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Suppose that the market equilibrium price for a good is $1. A nonbinding price ceiling in this market will result in a price set at

Market for used cars: Demand: Qd = 154,000 - 86 P Supply: Qs = -100 + 14 P What would be the equilibrium price for used cars?

$1,541

Use the following information to answer the questions that follow. Market for used cars: Demand: Qd = 154,000 - 86 P Supply: Qs = -100 + 14 P What would be the equilibrium price for used cars?

$1,541

What is the equilibrium price in the market for public transportation? Demanded 86,000 Supplied 86,000

$1.25

Muddy's Bakery and Lilly's Sweetshop both sell cupcakes. The market price of one chocolate cupcake is $2.50. Muddy's is willing to sell a cupcake for as little as $1.65; Lilly's is willing to sell a cupcake for as little as $1.75. What is the total producer surplus for the two firms?

$1.60

Consider the market for socks. The current price of a pair of plain white socks is $5.00. Two consumers, Jeff and Samir, are willing to pay $7.25 and $8.00, respectively, for a pair of plain white socks. Two sock manufacturers are willing to sell plain white socks for as little as $4.00 and $4.15 per pair. How much is total producer surplus in this market?

$1.85

You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is performing on the same night and is your next best alternative activity. Tickets to see Dylan cost $40. On any given day, you would be willing to pay up to $50 to see Dylan. Assume there are no other costs of seeing either performer. Based on this information, what is the opportunity cost of seeing Eric Clapton?

$10

Jamal is willing to pay $85 for a new jacket that sells for $70. Eddie is willing to pay $65 for that same jacket. What is the total consumer surplus for Jamal and Eddie?

$15

In the figure above, if the government imposes a price floor on wheat at $5 and agrees to purchase any surpluses, how much will the government be forced to spend?

$15 million

Suppose that the equilibrium price of a mountain bike is $250. The government decides that people have a right to affordable mountain biking. To protect this new right, government passes a law setting a maximum price of $150 for a bike. As a result of the legislation, and in the absence of a black market, the price of a mountain bike will be

$150

Many consumers will be unable to buy the good at a price ceiling of $0.50 because of a shortage. However, they may still be able to purchase the good at the price of

Sellers who are unable to sell their good at a price floor of $6, may still be able to sell their good at a price of

What will be the amount of government expenditure required if a price floor for corn is set at $4.50 and the government agrees to purchase the amount of disequilibrium?

$202,500

Bob is willing to pay $65 for a new pair of shoes. Bill is willing to pay $50 for the same shoes. The shoes have a price of $45. What is the total consumer surplus for Bob and Bill?

$25

MJM Products, Inc., designs and sells flannel jackets. The company is willing to sell a men's flannel jacket for as little as $45. Its main competitor is RL Outriggers, which is willing to sell the same men's flannel jacket for as little as $40. The current market price of that type of jacket is $57. What is the total producer surplus for the two firms?

$29

What would be the equilibrium price in the market for corn? Demanded 169,000 Supplied 169,000

$3.50

Say Sarah was choosing between three alternatives: working on her job that pays her $20; writing a term paper wheich she values at $10; or going out with a friend, which she values at $30. The opportunity cost of writing the term paper is:

$30.

Market for a new hardcover book: Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P What would be the equilibrium price for hardcover books?

$35

Use the following information to answer the questions that follow. Market for a new hardcover book: Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P What would be the equilibrium price for hardcover books?

$35

Say John was choosing between 3 alternatives: going to the beach, which he values at $40; washing his car, which he values at $20; or going out with a friend, which he values at $60. The opportunity costs of going out with a friend is:

$40

Suppose Sarah was considering between buying a burger or a pizza. She would be willing to pay $10 for the pizza, which costs around $5. The opportunity costs of buying a burger would be:

Say Sarah was choosing between three alternatives: working on her job that pays her $20; writing a term paper which she values at $40; or going out with a friend, which she values at $50. The opportunity costs of writing the term paper is:

$50.

A friend comes up to you and offers to give you a free ticket to the local professional team's baseball game that night. You decide to attend the game. The game takes 5 hours and costs you $15 for transportation. If you had not attended the game, you would have worked at your part-time job for $8 an hour. What is the cost to you of attending the game?

$55

In the table above, at what price level does the labor market reach equilibrium? Wage Rate $6 Labor demanded 153,300,020 Labor supplied 153,300,020

$6.00

A college student is faced with a difficult decision of how to spend one hour tonight. She could babysit her professor's child at an hourly wage of $7, she could work at the college library at a wage of $6, or she could finish her economics homework assignment. If she chooses to complete her homework assignment, she has incurred an opportunity cost equal to:

$7.

$7.10

Based on the infographic, what is the minimum amount employees can be paid by law in the state of Wyoming?

$7.25/hour

Refer to the accompanying figure. At what price would there be the LEAST pressure to form a black market?

Say John was choosing between three alternatives: going to the beach, which he values at $50; washing his car, which he values at $100; or going out with a friend, which he values at $80. The costs of washing his car is:

$80

Using the table below, calculate total consumer surplus for Beanie, Mitch, and Frank if the price of the textbook is $110. Beanie: $200 Mitch: $150 Frank: $100

-$130 -Consumer surplus is calculated as the difference between a consumer's willingness to pay and the price that he or she actually pays. For Beanie and Mitch, consumer surplus is calculated as follows Beanie: $200 - $110 = $90 Mitch: $150 - $110 = $40 For Frank, his willingness to pay ($100) is lower than the price ($110), so he does not buy the textbook; therefore, he does not receive any consumer surplus. The total consumer surplus is Beanie's plus Mitch's, which equals $130.

Andrew paid $30 to buy a potato cannon, a cylinder that shoots potatoes hundreds of feet. He was willing to pay $45. When Andrew's friend Nick learns that Andrew bought a potato cannon, he asks Andrew if he will sell it for $60, and Andrew agrees, since he would have sold it for $45. Nick is thrilled, since he would have paid Andrew up to $80 for the cannon. Andrew is also delighted. What is Andrew's original consumer surplus?

-$15 -The consumer surplus from the original purchase is equal to Andrew's willingness to pay minus the price that he actually paid, namely $45-$30 = $15.

-$15 -The producer surplus from the resale is equal to $60-$45 = $15, since Andrew valued the cannon at $45 but received a price of $60 for it.

-$20 -The consumer surplus from the resale is equal to $80-$60 = $20, since Nick's willingness to pay was $80, but he actually paid $60.

-$35 -The consumer surplus from the resale is equal to $80-$60 = $20, since Nick's willingness to pay was $80 but he actually paid $60. The producer surplus from the resale is equal to $60-$45 = $15, since Andrew was willing to sell the cannon at $45 but received a price of $60 for it. Therefore, the total surplus generated by the resale is $20+$15 = $35.

Austin and Erin are willing to pay $10 and $9, respectively, for a ticket to a screening of a new movie. What is the total consumer surplus for both Austin and Erin if the market price of a ticket is $6?

-$7 -The total consumer surplus is the amount of consumer surplus for every individual added together. In this market we have two consumers with willingness to pay of $10 and $9. Subtract the market price from each individual's willingness to pay in order to find the consumer surplus for that individual.

The table below shows the willingness of three people to sell their tutoring services. Calculate the producer surplus for Frank if the price of the tutoring is $18 per hour. Frank willingness to sell: $10/hr

-$8/hr -If Frank is willing to tutor for a minimum of $10/hr and he receives $18/hr, he receives $8/hr more than the minimum price at which he is willing to sell tutoring services. Therefore, he receives a producer surplus of $8/hr.

Look at the provided figure. What area(s) represent consumer surplus after the tax (select all that apply)?

-A -the top of the triangle

Look at the provided figure. What area(s) represent the tax revenue after the tax (select all that apply)?

-B,C -middle rectangles

Look at the provided figure. What area(s) represent producer surplus before the tax (select all that apply)?

-C,D,F -the bottom half of P*

Look at the provided figure. What area(s) represent producer surplus after the tax (select all that apply)?

-D -the bottom triangle

Look at the provided figure. What area(s) represent consumer surplus before the tax (select all that apply)?

-E,B,A -the top half of P*

Look at the provided figure. What area(s) represent the deadweight loss after the tax (select all that apply)?

-E,F -just the tip

Is the following statement true or false? Provide the correct reason: A tax that raises no revenue for the government cannot have any deadweight loss.

-False. A tax can become so large that production of the good decreases to zero.

If you were willing to pay $3.05 for a gallon of milk purchased at the grocery store but were required to pay only $2.05, you have gained a refund of $1.00 from the clerk a consumer surplus amounting to $1.00 a producer surplus amounting to $1.00 None of these answers are true.

-a consumer surplus amounting to $1.00 -Consumer surplus is defined as the difference between your willingness to pay for a good and the price that you actually pay for it. In this case, that's $3.05 minus $2.05, or $1.00.

The difference between the willingness to pay for a good and the price that is paid to get it is producer surplus willingness to sell consumer surplus welfare economics

-consumer surplus -A consumer's willingness to pay is the maximum price a consumer will pay for a good. Consumer surplus is the difference between the willingness to pay for a good and the price that is paid to get it

If the government wants to minimize the deadweight loss of taxation, which of the following items are good candidates for an excise tax (select all that apply)? emergency plumber services Coca-Cola insulin food at restaurants

-emergency plumber services -insulin

The difference between the willingness to sell a good and the price that the seller receives for it is consumer surplus welfare economics willingness to pay producer surplus

-producer surplus -A seller's willingness to sell is the minimum price the seller will accept to sell a good or service. Producer surplus is the difference between the willingness to sell a good and the price that the seller receives.

Which of the following are characteristics of an efficient market? Select all that apply. Producer surplus and consumer surplus are equal Both producer and consumer surplus are greater than zero Total surplus (aka social welfare) is maximized. Quantity supplied equals quantity demanded. Deadweight loss equals zero. Willingness to pay exceeds willingness to sell at the margin. Willingness to sell exceeds willingness to pay at the margin. There is a tax. There is a price ceiling. There is a price floor.

