a) Which of the following topics is the MOST likely to be studied in microeconomics?
[选择]
Will economic growth come back to pre-pandemic levels?
Did stimulus checks decrease unemployment?
What happens when central banks decrease interest rates?
Why do Boeing and Airbus dominate the civil aircraft manufacturing market?

b) Microeconomists are often interested in elasticities. From a business perspective, elasticities can help businesses to decide how to price their goods. From a policy perspective, elasticities help microeconomists measure the impact of a tax on consumers and producers. For example, to calculate the proportion of the tax borne by consumers, one can use the ratio of the absolute value of the elasticity of supply and the sum of the absolute value of the supply and the demand elasticities (
𝐸
𝑠
and
𝐸
𝑑
). That is:

𝐶
𝑠
ℎ
𝑎
𝑟
𝑒
=
|
𝐸
𝑑
|
|
𝐸
𝑠
|
+
|
𝐸
𝑑
|

Suppose the elasticity of demand is -1.25 and the elasticity of supply is 1.25. What share of the tax is borne by consumers?
[选择]
50%
25%
20%
80%

Question

a) Which of the following topics is the MOST likely to be studied in microeconomics? 
[选择]
Will economic growth come back to pre-pandemic levels?
Did stimulus checks decrease unemployment?
What happens when central banks decrease interest rates?
Why do Boeing and Airbus dominate the civil aircraft manufacturing market?

b) Microeconomists are often interested in elasticities. From a business perspective, elasticities can help businesses to decide how to price their goods. From a policy perspective, elasticities help microeconomists measure the impact of a tax on consumers and producers. For example, to calculate the proportion of the tax borne by consumers, one can use the ratio of the absolute value of the elasticity of supply and the sum of the absolute value of the supply and the demand elasticities (
𝐸
𝑠
 and 
𝐸
𝑑
). That is:

𝐶
𝑠
ℎ
𝑎
𝑟
𝑒
=
|
𝐸
𝑑
|
|
𝐸
𝑠
|
+
|
𝐸
𝑑
|

Suppose the elasticity of demand is -1.25 and the elasticity of supply is 1.25. What share of the tax is borne by consumers? 
[选择]
50%
25%
20%
80%

BlackTom AI · Accepted Answer

To tackle part (a), I’ll examine each option to see whether it belongs to microeconomics as a main topic.
Option 1: 'Will economic growth come back to pre-pandemic levels?' This is typically a macroeconomics question focused on aggregate variables like GDP growth, unemployment rates at the national level, and overall economic performance rather than individual markets or firms. So it’s less likely to be a microeconomics topic.
Option 2: 'Did stimulus checks decrease unemployment?' This asks about the effect of fiscal policy on unemployment, which is a macroeconomic policy impact question rather than a micro-level analysis of individual markets, prices, or firm behavior.
Option 3: 'What happens when central banks decrease interest rates?' This is a monetary policy topic, again macro in scope, concerning the overall economy and financial conditions rather than how specific markets allocate resources.
Option 4: 'Why do Boeing and Airbus dominate the civil aircraft manufacturing market?' This is a question about market structure, competition, and firm dynamics within a specific industry, which are core microeconomic concerns.
From these assessments, the option about Boeing and Airbus fits microeconomics best because it deals with how a market is organized and why dominant players emerge, a central microeconomic theme.
Moving to part (b), the scenario discusses elasticities for tax incidence. The formula given is for the share borne by consumers: Cs share = |Ed| / (|Es| + |Ed|). Here, |Ed| = 1.25 and |Es| = 1.25.
Compute the denominator: |Es| + |Ed| = 1.25 + 1.25 = 2.50. Then the consumer share is 1.25 / 2.50 = 0.5, which is 50%. This aligns with the standard tax incidence result when demand and supply elasticities are equal in absolute value.
Now, evaluating the remaining options for the numeric part:
- 25% would imply a much smaller consumer burden, inconsistent with the given symmetric elasticities where both sides share the tax burden equally.
- 20% would similarly understate the consumer portion and does not fit the ratio calculation.
- 80% would imply a dominant consumer burden far beyond what the elasticity ratio yields in this symmetric case.
Thus, the reasoning shows that the 50% option correctly reflects the computed share, while the other percentages misrepresent the incidence given the elasticities.
In summary, the microeconomics question in (a) points toward the industry structure topic (Boeing and Airbus), and the elasticity problem in (b) yields a 50% consumer tax burden due to equal absolute elasticities for supply and demand. The incorrect macro-focused options in (a) fail to address micro-level market structure, and the incorrect numeric choices in (b) contradict the ratio calculation with the provided elasticities.

ECON3200001.1251 Midterm Exam I

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