Econ 2000 exam 2 part 2

Refer to Figure 8-2. The loss of producer surplus associated with some sellers dropping out of the market as a result of the tax is a. $1. b. $3. c. $2. d. $0.

a. $1.

Refer to Figure 8-2. The loss of consumer surplus as a result of the tax is a. $4.50. b. $3. c. $6. d. $1.50.

a. $4.50.

Refer to Figure 6-13.Acme, Inc. is a seller of the good. Acme sells a unit of the good to a buyer and then pays the tax on that unit to the government. After paying the tax, Acme receives how much? a. $8.00 b. $12.00 c. $9.00 d. $10.50

a. $8.00

Refer to Figure 6-11.Suppose a tax of $2 per unit is imposed on this market. What will be the new equilibrium quantity in this market? a. Between 60 units and 100 units b. 60 units c. Greater than 100 units d. Less than 60 units

a. Between 60 units and 100 units

Which of the following causes a shortage of a good? a. Binding price ceiling b. Tax on the good c. Nonbinding price control d. Binding price floor

a. Binding price ceiling

Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle. Which of the following statements is correct? a. The effective price received by sellers is $0.40 per bottle less than it was before the tax. b. Sixty percent of the burden of the tax falls on sellers. c. This tax does not change the quantity of perfume bought and sold. d. This tax causes the demand curve for perfume to shift downward by $1.00 at each quantity of perfume.

a. The effective price received by sellers is $0.40 per bottle less than it was before the tax.

Refer to Figure 6-15. In which market will the majority of the tax burden fall on buyers? a. The market shown in graph (b) b. The market shown in graph (a). c. The market shown in graph (c) d. The tax burden on buyers is the same for all three graphs.

a. The market shown in graph (b)

If a binding price floor is imposed on the video game market, then a. a surplus of video games will develop. b. the demand for video games will decrease. c. the supply of video games will increase. d. a shortage of video games will develop.

a. a surplus of video games will develop.

Suppose that a tax is placed on books. If the buyers pay the majority of the tax, then we know that the a. demand is more inelastic than the supply. b. supply is more inelastic than the demand. c. government has required that buyers remit the tax payments. d. government has required that sellers remit the tax payments.

a. demand is more inelastic than the supply.

Refer to Figure 6-14. Suppose D1represents the demand curve for gasoline in both the short run and long run, S1represents the supply curve for gasoline in the short run, and S2represents the supply curve for gasoline in the long run. After the imposition of the $2 tax, the price paid by buyers will be a. higher in the long run than in the short run. b. unable to be determined without additional information. c. higher in the short run than in the long run. d. equivalent in the short run and the long run.

a. higher in the long run than in the short run.

Suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages. The tax would shift a. supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially sweetened beverages. b. supply, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially sweetened beverages. c. demand, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially sweetened beverages. d. demand, raising both the equilibrium price and quantity in the market for artificially sweetened beverages.

a. supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially sweetened beverages.

Consider the U.S. market for chocolate, a market in which the government has imposed a nonbinding price ceiling. Which of the following events could convert the price ceiling from a nonbinding to a binding price ceiling? a. A government study that shows that consuming chocolate increases the incidence of cancer. b. South American cocoa bean producers refuse to ship to chocolate producers in the United States. c. A sharp drop in consumer income; chocolate is a normal good. d. A large increase in the size of the cocoa bean crop; cocoa beans are used to produce chocolate.

b. South American cocoa bean producers refuse to ship to chocolate producers in the United States.

Which of the following causes the price paid by buyers to be different than the price received by sellers? a. Nonbinding price control b. Tax on the good c. Binding price ceiling d. Binding price floor

b. Tax on the good

Refer to Figure 6-5.A government-imposed price of $12 in this market is an example of a a. binding price ceiling that creates a shortage. b. binding price floor that creates a surplus. c. nonbinding price floor that creates a surplus. d. nonbinding price ceiling that creates a shortage.

b. binding price floor that creates a surplus.

Refer to Figure 6-2. The price ceiling causes quantity a. supplied to exceed quantity demanded by 60 units. b. demanded to exceed quantity supplied by 90 units. c. demanded to exceed quantity supplied by 30 units. d. supplied to exceed quantity demanded by 90 units.

b. demanded to exceed quantity supplied by 90 units.