-quantity supplied equals quantity demanded -deadweight loss equals zero -total surplus (aka social welfare) is maximized -Markets are efficient (meaning that social welfare is maximized) at the equilibrium point. At the equilibrium point, quantity supplied will equal quantity demanded and deadweight loss will equal zero. Anything that moves the market away from the equilibrium point will reduce social welfare. Taxes, price ceilings, and price floors are artificial mechanisms that keep the market from reaching equilibrium and thereby generate deadweight loss. When the market is efficient, willingness to pay equals willingness to sell at the margin.

shift from D1 to D2.(SHIFT OUT-RIGHT)

. Refer to the accompanying diagram. An increase in the number of buyers would cause the demand curve to:

Use the following information to answer the questions that follow. Market for flat-screen TVs: Demand: Qd = 2,600 - 5 P Supply: Qs = -1,000 + 10 P What would be the quantity demanded if a price floor is set at $300? Hint: you need to confirm whether or not the price control is binding.

1,100

Market for flat-screen TVs: Demand: Qd = 2,600 - 5 P Supply: Qs = -1,000 + 10 P What would be the equilibrium quantity for flat-screen TVs?

1,400

Use the following information to answer the questions that follow. Market for flat-screen TVs: Demand: Qd = 2,600 - 5 P Supply: Qs = -1,000 + 10 P What would be the quantity demanded if a price floor is set at $100? Hint: you need to confirm whether or not the price control is binding.

1,400

If P = $8 and MC = $5 + 0.2Q, the competitive firm's profit-maximizing level of output is:

Market for used cars: Demand: Qd = 154,000 - 86 P Supply: Qs = -100 + 14 P What would be the quantity supplied if a price floor is set at $100?

21,474

Use the following information to answer the questions that follow. Market for used cars: Demand: Qd = 154,000 - 86 P Supply: Qs = -100 + 14 P What would be the quantity supplied if a price floor is set at $100? Hint: you need to confirm whether or not the price control is binding.

21,474

Market for used cars: Demand: Qd = 154,000 - 86 P Supply: Qs = -100 + 14 P What would be the quantity supplied if a price floor is set at $2,000?

27,900

Use the following information to answer the questions that follow. Market for used cars: Demand: Qd = 154,000 - 86 P Supply: Qs = -100 + 14 P What would be the quantity supplied if a price floor is set at $2,000? Hint: you need to confirm whether or not the price control is binding.

27,900

Market for a new hardcover book: Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P What would be the equilibrium quantity for hardcover books?

Use the following information to answer the questions that follow. Market for a new hardcover book: Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P What would be the equilibrium quantity for hardcover books?

If Newburgia's economy is currently producing at point Y, what is the opportunity cost of moving to point X?

5 million tons of paper.

Market for used cars: Demand: Qd = 154,000 - 86 P Supply: Qs = -100 + 14 P What would be the quantity demanded if a price ceiling is set at $1,000?

68,000

What is the quantity demanded when the price floor is $0.75 in the market for public transportation?

86,000

Market for a new hardcover book: Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P What would be the quantity supplied if a price floor is set at $50?

What is the incentive to create a black market when a binding price ceiling exists?

A black market emerges because buyers who want to have a low opportunity cost are seeking out the product.

What is the incentive to create a black market when a binding price floor exists?

A black market emerges because sellers need a way to dispose of surplus product

What is the incentive to create a black market when a binding price floor exists?

A black market emerges because sellers need a way to dispose of surplus product.

is represented by a movement along the supply curve.

A change in quantity supplied:

shift of the demand curve to the left. d. movement along the demand curve to the left.

A decrease in demand is represented by a:

is a TABLE representing the relationship between the price of a good or service and the quantity demanded.

A demand schedule:

A minimum wage will create unemployment A. if the minimum wage is set above the equilibrium wage. B. always. C. if the minimum wage is set below the equilibrium wage. D. if the minimum wage is below the federal poverty standard.

A minimum wage will create unemployment if the minimum wage is set above the equilibrium wage as a surplus of labor is made available at this inefficiently high price. Points Earned: 1/1 Correct Answer: A

A simplified representation that is used to study a real situation is called:

A model

A claim that can be tested is ?

A positive statement

If the government wants to ensure that farmers receive a fair price for their produce so that they continue to produce agricultural products, they would A. establish a price floor for their products, above equilibrium. B. establish a price ceiling for their products, below equilibrium. C. allow prices to adjust to equilibrium. D. take no action and allow market forces to adjust.

A price floor is a minimum price allowed by law, if current market prices are below that point, the price must rise to the level of the price floor. The higher price will induce farms to keep production high, but will reduce the quantity demanded for their crops. Points Earned: 1/1 Correct Answer: A

When are political connections and "who you know" more likely to be important? A. in a competitive market B. in a price-controlled market C. in an unregulated market D. None of these answers.

A price-controlled market will lead to more corruption and bribes since wheeling-and-dealing can lead to profitable opportunities. Points Earned: 1/1 Correct Answer: B

What is the long-run consequence of a price ceiling law?

A shortage will continue to exist and will grow larger over time

7. If the production possibility frontier is a straight line, which of the following is true?

A) Opportunity costs are constant.

15. "Steel tariffs will prevent job losses in the steel industry" is a positive statement.

A) True

the QUANTITY demanded falls when the price rises, and the quantity demanded rises when the price falls.(INVERSELY PROPORTIONAL)

According to the law of demand, all other things being equal,

A benefit or cost experienced by someone who is not an producer or consumer of a good or sevice is?

An Externality

Which areas represent the amount of consumer surplus lost due to the tax?

B + F

14. If the United States is more productive than Mexico in all lines of production, then the United States cannot benefit from trade with Mexico.

B) False

17. If they spend all night writing computer programs, Laurence can write 10 programs while Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 while Carrie Anne can make 4. Given this information and supposing Laurence and Carrie Anne have constant opportunity costs, we know that:

B) Laurence has an absolute advantage in both programs and sunglasses.

10. Dr. Colgate is a dentist who employs an assistant, Ms. Crest. If Dr. Colgate worked all day at the front desk, she could answer 40 phone calls. If she worked all day with patients, she could clean the teeth of 40 patients. If Ms. Crest worked all day at the front desk, she could answer 60 phone calls. If she worked all day with patients, she could clean the teeth of 20 patients. Which of the following is true?

B) Ms. Crest has a comparative advantage in answering phones.

The opportunity cost of production:

B) is what you give up to produce the good.

19. Efficient production exists when the economy is:

B) operating on its production possibility frontier.

What must lie above the the free market equilibrium price?

Binding Price floor

Apartment rent control in New York City is an example of

Binding price ceiling

What would you expect the consequences to size and quality would be for a product sold under a binding price ceiling?

Both the quality and the size of the product will decrease

What would you expect the consequences to size and quality would be for a product sold under a binding price ceiling?

Both the quality and the size of the product will decrease.

11. Assume that Colombia gives up three motorcycles for each ton of coffee it produces, while Bolivia gives up seven motorcycles for each ton of coffee it produces.

C) Colombia has a comparative advantage in coffee production and should specialize in coffee production.

13. Which of the following is an example of a positive statement?

C) The federal government pays for 46% of U.S. health care costs.

8. Assume an economy is operating on its production possibility frontier, which shows the production of military and civilian goods. If the output of military goods is increased, the output of civilian goods:

C) must decrease.

18. Technological improvements will:

C) shift the production possibility frontier outward.

12. The two flows represented in the circular-flow diagram are:

C) the flow of money and the flow of goods and services.

What is the area that represents the deadweight loss after the imposition of the price ceiling?

C+E

When looking at a graph, the area under the demand curve and above market price is defined as?

Consumer Surplus

what is the difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called?

Consumer surplus

What happens to the amount of consumer surplus and producer surplus when the supply of scarves suddenly declines (shifts left)?

Consumer surplus declines and producer surplus declines

How do consumers who are subject to a binding price ceiling respond as the time frame shifts from the short run to the long run?

Consumers are increasingly willing to substitute away from the good, and their elasticity of demand becomes more elastic.

If the local government tells gas stations that they are not allowed to change the price of gas for three weeks during hurricane season, what will be the consequence?

Consumers will be unable to buy all the gas they want at the temporary price ceiling price.

If the government makes it illegal for the price of a gallon of milk to be sold at a price higher than $5, we call this policy a ____________________ and expect that it was targeted to benefit __________________. A. price floor; consumers B. price ceiling; consumers C. price floor; producers D. price ceiling; producers

Correct Answer: B

Government decides it wants to reduce smoking among its citizens. It raises the price of cigarettes via a tax that is then returned to the public so that each persons income is the same before and after the tax. Let there be two goods, cigarettes and chocolates (i.e., everything else but cigarettes). Prior to the introduction of the tax, the average citizen would have a U= sqrt(X*Y) with X = 2, cigarettes and Y = 2, chocolates. After the tax consumption of cigarettes falls to 1 and chocolates go to 3. The government thinks its campaign has been highly successful. In reality A. the govt has achieved its purpose and everyone will be better off. B. utility will have fallen by the amount of government well-being. C. utility has fallen from 2 to sqrt(3) so there is deadweight loss. D. there is no deadweight loss just a transfer of utility from smokers to society as a whole.

Correct Answer: C

If the current market price of baseballs is $5 and the government imposes a price ceiling of $4, what are the expected market results? A. The market price will be $5 and there will be no change in the market quantity. B. The market price will be $4 and there will be an increase in the market quantity. C. The market price will be $4 and there will be a decrease in the market quantity. D. The market price will be $4 and there will be no change in the market quantity.

Correct Answer: C

If the role of govt is to deal with externalities, how can it do this without incurring deadweight loss? A. It faces a difficult challenge here leading economists to recommend government intervention very sparingly. B. It must rely on lump sum transfer to prevent distorting decisions at the margin. C. It must balance deadweight loss with the benefits conferred by the intervention. D. All answers are correct.

