good.
(Example: If you go to the store expecting to pay $5 for something and the price is $3, you have
a surplus of $2)
Producer Surplus - Answer The difference between the actual price a producer receives and
the minimum price they would accept. (Example: If they are willing to sell something for $5 but
the consumer is willing to buy it for $3, the producer has made a $2 surplus.)
Total Surplus - Answer Consumer Surplus + Producer Surplus
Externalities - Answer The impact on someone that does not participate in the action or
transaction. Can be positive or negative.
Internalizing the Externality: - Answer Altering incentives so that people take account of the
external affects of their actions. (Example: Taxing cigarettes to reduce the affects of secondhand
smoke on bystanders.)
How does the government respond to negative externalities? - Answer Taxes and/or
Regulation.
How does the government respond to positive externalities? - Answer Subsidies and/or Tax
Benefits.
Market Failure - Answer When a private market cannot ensure efficient production of a good
or service.
Rival Good: - Answer If one person's use of a good diminishes another person's use of it.
(Example: If someone eats a slice of pizza, there is less pizza available for everyone else.)
