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Questions and Answers
An increase in the price of wheat, a substitute crop, would cause a rightward shift in the supply curve for corn.
False
If two goods have a positive cross-price elasticity of demand, they are most likely complements.
False
Consumer surplus is defined as the area above the supply curve and below the equilibrium price.
False
When demand is inelastic and a tax is imposed, most of the tax burden is borne by producers.
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Setting a price floor above the equilibrium price leads to a surplus of the good.
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Implementing a tax that reduces the quantity of a good bought and sold results in a surplus above the market equilibrium.
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If the price elasticity of demand for a product is -0.5, this indicates that the demand for the product is elastic.
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Producer surplus is defined as the area below the supply curve and above the price received by sellers.
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If an increase in income leads to a decrease in demand for a good, that good is referred to as a normal good.
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A leftward shift in the demand curve for coffee can be caused by a health report linking coffee to adverse health effects.
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A vertical supply curve indicates that the price elasticity of supply is perfectly elastic.
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Total revenue will increase when the price of a product rises if the demand for that product is elastic.
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The income elasticity of demand for a normal good is always negative.
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