Correct Answer: D

If the government forced all sellers of loaves of bread to sell at a price equal to half the current price, what would happen to consumer surplus? To keep it simple, assume that people wait in line to get the bread they need. A. Consumer surplus would fall. B. Consumer surplus would rise. C. Consumer surplus would not change with this government policy. D. There is not enough information in the question to determine what would happen to consumer surplus.

Correct. Binding price ceilings reduce consumer surplus because they limit trade between buyers and suppliers. Points Earned: 1/1 Correct Answer: A Your Response: A

Harry is lucky enough to get a rent-controlled apartment for $300 per month. The market rent on such an apartment is $3,000 per month. Harry himself values the apartment at $2,000 per month, and he'd be quite happy with a regular $2,000 per month New York apartment. If he stays in the apartment, how much consumer surplus does he enjoy? A. 0 B. $2000 C. $3000 D. $1700

Correct. Harry would be willing to pay $2,000 per month for the apartment but only pays $300 per month. The difference in the two amounts is the consumer surplus. He can spend that amount elsewhere if he wishes. Points Earned: 1/1 Correct Answer: D

Between 2000 and 2008, the price of oil increased from $30 per barrel to $140 per barrel, and the price of gasoline in the United States rose from $1.50 per gallon to over $4.00 per gallon. Unlike the 1970s when oil prices spiked, there were no long lines outside the gas stations for the most part. Why? A. Because price ceilings corrected for the problem of potential long lines. B. Because the government intervened to supply more gasoline to the markets. C. Because the gasoline market was mostly unregulated during the period 2000 and 2008. D. Because bribes were very common in the gasoline market in the period 2000 to 2008 even with strict government regulation. This eliminated long lines.

Correct. In the 1970s the government imposed a price ceiling, which created long lines outside the gas stations. They did not do this in the period 2000 to 2008 (with the exception of the state of Georgia in 2008). Points Earned: 1/1 Correct Answer: C

On January 31, 1990, the first McDonald's opened in Moscow, capital of the then-Soviet Union. Economists often described the Soviet Union as a "permanent shortage economy," where the government kept prices permanently low in order to appear "fair." An American journalist reported that the customers seemed most amazed at the "simple sight of polite shop workers... in this nation of commercial boorishness". Why were most Soviet shop workers "boorish" while the McDonald's workers in Moscow were "polite"? A. Because a price floor reduces the quality. B. Because a price ceiling reduces the quality. C. Since prices were in equilibrium in the Soviet Union, sellers have more customers than they need or want. In this case, customers can be treated poorly without any great consequence. D. All of these answers are correct.

Correct. Ordinarily, sellers have an incentive to please their customers like McDonald's tries to do. But when prices are held below market levels, like in the Soviet-Union, sellers have more customers than they need or want. In this case, customers can be treated poorly without any great consequence. Points Earned: 1/1 Correct Answer: B Your Response: B

When a binding price ceiling is in place, what is the effect on quantity demanded and quantity supplied? A. Quantity demanded will be equal to quantity supplied. B. Quantity demanded will be larger than quantity supplied. C. Quantity demanded will be smaller than quantity supplied. D. None of these answers are correct.

Correct. Price ceilings create a shortage of the good. Points Earned: 1/1 Correct Answer: B Your Response: B

How might an increase in the minimum wage impact U.S. teenagers? A. Firms would hire more teenagers since their wage has now increased. B. Firms would hire fewer teenagers since the minimum wage has now increased. C. A minimum wage is a price ceiling. An increase in this price control has no impact on U.S. teenagers. D. None of these answers.

Correct. Since hiring teenagers would become more costly for firms, unemployment among teenagers would probably increase. Points Earned: 1/1 Correct Answer: B Your Response: B

We noted in the chapter that in the 1970s price floors on airline tickets caused wasteful increases in the quality of airline trips. Does the minimum wage cause wasteful increases in the quality of workers? In other words, how are minimum-wage workers like airplane trips? A. Minimum-wage workers will accept to work for a lower wage just like airplane companies accepted lowered their price from 1938 to 1978. B. Minimum-wage workers would demand that the price ceiling imposed on them be raised to the equilibrium wage just like airplane companies did from 1938 to 1978. C. Minimum-wage workers would invest in "quality waste" such as fancy clothes. D. None of these answers are correct.

Correct. Since minimum-wage workers are competing with one another to find employment. They will invest in frills that potential employers possibly like but would not be willing to pay for. Points Earned: 1/1 Correct Answer: C

f a government decides to make health insurance affordable by requiring all health insurance companies to cut their prices by 30 percent, what will probably happen to the number of people covered by health insurance? A. This would be a form of price ceiling and the number of people covered by health insurance would decrease. B. This would be a form of price ceiling and the number of people covered by health insurance would increase. C. This would be a form of price floor and the number of people covered by health insurance would decrease. D. This would be a form of price floor and the number of people covered by health insurance would increase.

Correct. The price ceiling would create a shortage of health insurance. Points Earned: 1/1 Correct Answer: A

Minimum wage is a _______, and rent control is a ________. A. They are both examples of price floors. B. They are both examples of price ceilings. C. price ceiling; price floor D. price floor; price ceiling

Correct. These are both examples of price controls. Minimum wage is an example of a price floor, while rent control is an example of a price ceiling. Points Earned: 1/1 Correct Answer: D Your Response: D

The Canadian government has wage controls for medical doctors. To keep things simple, let's assume that they set one wage for all doctors: $100,000 per year. It takes about 6 years to become a general practitioner or a pediatrician, but it takes 8 or 9 years to become a specialist like a gynecologist, surgeon, or ophthalmologist. If you have no significant preference in either direction, what kind of doctor would you want to become under this system? A. A general practitioner since they earn more than specialists. B. A specialist since they have to do more years of schooling to earn the same amount as a general practitioner. C. A surgeon since they earn more than all other types of doctors. D. A general practitioner since it takes less time to earn the same amount of money as a specialist.

Correct. This price control would create an incentive to become a general practitioner and a disincentive to become a specialist because of the concept of opportunity cost. A specialist has to sacrifice more time than a general practitioner, yet they both make the same salary. Points Earned: 1/1 Correct Answer: D

During a crisis such as Hurricane Katrina, governments often make it illegal to raise the price of emergency items like flashlights and bottled water. In practice, this means that these items get sold on a first-come, first-served basis. If a person has a flashlight that she values at $5, but its price on the black market is $40, what gains from trade are lost if the government shuts down the black market? A. $35 B. $40 C. $5 D. None of these answers.

Correct. When price ceilings are imposed on markets, mutually profitable trades that would benefit both the supplier and consumer are made illegal. Points Earned: 1/1 Correct Answer: A

Business leaders often say that there is a "shortage" of skilled workers, and so they argue that immigrants need to be brought in to do these jobs. How do unregulated markets cure a "labor shortage" when there are no immigrants to boost the labor supply? A. If the labor market were to be unregulated, wages would increase in order to get rid of the shortage. This would give an incentive to workers to provide more labor hours. B. If the labor market were to be unregulated, wages would decrease in order to get rid of the shortage. This would give an incentive to workers to provide more labor hours. C. The government would have to impose a price floor in the labor market. D. None of these answers.

Correct. With a wage increase, the quantity supplied of labor hours would increase and the quantity demanded of labor hours would decrease. Equilibrium would be reached. Points Earned: 1/1 Correct Answer: A Your Response: A

The local city council passes a law that establishes a maximum rent for apartments in your city. Which of the following is likely to happen?

Current renters will sublet to others at prices above the legal maximum.

16. Of the following statements, which reflect(s) a normative view? I. The United States should increase the minimum wage to $10 per hour. II. There is a federal minimum wage in the United States. III. The federal minimum wage in the United States is less than $10 per hour.

D) Statement I reflects a normative view.

20. The slope of a typical production possibility frontier is:

D) negative.

9. As long as people have different ________, everyone has a comparative advantage in something.

D) opportunity costs

what is the reduction in economic surplus as a result from not being in competative equillbrum?

Deadweight loss

Why does a shortage that occurs under a binding price ceiling decrease over time?

Demand and supply both become more elastic.

What are simplified versions of reality?

Economic models

Which of the following statements is concerned with efficiency rather than equity?

Excise taxes tend to raise prices for consumers

Which of the following statements is concerned with efficiency rather than equity?

Excise taxes tend to raise prices for consumers.

If a price is low enough to attract buyers, it will always encourage producers to sell.

False

Say John was choosing between 3 alternatives: going to the beach, washing his car, or going out with a friend. The opportunity cost of going out with a friend is:

Going to the beach or washing his car

Which of the following is a normative question?

How will oil exploration be affected if the government imposes price controls on gasoline?

What will I do differently as a seller in the black market in the long run?

I will substitute away from producing the product

What will I do differently as a seller in the black market in the long run?

I will substitute away from producing the product.

What will I do differently as a buyer in the black market in the long run?

I will substitute away from the product because in the long run I can find substitutes.

Imagine that France adopts a minimum wage law that is significantly above the current equilibrium. As a result, many firms choose to lay off employees, as they cannot afford the new, higher rate. What is likely to take place in the aftermath of this policy? A. a shortage of workers, as firms begin demanding a significant number of new employees. B. a black market, as employees will begin selling their services off the books, below the market rate. C. an increase in the demand of employees, to take advantage of the new income level of the country. D. a decrease in inflation, as good prices drop.

If a price floor is set at a level above equilibrium, causing a surplus of labor to exist, some individuals in this population will offer their services at below market rate, in the black market. Points Earned: 1/1 Correct Answer: B

In rich countries, governments almost always set the fares for taxi rides. The price for taxi rides is the same in safe neighborhoods and in dangerous neighborhoods. If the taxi price controls were ended, what would probably happen to the price and quantity of cab rides in dangerous neighborhoods? A. The price and quantity of cab rides in dangerous neighborhoods would probably decrease with the removal of the price floor. B. The price and quantity of cab rides in dangerous neighborhoods would probably increase with the removal of the price floor. C. The price and quantity of cab rides in dangerous neighborhoods would decrease with the removal of the price ceiling if the previous price controls were binding. D. The price and quantity of cab rides in dangerous neighborhoods would probably increase with the removal of the price ceiling.