The deadweight loss from a tax per unit of good will be smallest in a market with a. inelastic supply and elastic demand. b. inelastic supply and inelastic demand. c. elastic supply and inelastic demand. d. elastic supply and elastic demand.

b. inelastic supply and inelastic demand.

Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the a. demand curve will shift upward by $20, and the price paid by buyers will decrease by less than $20. b. supply curve will shift downward by $20, and the effective price received by sellers will increase by less than $20. c. demand curve will shift upward by $20, and the price paid by buyers will decrease by $20. d. supply curve will shift downward by $20, and the effective price received by sellers will increase by $20.

b. supply curve will shift downward by $20, and the effective price received by sellers will increase by less than $20.

Refer to Figure 6-9.In this market, a minimum wage of $7.00 creates a labor a. shortage of 2,000 worker hours. b. surplus of 4,000 worker hours. c. shortage of 4,000 worker hours. d. surplus of 2,000 worker hours.

b. surplus of 4,000 worker hours.

Refer to Figure 8-1.Suppose the government imposes a tax of P'-P'''. The area measured by K + L represents a. total surplus before the tax. b. tax revenue. c. producer surplus after the tax. d. consumer surplus before the tax.

b. tax revenue.

Refer to Figure 8-2. The amount of deadweight loss as a result of the tax is a. $7.50. b. $5. c. $2.50. d. $10.

c. $2.50.

Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''. The area measured by I + Y represents the a. loss in consumer surplus due to the tax. b. loss in producer surplus due to the tax. c. deadweight loss due to the tax. d. total surplus before the tax.

c. deadweight loss due to the tax.

If the government removes a binding price ceiling from a market, then the price paid by buyers will a. increase, and the quantity sold in the market will decrease. b. decrease, and the quantity sold in the market will decrease. c. increase, and the quantity sold in the market will increase. d. decrease, and the quantity sold in the market will increase.

c. increase, and the quantity sold in the market will increase.

Refer to Figure 8-3. As a result of the tax, a. producer surplus decreases from $200 to $145. b. consumer surplus decreases from $200 to $80. c. the market experiences a deadweight loss of $80. d. total surplus increases from $180 to $200.

c. the market experiences a deadweight loss of $80.

Refer to Figure 8-2. The per-unit burden of the tax on buyers is a. $2. b. $5. c. $4. d. $3.

d. $3.

Refer to Figure 6-10. The per-unit burden of the tax on buyers is a. $6. b. $24. c. $14. d. $8.

d. $8.

Kate is a personal trainer whose client William pays $80 per hour-long session. William values this service at $100 per hour, while the opportunity cost of Kate's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. After the tax, what is likely to happen in the market for personal training? a. Kate will no longer offer personal training services to William because she must charge more than $100 in order to cover her opportunity costs and pay the tax. b. Kate and William will agree to a new price somewhere between $70 and $110. c. The price will remain at $80, and Kate will pay the $10 tax. d. Kate and William will agree to a new price somewhere between $85 and $100.

d. Kate and William will agree to a new price somewhere between $85 and $100.

Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling is established, a. the price rises above the previous equilibrium. b. a smaller quantity of the good is demanded. c. a larger quantity of the good is supplied. d. a smaller quantity of the good is bought and sold.

d. a smaller quantity of the good is bought and sold.

Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''. The area measured by J represents a. producer surplus before the tax. b. producer surplus after the tax. c. consumer surplus before the tax. d. consumer surplus after the tax.

d. consumer surplus after the tax.

Refer to Figure 8-2. The imposition of the tax causes the quantity sold to a. decrease by 2 units. b. increase by 1 unit. c. increase by 2 units. d. decrease by 1 unit.

d. decrease by 1 unit.

Refer to Figure 6-6. When a certain price control is imposed on this market, the resulting quantity of the good that is actually bought and sold is such that buyers are willing and able to pay a maximum of P1dollars per unit for that quantity and sellers are willing and able to accept a minimum of P2dollars per unit for that quantity. If P1− P2= $3, then the price control is a. only a price floor of $6.00. b. only a price ceiling of $3.00. c. only a price ceiling of $6.00. d. either a price ceiling of $3.00 or a price floor of $6.00.

d. either a price ceiling of $3.00 or a price floor of $6.00.