If the labor market were to be unregulated, wages would increase in order to get rid of the shortage. This would give an incentive to workers to provide more labor hours. Points Earned: 1/1 Correct Answer: D

the DEMAND for all of that good's substitutes will increase.(DIRECT)

If the price of a good increases, holding all else constant,

Which of the following is true, holding all other things constant, when comparing regions that impose a higher minimum wage to regions that impose a lower minimum wage?

In regions with the lowest minimum wage, the price control is non-binding; in the regions with the highest minimum wage, the price control is binding

Which of the following is true, holding all other things constant, when comparing regions that impose a higher minimum wage to regions that impose a lower minimum wage?

In regions with the lowest minimum wage, the price control is nonbinding; in the regions with the highest minimum wage, the price control is binding.

Which of the following describes the difference between "scarcity" and "shortage"?

In the economic sense, almost everything is scarce. A shortage of a good or service occurs when the quantity demanded is greater than the quantity supplied at the current market price.

RESOURCES that firms use in the production of final goods and services.

Inputs are:

Which of the following is a correct statement about a minimum wage law?

It causes prices to rise as producers pay more for labor

Which of the following is a correct statement about a minimum wage law?

It causes prices to rise as producers pay more for labor.

Say you took an average of 20 minutes to answer and ECON problem, and 40 minutes to answer a MATH problem. If you had a limited time left to study, your best strategy would be to solve:

It depends

Say you took an average of 5 minutes to answer an ECON problem, and 2 minutes to answer a MATH problem. If you had a limited time left to study, your best strategy would be to solve:

It depends

Imagine you find yourself in a heat wave and your air conditioner has broken. Unable to find a new one at the store because of a price gouging law, you purchase an air conditioner on the black market. What role did the price gouging law have?

It increased the incentive of individuals to supply the good on the black market

It increased the incentive of individuals to supply the good on the black market.

Why does a surplus exist under a binding price floor?

It makes the price so high that the quantity supplied exceeds the quantity demanded in the legal market

Why does a surplus exist under a binding price floor?

It makes the price so high that the quantity supplied exceeds the quantity demanded in the legal market.

Why do shortages develop under a binding price ceiling?

It makes the price so low that the quantity demanded exceeds the quantity supplied in the legal market

Why do shortages develop under a binding price ceiling?

It makes the price so low that the quantity demanded exceeds the quantity supplied in the legal market.

Suppose that the federal government places a binding price floor on chocolate. To help support the price floor, the government purchases all chocolate that consumers do not buy. If the price floor remains in place for a number of years, what do you expect to happen to the quantity of chocolate demanded by consumers?

It will decrease.

It will increase.

The market is currently at market equilibrium. If a binding price ceiling of P1 is imposed, by how much would the quantity supplied change?

It would decrease by 18,000 units

If Jim can sell paper at a lower opportunity cost than Dwight can, then?

Jim has a comparative advantage in paper sales

Suppose that Sheldon and Leonard can either run errands or wash dishes. Their maximum output per hour is listed in the following table. Given the same quantity of resources (time), how will they specialize and what terms of trade (relative price ratio) allow both to consume outside their own production possibilities frontier (PPFs)?

Leonard specializes in running errands and Sheldon in washing dishes; they trade at 1 errand per 30 dishes washed.

In perfectly competitive markets, profits are maximize when:

MR = MC

The equilibrium Price is INDERterminate and equilibrium Quantity goes DOWN.

Many consumer items eventually go out of style, and because fewer people want these items, demand for them drops. When this happens, we usually see production of these items stop. What happens to the equilibrium price and equilibrium quantity in a market like this?

In economics what terms means additional?

Marginal

Kelly is an architect, and she is trying to decide whether to hire Mike, a draftsman, to assist with her work. Kelly could hire Mike for $20 per hour, but it would take him three times as long to complete a task as it takes Kelly. Kelly is able to earn $90 per hour and has more architectural jobs than she is able to handle. Which of the following is true?

Mike should be hired at the $20 per hour.

Two neighbors, Molly and Sandy, are separated by a white picket fence. Each neighbor has a garden that grows tomatoes and peppers. How could Molly and Sandy gain from trade?

Molly could trade peppers to Sandy in exchange for tomatoes if Molly was the more efficient grower of peppers.

Suppose you live in a community with no price controls. What do you expect to happen if your town borders a community where there is a binding price floor on most products?

More consumers would purchase the product in the community without a price floor.

Which of the following demonstrates how people respond to incentives to make themselves better off?

More students major in economics when they hear that salaries for economists are rising.

Let's say that you have a friend who was caught illegally buying a good on the black market. When the judge asks you to describe your friend's motivation as a buyer, which of the following would most likely be your reply?

My friend bought the good on the black market because a binding price floor made the good too expensive to purchase on the legal market and it was cheaper on the black market

My friend bought the good on the black market because a binding price floor made the good too expensive to purchase on the legal market and it was cheaper on the black market.

Let's say that you have a friend who was caught illegally selling a good on the black market. When the judge asks you to describe your friend's motivation as a seller, which of the following would most likely be your reply?

My friend sold the good on the black market because a binding price floor resulted in a surplus of the product in the legal market and he needed to get rid of the surplus.

Do all buyers benefit from a binding price ceiling?

No. A binding price ceiling benefits only some buyers because not all are able to obtain the good in the legal market.

Do all sellers benefit from a binding price floor?

No. A binding price floor benefits only some sellers because not all are able to sell as much as they would like in the legal market

Do all sellers benefit from a binding price floor?

No. A binding price floor benefits only some sellers because not all are able to sell as much as they would like in the legal market.

Pharmaceutical manufucters should not be allowed to patent their products so prescription should be more affordable normative or positive?

Normative statment

For a firm in perfectly competitive market equilibrium:

P = MC

In the long run, firms will offer supply at the point where P = MR = MC if:

P > AC

A key theme fundamental to all of economics is:

People have unlimited wants facing limited means to satisfy them.

Deadweight loss is the total of A. lost consumer and producer surplus when not all mutually profitable gains from trade are exploited. B. gained consumer and producer surplus when all mutually profitable gains from trade are exploited. C. lost consumer surplus when not all mutually profitable gains from trade are exploited. D. lost producer surplus when not all mutually profitable gains from trade are exploited. A deadweight loss is the total of lost consumer and producer surplus when not all mutually profitable gains from trade are exploited.

Points Earned: 1/1 Correct Answer: A

The previous two questions show that one of the essential roles of government in a market system is to A. protect property rights. B. maintain full employment so that thieves have something better to do. C. introduce welfare payments to keep thieves from stealing. D. reduce the growth of the money supply so that idle cash will not be laying around.

Points Earned: 1/1 Correct Answer: A

Raising the U.S. minimum wage to a "living wage" of $15 would likely have all of the following effects except an increase in A. unemployment among workers under age 25. B. number of entry-level jobs available. C. the prices of goods and services throughout the economy. D. an increase in pay for some workers.

Points Earned: 1/1 Correct Answer: B

The demand curve is p = 20 - 4q and the supply curve is p = q. If there is a price ceiling at 2, what is the deadweight loss? A. 8 B. 10 C. 6 D. 0

Points Earned: 1/1 Correct Answer: B

A thief breaks into a couple's house and steals $450. This A. is not a market transaction since coercion is involved. B. involves no deadweight loss since cash was stolen. C. is an example of a transfer of income. D. All answers are correct.

Points Earned: 1/1 Correct Answer: D

If the local citizens demand a living wage be paid to city employees, yet the economists on the city council think it is a bad idea, the best solution would be to A. make side-payment to the employees equal to the difference between the market and living wage times the number of hours worked. B. allow the wage rate to rise to half the distance (using the rule for the area of triangle) to the equilibrium. C. realize that economics doesn't have all the answers and grant the living wage request. D. make a lump-sum transfer.

Points Earned: 1/1 Correct Answer: D

The same thief comes back the next night and steals a family photo album he mistakes for a rare book. Now this A. is an example of deadweight loss since the photos are of no value to him but are to the couple. B. would involve no deadweight loss if he offered to sell the photos back to the family for an amount less than or equal to their marginal benefit of the photos. C. now a valid market activity since the family can decide or not to repurchase the photos. D. All answers are correct.

Points Earned: 1/1 Correct Answer: D

Rent control is an example of?

Price ceiling

Which of the following is not held constant as you move along the demand curve for peanut butter?

Price of peanut butter.

When normal price mechanisms cannot signal a problem, goods cannot flow to needed areas to adjust the market price, therefore creating a misallocation of resources. This scenario is created by A. price controls. B. equilibrium. C. misinformation. D. surpluses.

Prices serve as a signal to entrepreneurs - when price controls are implemented however, these signals are masked and therefore entrepreneurs cannot see the need to move products into the areas, thereby misallocating resources superfluously. Points Earned: 1/1 Correct Answer: A

The table lists the marginal cost of polo shirts by Marko's, a firm that specializes in producing men's clothing. If the market price of Marko's polo shirts is $18

Producer surplus will equal $22.

How do producers who are subject to a binding price ceiling respond as the time frame shifts from the short run to the long run?

Producers are increasingly willing to substitute away from producing the good, and their elasticity of supply becomes more elastic

How do producers who are subject to a binding price ceiling respond as the time frame shifts from the short run to the long run?

Producers are increasingly willing to substitute away from producing the good, and their elasticity of supply becomes more elastic.

Recently, the government imposed a rent ceiling at Ro. With rent control, the quantity supplied is Q1. Suppose apartment owners ignore the law and rent this quantity for the highest rent they can get on the black market. What is the highest rent they can get?

Firms entered the market.

Refer to the accompanying figure. What event would cause the supply curve to shift out?

Which of the following would be true in a city with rent-controlled apartments?

Rents for those fortunate enough to find an apartment are lower than rents in nearby cities that lack rent controls

Which of the following would be true in a city with rent-controlled apartments?

Rents for those fortunate enough to find an apartment are lower than rents in nearby cities that lack rent controls.

Mortimer loves sushi. He loves sushi so much that he asks his congressional representative to work for passage of a binding price ceiling law. Who would be affected by this law and how?

Some consumers would benefit from such a law because prices for sushi would be lower for those able to buy it in the legal market.

Assume that all fast-food restaurants employ many minimum wage workers. Suppose 20,000 people in Pennsylvania work in fast-food restaurants for the federal minimum wage of $7.25/hour. If the state of Pennsylvania increases its minimum wage to $9.00/hour, who will be better off? Who will be worse off?

Some minimum wage workers will be better off, some minimum wage workers will be worse off, and all fast-food restaurant owners will be worse off

increases as the consumer's income decreases.(INVERSE)

Something is an inferior good if the demand for the good:

Equilibrium price will be indeterminate and equilibrium quantity will go UP. (INFERIOR IS INVERSED Q&INC)

Spam is considered an inferior good. What would happen to the equilibrium price and quantity of Spam if income decreased and more firms started producing Spam?

Cs=

TB-TC

Ps=

TB-TC

The actual division of the burden of the tax between buyers and sellers in a market is?

Tax Incidence

Which of the following statements is concerned with equity rather than efficiency?

Tax rates on middle-class households are too high and should be reduced

increase.

Taxes cause the equilibrium price of a good to:

When the Smiths were shopping for their present home, the asking price from the previous owner was $250,000, which the Smiths were not willing to pay. After negotiations, the Smiths actually purchased the house for $239,000. Assuming that the Smiths and the sellers are rational people, we can conclude that:

The Smiths' marginal benefit from buying the house is less than $250,000 and at least equal to $239,000

If a good is subject to a binding price ceiling and you purchase it on the black market, what do you expect to happen to the availability of the good over time?

The availability of the good will fall over time as both the supply and demand curves become more elastic. (The shortage of the good will rise.)

You are the president of the United States. In an attempt to make gasoline prices cheaper, you have imposed a binding price ceiling on gas. What would you expect your critics to say?

The binding price ceiling will increase the likelihood that customers obtain needed gasoline on the black market.

You are a senator from Kansas who wants to help farmers. You have worked to encourage the passage of a law that would impose a binding price floor on wheat. What would you expect your critics to say?

The binding price floor will cause a surplus of wheat that farmers will be unable to sell

Suppose you live in a community with no price controls. What do you expect to happen if your town borders a community where there is a binding price floor on most products?

The black market in the community with a binding price floor would be larger

If Pepsi and Coke did NOT change their formula, holding all else constant, what do you think would have happened to the demand for these goods, assuming Pepsi and Coke were in a competitive market?

The demand curve for Pepsi and Coke would have shifted to the left, causing the price of both products to decrease and the profits for both companies to fall.

Butter and margarine are substitute goods. A tax on butter will have what effect on the market for margarine?

The demand for margarine will increase, causing its price to rise.

Which of the following concepts is more frequently associated with Adam Smith and his 1776 magnum opus "An Inquiry into the Wealth of Nations"?

The invisible hand theory.

In some countries, a binding price ceiling is placed on prescription medicines. What would you expect the prescription medicine market to be like in these countries?

The legal maximum price would mean that not all consumers will have access to prescription medicines

In some countries, a binding price ceiling is placed on prescription medicines. What would you expect the prescription medicine market to be like in these countries?

The legal maximum price would mean that not all consumers will have access to prescription medicines.

Based on the infographic, what are the minimum wages in Nebraska and Colorado in relation to the federal minimum wage?

The minimum wage in Colorado is higher than the federal minimum wage, while Nebraska's minimum wage is equal to the federal minimum wage.

Why is raising the minimum wage generally ineffective?

The minimum wage is usually set below the prevailing equilibrium wage and is frequently nonbinding.

How would an economist explain a teenager's continued unemployment where there exists a minimum wage?

The minimum wage law made it such that the quantity of labor willing to work at that wage was greater than the quantity of labor demanded at that wage

How would an economist explain a teenager's continued unemployment where there exists a minimum wage?

The minimum wage law made it such that the quantity of labor willing to work at that wage was greater than the quantity of labor demanded at that wage.

What will happen in a market where a nonbinding price ceiling is removed?

The price and quantity will not change in the legal market.

Suppose you live in a community with no price controls. What do you expect to happen if your town borders a community where there is a non-binding price floor on most products?

The price and the quantity sold in the community without a non-binding price floor will be the same as the price and quantity in the community with a non-binding price floor

Suppose you live in a community with no price controls. What do you expect will happen if your town borders a community where there is a nonbinding price ceiling on most products?

The price and the quantity sold in the community without a nonbinding price ceiling will be the same as the price and quantity in the community with a nonbinding price ceiling.

One strategy I might use to be elected mayor of a university town is to place a binding price ceiling on rent for student apartments. What will happen if I get elected and am able to pass such a law?

The price ceiling will cause students to sleep in their cars or to move in with their friends because they won't be able to find a place to live.

What will happen in a market where a non-binding price floor is removed?

The price or quantity of the product sold on the legal market will not change

What will happen in a market where a binding price ceiling is removed?

The products sold will improve in quality and become more plentiful

A binding price ceiling will have the following consequences:

The quantity demanded will always exceed the quantity supplied.

Lena and Jess are roommates. Lena hates to clean the bathroom. Jess will agree to clean the bathroom only if Lena vacuums the living room. This statement best represents this economic concept:

There are gains from trade.

Nate and Dylan are brothers. They have to mow the lawn and clean their rooms before they can go to the high school football game. Nate mows the lawn and Dylan picks up the rooms, and they make it to the football game on time. This statement best represents this economic concept:

There are gains from trade.

One parent picks up the child from day care while the other parent goes to the grocery store and begins to make dinner. This is an example of which principle at work?

There are gains from trade.

A nonbinding price floor has the following consequences:

There are no consequences to a nonbinding price floor.

If the price floor for corn is set at $5.00, what amount and type of disequilibrium will be present in the market for corn? Demanded 120,000 Supplied 223,000

There will be a surplus of 103,000

In the figure above, if the government imposes a price floor on wheat at $5, what would be the amount of disequilibrium?

There will be a surplus of 3 million

What will happen in a market where a binding price floor is removed?

There will be downward pressure on the prices

What will happen in a market where a binding price floor is removed?

There will be downward pressure on the prices.

If the price ceiling for corn is $2.50, what amount and type of disequilibrium would be present in the market for corn? Demanded 186,000 Supplied 125,000

There would be a shortage of 61,000

In the table above, if a minimum wage is established at $7.50, what would be the amount of disequilibrium in the labor market? Labor demanded 139,630,000 Labor supplied 159,800,000

There would be a surplus of labor of 20,170,000

As the time frame shifts from the short run to the long run, what happens to producers who are subject to a binding price floor?

They are increasingly willing to substitute away from producing the good, and the supply curve becomes more elastic.

As the time frame shifts from the short run to the long run, what happens to consumers who are subject to a binding price floor?

They are increasingly willing to substitute away from the good, and the demand curve becomes more elastic.

Why do government leaders impose price controls?

They are trying to ensure that a social goal is satisfied.

Which of the following is an accurate statement about the consequence of non-binding price ceilings?

They do not change the quantity of goods bought or sold in the legal market

Why are binding price floor laws passed?

They help producers receive higher prices for products sold in the legal market

Why are binding price floor laws passed?

They help producers receive higher prices for products sold in the legal market.

Why are binding price ceiling laws passed?

They make a good less expensive for those customers who are able to purchase the good in the legal market.

Tina, an economics student, was just named Miss Florida, based in part on her answer to the question of why price gouging laws should be relaxed in that state. Price gouging laws prevent prices from rising in a disaster, and operate as a price ceiling. Tina won because she gave which of the following answers?

They prevent customers who are willing to pay higher prices for needed products from doing so during a time of disaster, thereby making them suffer from the shortage that is created..

Tina, an economics student, was just named Miss Florida, based in part on her answer to the question of why price gouging laws (temporary binding price ceiling) should be relaxed in that state. Tina won because she gave which of the following answers?

They prevent customers who are willing to pay higher prices for needed products from doing so during a time of disaster.

what is equal to the sum of the consumer surplus and producer surplus

Total Economic Surplus

What are the point outside the Production Possibilities frontier (PPF)?

Unattainable

Scarcity in economics means:

We do not have sufficient resources to produce all of the goods and services we want.

Equilibrium price will be indeterminate and equilibrium quantity will go down.

What would happen to the equilibrium price and quantity for the market for cigarettes if the government increased the tax and a scientific study came out confirming that smoking cigarettes increased the rate of heart disease?

As a seller of a product subject to a binding price floor, you would be better off in which of the following situations?

You would be better off under a binding price floor because you could sell any of the resulting surplus to the government.

quantity supplied

a change in _______ is a movement along the supply curve

supply

a change in _____is a shift in the supply curve

decrease; decrease

a decrease in demand with no change in supply will lead to ______ in equilibrium quantity and ____ in equilibrium price

if an increase in income leads to an increase in the demand for peanut butter, then PB is?

a normal good

Refer to the graph above. If the current market price is $25, the market will achieve equilibrium by

a price decrease, decreasing the quantity supplied and increasing the quantity demanded

Suppose the government decides the Big Mac is an American tradition. To recognize the value of the Big Mac, government passes legislation making it illegal to sell a Big Mac for less than $8. The equilibrium price of a Big Mac is $4. This legislation is an example of

a price floor

price and quantity

a shift of a demand curve to the right all other things unchanged will increase equilibrium ____

Setting a price ceiling below the equilibrium price can result in

a shortage, where the quantity demanded exceeds the quantity supplied

a smaller number of mountain bikes sold than before the legislation

At a price floor of $6, this market is experiencing

a surplus

The government has imposed a price control for many agricultural products in an effort to support farmers. In the case of price floor P2 in the accompanying figure, how much of a disequilibrium in quantity exists?

a surplus of 30,000 units

Farm price supports are an example of a price floor, in this case the market for farm products. A binding price support will cause

a surplus of farm products

If a price floor is imposed at $15 per unit when the equilibrium market price is $12, there will be:

a surplus.

When a tax is imposed on some good, what usually happens to consumer and producer surplus? a. They both decrease. b. They both increase. c. Consumer surplus decreases and producer surplus increases. d. Consumer surplus increases and producer surplus decreases. e. They both fall to zero.

a. They both decrease.

The difference between the willingness to pay for a good and the amount that is paid to get it is also known as: a. consumer surplus. b. surplus spending. c. consumer expenditure. d. consumer benefit. e. producer profit.

a. consumer surplus.

When the price of ground beef increases and all else is held constant, we would expect the supply of hamburgers to _________, causing the price to _________. a. decrease; increase b. decease; decrease c. stay the same; stay the same d. increase; increase e. increase; decrease

a. decrease; increase

Compared to producers, consumers will lose the lesser amount of surplus from a tax if: a. demand is more elastic than supply. b. supply and demand are equally elastic. c. demand is perfectly inelastic. d. supply is perfectly elastic. e. demand is less elastic than supply.

a. demand is more elastic than supply.

The difference between the price consumers pay and the price sellers receive after a tax is imposed is equal to the: a. dollar amount of the tax. b. lost profit from the tax. c. deadweight loss from the tax. d. revenue from the tax. e. loss of social welfare from the tax.

a. dollar amount of the tax.

The price-quantity combination found where the supply and demand curves intersect is a unique combination that is efficient because: a. total surplus is maximized. b. tax revenue is sufficient to pay for government services. c. new products are being introduced. d. consumers can buy as much as they want. e. producers can sell as much as they want.

a. total surplus is maximized.

In order for a price floor to be binding, it must be set

above the equilibrium price

A tax on milk would likely cause an increase in the

amount of milk sold

Perfect competition always prevails in markets with:

an even balance of power between sellers and buyers.

an excess demand for mountain bikes

income

an increase in ______ will have an uncertain effect on price

indeterminate change; increase

an increase in demand and a decrease in supply will lead to an_____ in equilibrium quantity and _______ in equilibrium price

Ecxice takes are taxes that are

applied to a particulargood or activity

A sporting goods store observes that as they reduce the price of squash balls from $5 to $4, their quantity demanded rises from 200 to 220. Rounding to the nearest tenth, they correctly compute the elasticity of demand of squash balls to be: a. 0.1 b. 0.4 c. 0.5 d. 0.6 e. 2.3

b. 0.4

Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P What would be the equilibrium quantity for hardcover books? a. 100 b. 45 c. 385 d. 35 e. 11

b. 45

Which of the following statements is concerned with efficiency rather than equity? a. It is not fair to tax the income earned by the wealthy at higher rates than the poor. b. Taxes cause distortions in markets and reduce social welfare. c. The best type of income tax is a flat tax because it treats everyone the same. d. Excise taxes on tobacco products affect low-income families the most and should be reduced. e. Our income tax system should be more progressive than it is now.

b. Taxes cause distortions in markets and reduce social welfare.

Holding all else constant, when the price of a good decreases: a. producer surplus increases. b. consumer surplus increases. c. both consumer surplus and producer surplus increase. d. consumer surplus decreases. e. both consumer surplus and producer surplus decrease.

b. consumer surplus increases.

Consumers will lose no consumer surplus due to a tax if: a. demand is somewhat elastic. b. demand is perfectly elastic. c. supply is perfectly elastic. d. demand is perfectly inelastic. e. supply is somewhat elastic.

b. demand is perfectly elastic.

If a tax is imposed on a good where both supply and demand are somewhat elastic, but supply is more elastic than demand, the burden of the tax will be borne: a. mostly by producers but partially by consumers. b. mostly by consumers but partially by producers. c. by producers alone. d. by consumers alone. e. by consumers and producers equally.

b. mostly by consumers but partially by producers.

A tax on apples would cause apple growers to suffer because: a. consumers would pay higher prices. b. revenues and profits from growing apples would decrease. c. the government would collect revenue from the tax. d. consumer surplus would decrease. e. producer surplus would increase.

b. revenues and profits from growing apples would decrease.

A tax on producers would cause the __________ curve(s) to shift to the __________. a. demand; left b. supply; left c. supply and demand; right d. supply; right e. supply and demand; left

b. supply; left

The deadweight loss from a tax is equal to one half of: a. producer surplus multiplied by consumer surplus. b. the amount of the tax multiplied by the decrease in quantity sold. c. the tax revenue multiplied by consumer surplus. d. the amount of the tax multiplied by consumer surplus. e. the decrease in quantity sold multiplied by the tax revenue.

b. the amount of the tax multiplied by the decrease in quantity sold.

If you were a politician, why would you find it difficult to remove a binding price floor?

because it greatly benefits firms, and they would spend a lot of money to lobby against the law's repeal

If you were a politician, why would you find it difficult to remove a binding price ceiling?

because it greatly benefits some consumers who are also voters

When looking at a supply and demand graph, you would find producer surplus

below market price and above the supply curve

When looking at a supply and demand graph, you would find consumer surplus

below the demand curve and above market price

In order for a price ceiling to be binding, it must be set

below the equilibrium price

You would expect there to be many customers for a black market good when the opportunity cost of finding the good under a:

binding price ceiling is high.

If a store is able to sell a good at the market price, even though the government authorities have set the maximum price that can be charged for it, the store is selling the good in a(n)

black market for a market price that is higher

If a store is able to sell a good at the market price, even though the government authorities have set the minimum price that can be charged, the store is selling the good in a(n)

black market for a market price that is lower

A tax on milk would likely cause a decrease in the price of

breakfast cereal

For a given supply elasticity, the more inelastic the demand for a good, the larger the share of the tax paid by the A) government B) sellers C) buyers D) participants other than the buyers and sellers E) None of the above answers is correct

buyers

If the government eliminates a tax on a good with a perfectly elastic supply, who benefits most? A) sellers B) buyers C) buyers if the demand is unit elastic, otherwise sellers D) buyers if the demand is also perfectly elastic, otherwise sellers E) Buyers and sellers benefit equally

buyers

The demand for gasoline is inelastic and the supply of gasoline is elastic. Therefore, A) the incidence of a tax on gasoline depends if the tax is imposed on sellers or on buyers B) the government bears most of the incidence of a tax on gasoline C) buyers bear most of the incidence of a tax on gasoline D) sellers bear most of the incidence of a tax on gasoline E) None of the above answers is correct

buyers bear most of the incidence of a tax on gasoline

c. $5.25

In agriculture, a "bumper crop" refers to a particularly productive harvest. If there is a bumper crop for wheat at the same time that more people become allergic to wheat and all else is held constant, what will happen to the equilibrium price and quantity for wheat? a. The equilibrium price will go up and equilibrium quantity will go up. b. The equilibrium price will be indeterminate and equilibrium quantity will go up. c. The equilibrium price will go down and equilibrium quantity will be indeterminate. d. The equilibrium price will go up and equilibrium quantity will be indeterminate. e. The equilibrium price will be indeterminate and equilibrium quantity will go down.

c. The equilibrium price will go down and equilibrium quantity will be indeterminate.

When looking at a graph, the area under the demand curve and above market price is defined as: a. consumer benefit. b. spending surplus. c. consumer surplus. d. tax revenue. e. producer surplus.

c. consumer surplus

Social welfare is measured as the sum of: a. tax revenue and deadweight loss. b. deadweight loss and consumer surplus. c. consumer surplus and producer surplus. d. consumer surplus and tax revenue. e. producer surplus and tax revenue.

c. consumer surplus and producer surplus.

As a tax rate grows larger and larger, eventually: a. willingness to pay can outweigh deadweight loss. b. tax revenue can outweigh willingness to sell. c. deadweight loss can outweigh tax revenue. d. supply can outweigh demand. e. demand can outweigh supply.

c. deadweight loss can outweigh tax revenue.

A(n) __________ in the elasticity of supply or demand in a market for a good that is taxed would tend to __________ deadweight loss from that tax. a. decrease; increase b. increase; decrease c. increase; increase d. decrease; have no effect on e. increase; have no effect on

c. increase; increase

Taxing a good with very elastic demand generates more deadweight loss than taxing a good with very inelastic demand because: a. the change in consumer behavior is smaller. b. consumers have to pay these taxes out of pocket. c. the change in consumer behavior is greater. d. the government does not bother collecting the revenue. e. the amount of the tax is larger.

c. the change in consumer behavior is greater. Answers:

Taxes will almost always cause consumer prices to increase. How much they increase depends on: a. who pays the tax out of pocket. b. the amount of the tax. c. the elasticities of supply and demand. d. who is legally obligated to pay the tax. e. how often the government collects the tax.

c. the elasticities of supply and demand.

A tax on apples would cause consumers to suffer because: a. consumer surplus would increase. b. the government would collect revenue from the tax. c. the price of apples would increase and fewer apples would be purchased. d. producer surplus would decrease. e. revenues for apple growers would decrease.

c. the price of apples would increase and fewer apples would be purchased.

All taxes create some deadweight loss except those on goods: a. that can be resold for a higher price. b. with a very low demand. c. with a perfectly inelastic demand or supply. d. with a very elastic demand or supply. e. that everyone likes to consume.

c. with a perfectly inelastic demand or supply.

Economic profit:

can exceed the risk-adjusted normal rate of return.

If resources are scarce if means they:

cannot provide enough goods or services to satisfy all human material wants and needs.

More oranges are grown in Florida than North Dakota because Florida's warm climate gives it a ________ in growing oranges

comparative advantage

Two goods that are used together are called?

complements.

The difference between the willingness to pay for a good and the amount that is paid to get it is also known as

consumer surplus

When looking at a graph, the area under the demand curve and above market price is defined as

consumer surplus

Social welfare is measured as the sum of

consumer surplus and producer surplus

Holding all else constant, when the price of a good increases

consumer surplus decreases

Holding all else constant, when the price of a good increases:

consumer surplus decreases

Holding all else constant, when the price of a good increases

consumer surplus decreases.

Holding all else constant, when the price of a good increases:

consumer surplus decreases.

Holding all else constant, when the price of a good decreases

consumer surplus increases

In a competitive market when there is no deadweight loss,

consumer surplus plus producer surplus is maximized.

When looking at a graph, the area under the demand curve and above market price is defined as:

consumer surplus.

Consumers will lose no consumer surplus due to a tax if demand in their market is perfectly elastic because:

consumers can effortlessly change their behavior in response to the tax.

what is opportunity cost?

cost of a purchase or decision as measured by what is given up.

Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P What would be the equilibrium price for hardcover books? a. $100 b. $45 c. $385 d. $35 e. $11

d. $35

If Jim can sell paper at a lower opportunity cost than Dwight can, then: a. Jim has an absolute advantage in paper sales. b. Dwight has an absolute advantage in paper sales. c. Jim has a positive advantage in paper sales. d. Jim has a comparative advantage in paper sales. e. Dwight has a comparative advantage in paper sales.

d. Jim has a comparative advantage in paper sales.

Butter and margarine are substitute goods. A tax on butter will have what effect on the market for margarine? a. The supply of margarine will decrease, causing price to rise. b. The supply of margarine will increase, causing its price to fall. c. The demand for margarine will decrease, causing its price to fall. d. The demand for margarine will increase, causing its price to rise. e. Both the supply and demand of margarine will decrease, causing price to fall.

d. The demand for margarine will increase, causing its price to rise.

The deadweight loss from a tax is likely to be less with a good that has: a. many substitutes. b. an elastic demand. c. an elastic supply. d. few substitutes. e. few complements.

d. few substitutes.

When a tax is imposed on some good, the lost consumer surplus and producer surplus both typically end up as: a. increased social welfare. b. more units of output bought and sold. c. lower prices for consumers. d. tax revenue and deadweight loss. e. additional revenues for firms.

d. tax revenue and deadweight loss.

Excise taxes are popular sources of revenue for governments because: a. they are easy to understand. b. they require very little paperwork. c. they have very high levels of deadweight loss. d. they are very stable sources of revenue. e. consumers are rarely aware that they are paying them.

d. they are very stable sources of revenue.

The loss to society resulting from a tax includes the A) consumer surplus paid to the government in the form of tax revenue B) deadweight loss minus the tax revenue collected by the government C) deadweight loss D) producer surplus paid to the government in the form of tax revenue E) deadweight loss plus the consumer surplus and producer surplus paid to the government as tax revenue

deadweight loss

All else held constant, an increase in the price of a good would necessarily

decrease consumers surplus

if demand curve shift to the left then the demand?

decreases

Peanut butter and jelly are complements. If a tax is imposed on peanut butter, how will that affect the market for jelly?

demand foe jelly will decrease along with the price.

Peanut butter and jelly are complements. If a tax is imposed on peanut butter, how will that affect the market for jelly?

demand for jelly will decrease along with the price

The burden of a per unit tax on a product will fall primarily on producers when:

demand is highly elastic with respect to price.

Compared to producers, consumers will lose the greater amount of surplus from a tax if

demand is less elastic than supply

Compared to consumers, producers will lose the greater amount of surplus from a tax if

demand is more elastic than supply

Compared to producers, consumers will lose the lesser amount of surplus from a tax if

demand is ore elastic than supply

A $2.00 increase in the size of a tax on a good will only cause the price for buyers to increase by $2.00 if A) demand is elastic, but not perfectly elastic B) demand is perfectly inelastic C) demand is inelastic, but not perfectly inelastic D) demand is unit elastic E) demand is perfectly elastic

demand is perfectly inelastic

A tax on consumers would cause the __________ curve(s) to shift to the __________.

demand; left

Producer surplus is defined as the

difference between the price the seller receives and the willingness to sell it

Tax incidence is the A) dollar amount of a tax, expressed as a percentage of the purchase price B) division of a tax burden between the buyer and seller C) amount of revenue collected by government on a specific good D) dollar amount of a tax per unit sold E) deadweight loss from the tax

division of a tax burden between the buyer and seller

e. $7.10

Which of the following statements is concerned with equity rather than efficiency? a. Almost all taxes create some amount of deadweight loss. b. The incidence of a tax does not depend on who actually pays it. c. Taxes generate revenues that governments spend on services. d. Excise taxes tend to raise prices for consumers and reduce sales for firms. e. Tax rates on the wealthy are too low and should be raised.

e. Tax rates on the wealthy are too low and should be raised.

A tax on milk would likely cause a decrease in the: a. price of products made from milk. b. deadweight loss from the milk tax. c. revenues from the milk tax. d. price consumers pay for milk. e. amount of milk sold

e. amount of milk sold

A tax on consumers of a good would shift the __________ curve down and cause the price paid by consumers to __________. a. supply; increase, then return to its original level b. supply; increase c. supply; decrease d. demand; decrease, then return to its original level e. demand; increase

e. demand; increase

Which of the following could be a negative consequence of free trade:

efficient and intensive resource usage that can lead to environmental degradation

All taxes create some deadweight loss, unless:

either supply or demand is perfectly inelastic.

the models used in economics:

emphasize basic relationships by abstracting from complexities in the everyday world.

By itself, a reduction in import tarrifs (taxes) will:

enhance domestic competition.

A firm will earn normal profits when price:

equals average total costs.

The deadweight loss from a tax is called the A) net loss from taxation B) net gain from taxation C) marginal cost of the tax D) marginal benefit of the tax E) excess burden of the tax

excess burden of the tax

In the long run, firms will exit a perfectly competitive industry if:

excess profits are less than zero.

increase; increase.

f the number of buyers in a market increases from 50 to 100, you would expect the equilibrium price to _________ and the equilibrium quantity to _________, holding all else constant.

Failure by market structure can occur when:

few buyers or sellers are present.

Imagine that local suburban leaders decide to enact a minimum wage, and soon after, a nearby city votes to increase the minimum wage to the same rate. As a result

firms will not have an incentive to move to the nearby city and the community will not lose jobs

The importance of an economic model is that is allows us to:

focus on the affects of only one change at a time.

increase

given that pizza is a normal good if students incomes at your college increase substantially there would be an _____ in the demand for pizza

what are the 3 fundamental question that any economy must address?

goods and services produced how theses goods and services be produced who recieves them

Market structure is not typically characterized on the basis of:

government regulation.

Suppose that the equilibrium wage for teachers in Minnesota is $15/hour. Also suppose that the state of Minnesota raises their minimum wage to $10/hour. Since the equilibrium wage for teachers is ____________ the new minimum wage, we would expect the number of teachers employed to _____________________ and the equilibrium wage for teachers to ______________________.

higher than; stay the same; stay the same

Graphically, competitive market supply is measured by the:

horizontal sum of competitor MC curves

The firm demand curve in a competitive market is:

horizontal.

is a constant amount of good Y

if a production possibility frontier is a straight line it tells us that the opportunity cost of producing one more unit of good X..

the paradox of drift

if all the households and businesses in the conomy start saving more during economic hard times that results in a fall in aggregate income hurting everyone in the economy. this is known as:

allocatively efficient

if an economy produces the appropriate mix of goods from its available resources then the mix of goods is

left

if suppliers expect prices to rise next year for their product then one would expect that this will shift the supply curve for the product the ____ this year

Why is it often difficult to remove a binding price floor after it exists?

in general, because sellers benefit from higher prices and would lobby their elected officials to keep the price control

keynesian theory

in recent times the us government has been trying to help the economy through one of the worst economic slumps. the policies used are based on

decrease in supply of wheat

in the market for wheat what would happen if the price of ethanol increases dramatically

Cigarettes are highly addictive and therefore have a very low elasticity of demand. A $2.00 increase in the national sales tax on cigarettes would likely cause the price paid by buyers of cigarettes to A) remain unchanged B) increase by more than $2.00 C) increase by $2.00 D) increase by more than $1.00 but less than $2.00 E) increase by less than $1.00

increase by more than $1.00 but less than $2.00

Gasoline and ethanol are substitute fuels with downwarding demand curves and upwarding supply curves. If the government increases taxes on gasoline, this will cause a(n):

increase in deadweight loss in the market for gasoline and a increase in the price of ethanol.

Spam is an inferior good. National income decreasing while the price of luncheon meant is decreasing. Everything else held constant, the equilibrium price of spam will __________ and the equilibrium quantity sold will _________.

increase; be ambiguous

If a 2 percent increase in price results in a 5 percent __________ in the quantity supplied, then it can be concluded that the supply is __________, everything else held constant.

increase; price elastic

After a tax is imposed, the price paid by consumers ________ and the price received by producers ________.

increase;decrease

A tax on apples would cause the price paid by consumers to ________ and the price received by producers to ________.

increase;increase

After a tax is imposed, the price paid by consumers ________ and the price received by producers ________.

increases decreases

Something is a normal good if the demand for the good..?

increases as the consumer's income increases

Neither the demand nor the supply of automobiles is perfectly elastic or inelastic. If the government imposes a $1,000 tax on automobiles, then the price of an automobile buyers pay A) increases by less than $1,000 B) increases by $1,000 C) increases by more than $1,000 D) decreases by $1,000 E) does not change

increases by less than $1,000

The facts that a society's production possibility frontier is bowed out pr concave to the origin of a graph demonstrates the law of:

increasing opportunity cost.

Scarcity exists when:

individuals can have more of one good but only at the expense of another.

When Nina decreases her price of lipstick from $7 to $5, she finds that her sales increase from 6 to 7 lipsticks. She faces _____________ demand for her product, and this price change will ___________ her total revenue.

inelastic; lower

resources that firms use in the production of final goods and services are called?

inputs

Consider a production possibility frontier for Iraq. If in 2014 Iraq's resources are not being fully utilied, Iraq will be somewhere____ of its production possibility frontier

inside

A society that is producing its maximum combination of goods and using all available resources for production?

is operating on its production possibilities frontier (PPF).

If a store legally sells a good at the market price, even though the government authorities have set the maximum price that can be charged for it, the store is selling the good in a(n):

legal market for a market price that is lower because the price ceiling is non-binding.

Above-normal profits in a perfectly competitive market are caused by:

luck.

A per unit tax will cause output prices to increase least when:

marginal cost is rising.

quantity supplied will decrease

market demand for a good is initially made up of 50 buyers. suppose there is a decrease in the number of buyers by 10. holding everything else constant one would expect that:

inflation

means that although overall prices are increasing some prices may be increasing and some may be decreasing

If the state government allocates additional spending on education, the opportunity cost is:

measured in terms of the best alternative uses for that money.

What is the minimum wage that employees can receive in California?

more than $7.25 per hour

If a tx is omposed on a good where both supply and demand are somewhat elastic, but supply is more elastic than demand, the burden of the ta will be

mostly consumers but partially producers.

A camera takes a picture of drivers who do not stop at a red light, and this practice is used to issue a traffic ticket. These red light cameras can be understood as serving a(n):

negative incentive to discourage individuals from driving through a red light

If a price ceiling is imposed at $15 per unit when the equilibrium market price is $12, there will be:

no surplus or shortage.

what is Positive economics?

objective and fact based have to be testable

In the market portrayed in this graph, a nonbinding price floor of $2 will result in a price set

of $3

An increase in the labor force would be reflected in a society's production possibilities frontier (PPF) by a shift?

outwards

If the demand curve for a good is horizontal, a tax is levied on this product is A) split between the buyers and the sellers but not evenly so that either the buyer or the seller pays more B) paid entirely by buyers C) split evenly between the buyers and the sellers D) paid entirely by sellers E) not paid by either the buyers or the sellers

paid entirely by sellers

If a $10 sales tax is imposed on a good and the equilibrium price increases by $10, the tax is A) paid fully by buyers B) split between buyers and sellers but not evenly C) split evenly between buyers and sellers D) paid fully by sellers E) perhaps split between buyers and sellers but it is impossible to determine the incidence without further information

paid fully by buyers

A government policy that addresses market failures caused by positive externalities is:

patent grants.

Competition tends to be light when:

potential entrants are few.

Many states have laws that limit the maximum amount of interest that a lender can charge a borrower. Such a law is an example of a(n):

price ceiling.

A tax on milk would likely cause an increase in the:

price consumers pay for milk

The minimum wage law is an example of a

price floor

No externalities exist when:

private costs and benefits equal social costs and benefits.

what is Absolute Advantage?

produce more of something than others

When looking at a graph, the area above the supply curve and below market price is defined as

producer surplus

When the price of a good decreases and all else is held constant

producer surplus decreases

In a market where supply and demand are both somewhat elastic, but demand is more elastic than supply, consumers will bear less of the burden of a tax because

producers have a greater ability to change their behaivior in response to the tax than consumers do.

As a politician, you would be more inclined to propose an increase in the minimum wage when you believe that the new minimum wage would

remain below the equilibrium wage and be non-binding

As a politician, you would be more inclined to propose an increase in the minimum wage when you believe that the new minimum wage would:

remain below the equilibrium wage and be nonbinding.

A real-life example of a binding price ceiling is

rent control

An example of a binding price ceiling is:

rent control that is set below the equilibrium price

When profits are maximized in a competitive market, average cost is always:

rising. falling. constant. *none of these.*

In a perfectly competitive market:

sellers and buyers have perfect information.

Suppose the elasticity of supply of land is 0 and elasticity of demand is 2. If the government imposes a 10 percent tax on land, then A) buyers and sellers each pay 5 percent of the tax B) buyers pay all of the tax C) buyers pay 1/2 of the tax D) sellers pay a smaller share of the tax than do buyers but both buyers and sellers pay some of the tax E) sellers pay all of the tax

sellers pay all of the tax

Leading economics indicators suggest that incomes will be going up next year. In response to these reports, companies are forecasting increased prices for the future sales of their goods. As a result of these increases, the supply curve will:

shift to the left, causing the equilibrium price to increase.

Click to view enlarged image. At a price ceiling of $0.50, this market is experiencing a(n)

shortage

Suppose that a group of die-hard sports fans is upset about the high price of tickets to many events. As a result of their lobbying efforts, a new law caps the maximum ticket price to any sporting event at $50. Assume there are a fixed amount of seats in the stadium, all seats are available to be sold, and the price of tickets before the ceiling was at an equilibrium point above $50. The price ceiling will create a ___________ of tickets, which will be greater if demand is more _______________. _________ people will attend the events.

shortage; elastic; the same number of

Gains from trade arise because of:

specialization in production.

what is Normative economics?

subjective opinion based

What is a payment made by the government to encourage consumption or production of a good or service.

subsidy

If tom eats potato chips because the prices of Sunflower seeds went up then they are?

substitutes in consumption

Suppose the government imposes a $1 per gallon per gallon tax on sellers of gasoline. As a result, the A) supply curve shifts rightward B) demand curve shifts rightward C) demand curve shifts leftward D) demand and supply curves both shift leftward E) supply curve shifts leftward

supply curve shifts leftward

When a hurricane rips through Florida, the price of oranges rises because the?

supply curve shifts to the left.

Compared to consumers, producers will lose the greater amount of surplus from a tax if:

supply is less elastic than demand

Sellers bear the entire incidence of a tax on a good. This outcome can occur if A) the good is an inferior good B) the demand curve is downward sloping and the supply curve is upward sloping C) supply is perfectly inelastic D) demand is perfectly inelastic E) supply is perfectly elastic

supply is perfectly inelastic

To calculate the revenue government receives when a tax is imposed on a good, multiply the A) pre-tax equilibrium price by the pre-tax quantity B) after-tax equilibrium price by the after-tax quantity and then subtract the pre-tax equilibrium price multiplied by the pre-tax quantity C) tax by the pre-tax quantity D) tax by the after-tax quantity E) after-tax equilibrium price by the after-tax quantity.

tax by the after-tax quantity

When a tax is imposed, consumer surplus and producer surplus are reallocated to

tax revenue and deadweight loss.

At very low tax rates________ is much larger than________

tax revenue; dead weight loss

Suppose you have a choice between studying one more hour for your history exam or studying one more hour for your psychology exam. Your decision on what to study should be based on:

the additional benefits of studying for each class.

The University recently inherited a large mansion from a wealthy alumnus. The University plans to use the mansion to host faculty parties and to house distinguished guests. The opportunity cost of the mansion to the University is:

the amount the university would receive if it sold the mansion.

Deadweight loss is defined as:

the cost to society created by distortions in the market.

what is market demand?

the demand by all the consumers of a given good or service

Consumer surplus is defined as the

the difference between the willingness to pay for a good and the price paid to get it

Taxes will almost always cause consumer prices to increase. How much they increase depends on:

the elasticities of supply and demand

The government offers numerous educational subsidies through grants and low-cost equipment to schools. They also provide a lot of incentives to go to school. Because of this, we except that:

the equilibrium price of education will be indeterminate and the equilibrium quantity of students will go up.

Specialization and trade usually lead to:

the exchange of goods and services in markets.

market demand

the horizontal summation of individual demand curves for a particular product, holding the quantity demanded constant is referred to as:

What does the Production Possibility Frontier Show?

the maximum attainable combination of 2 goods that can be produced with the aviable resources

The following market cannot be described as perfectly competitive:

the milk market.

The opportunity cost of something is:

the next best alternative given up to acquire it.

The best measure of the opportunity cost of any choice is:

the next best alternative you have given up to make that choice, even if no monetary costs are involved.

Macroeconomics is the study of?

the operation of the economy as a whole

the change of the quantity of a good supplied rather than the change in a supply if?

the price of the good changes

Effects of market structure are not typically measured in terms of:

the prices paid by consumers. *declining consumer popularity.* employment opportunities. pace of product innovation.

A binding price floor creates a surplus, which means:

the quantity demanded will always be smaller than the quantity supplied.

In a market a shortage occurs when ___________ is greater than ______________.

the quantity demanded; the quantity supplied

Several studies have shown promising links between green tea consumption and cancer prevention. How does this affect the market for green tea?

the quantity of green tea demanded increases because of a change in tastes in favor of green tea.

In competitive market equilibrium, social welfare is measured by:

the sum of net benefits derived by consumers and producers.

if in the market the supply for oranges has increased then the supply shifts to the?

the supply curve for oranges has shifted to the right

long run growth

the sustained upward trend in the economys overall output per person that generates higher incomes and higher standard of living for its members represents

Opportunity cost is:

the value of the best alternative forgone in making any choice.

Consumer surplus is the difference between

the willingness to pay for a good and the amount that is paid to get it

Consumer surplus is the difference between:

the willingness to pay for a good and the amount that is paid to get it

Consumer surplus is the difference between:

the willingness to pay for a good and the amount that is paid to get it.

Although water is very abundant in most places, it is scare because:

there is not enough of it to meet all needs.

In most cases, taxes reduce economic efficiency because:

they reduce consumer surplus and producer surplus.

Another name for social welfare is

total surplus

A market has reached an efficient outcome when

total surplus is maximized

In the short run, a perfectly competitive firm will shut down and produce nothing if:

total variable cost exceeds total revenue.

A new fast-food restaurant offered a free meal (valued at $5) a week for a year to its first 100 customers. Ramona camped out for 48 hours before the opening to be one of the first 100 customers. The cost of the free meal a week for a year for Ramona was:

whatever she would have done with those 48 hours.

Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is:

whatever she would have purchased with $10,000 and whatever she would have earned had she not been in college.

long run growth per capita

when an economys overall production grows faster than its population this is referred to as

simplify reality

when building a model economists _____ in order to highlight what really matters

The local Taco Hut charges the same price for everything on its menu: $3 will buy a taco, a burrito, or nachos. You buy the taco and think that if you had not purchased the taco, you would have purchased the burrito. The opportunity cost of the taco is:

continue pt 3

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