ECON 300 - CH 3

In 2009, the U.S. government imposed a 35% tariff on tires imported from China. The supply of tires from China is perfectly elastic. Domestic U.S. production of these tires is zero. The price of these tires is $40. Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. The producer surplus is: $675. $1,350. $0. $75.

$0.

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. If a quota of 20 million tires per year is imposed in this market, consumer surplus will be about: $1,427. $713. $268. $133.

$133.

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. Assuming the effective tax is $20 per tire, the deadweight loss after the tax is imposed will be about: $617. $154. $584. $308.

$154.

The demand for gasoline is given by QD = 15 − 0.5P. If the price per gallon falls from $4 per gallon to $2 per gallon, what is the gain in consumer surplus? $365 $27 $196 $169

$27

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. Assuming the effective tax is $20 per tire, producer surplus after the tax is imposed will be about: $159. $300. $600. $674.

$300.

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. Assuming the effective tax is $20 per tire, consumer surplus after the tax is imposed will be about: $317. $714. $1,234. $634.

$317.

The demand for a bouquet of flowers is given by QD = 20 − 0.5P. If the price falls from $6 per bouquet to $4 per bouquet, what is the gain in consumer surplus? $70 $324 $289 $35

$35

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. If a quota of 20 million tires per year is imposed in this market, the deadweight loss will be about: $940. $889. $0. $448.

$448.

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. Assuming the effective tax is $20 per tire, tax revenue after the tax is imposed will be about: $1,230. $923. $617. $307.

$617.

In 2009, the U.S. government imposed a 35% tariff on tires imported from China. Assume for this problem that the tariff was $20. The supply of tires from China is perfectly elastic. Domestic U.S. production of these tires is zero. Before the tariff, the price of these tires was $40. Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Before the tariff, consumer surplus was: $75. $600 $1,350. $675.

$675.

In 2009, the U.S. government imposed a 35% tariff on tires imported from China. The supply of tires from China is perfectly elastic. Domestic U.S. production of these tires is zero. The price of these tires is $40. Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. The total surplus is: $675. $1,350. $150. $75.

$675.

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. Suppose instead of a tax the U.S. government creates a subsidy of $5 per tire paid to tire producers. After the subsidy is imposed, the deadweight loss will be: $9.61. $562.52. $19.21. $3,000.06.

$9.61.

Demand is given by QD = 100 − 10P and supply is QS = −5 + 5P. The producer surplus is: $135. $45. $90. $180.

$90.

In 2009, the U.S. government imposed a 35% tariff on tires imported from China. The supply of tires from China is infinitely elastic. Domestic U.S. production of these tires is zero. The price of these tires is $40. Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. The producer surplus is $ ______. (Enter your answer as an integer with no decimal places and no $ sign.)

0

Which of the following equations could describe a consumer surplus triangle area? 0.5 × (quantity sold) × (PDChoke − market price) (quantity sold) × (PDChoke − market price) 0.5 × (quantity sold) × (PDChoke) (quantity sold) × (PDChoke)

0.5 × (quantity sold) × (PDChoke − market price)

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. What is the equation used to find the PSChoke? Q + 10 = 0 70 − Q = 0 105 - 1.5P = 0 1.5873P − 15.873 = 0

1.5873P − 15.873 = 0

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. What equation is used to determine PDChoke? 105 - 1.5P = 0 1.5873P − 15.873 = 0 Q + 10 = 0 70 − Q = 0

105 - 1.5P = 0

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. (The graph below shows the demand and supply functions.) If a price ceiling of $30 is imposed in this market, the deadweight loss will be ______. Enter your answer rounded to two decimal places without a $, +, or − sign.

136.87

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. If a price ceiling of $30 is imposed in this market, there will be excess demand of _______ million tires. (Round your answer to the nearest integer.)

28

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. Suppose the U.S. government creates a subsidy of $5 per tire paid to tire producers. After the subsidy is imposed, what approximately will the seller's price (PS) be? 39 41 65 15

41

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. Suppose instead of a tax the U.S. government creates a subsidy of $5 per tire paid to tire producers. After the subsidy is imposed, what will the seller's price (PS) be?

41.58

Demand is given by QD = 100 − 10P and supply is QS = −5 + 5P. The consumer surplus is $ _____. (Enter your answer as an integer with no decimal places and no $ sign.)

45

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. A quota of 20 million tires per year is imposed in this market. The equation CS = 0.5Q \times (PDChoke − Pquota) is used. Pquota is equal to: 56.67. 26.60. 70. 39.15.

56.67

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. Assuming the effective tax is $20 per tire, tax revenue after the tax is imposed will be about $ ____ million. (Round your answer to the nearest integer value and enter your answer without the $ sign.)

614 After the tax is imposed, sellers would face the price of $29.4345 per tire and sell 30.8483 million tires per year, while buyers pay the price of $29.4345. The tax revenue can be calculated by (49.4345 − 29.4345) × 30.8483.

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. Suppose instead of a tax the U.S. government creates a subsidy of $5 per tire paid to tire producers. After the subsidy is imposed, the deadweight loss will be $ _____ million. Round your answer to the nearest integer value and enter your answer without the $ sign. Be aware of rounding errors.

675

In 2009, the U.S. government imposed a 35% tariff on tires imported from China. The supply of tires from China is perfectly elastic. Domestic U.S. production of these tires is zero. The price of these tires is $40. Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. The consumer surplus is $ _____. (Enter your answer as an integer with no decimal places and no $ sign.)

675

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. What is the PDChoke?

70

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. If a quota of 20 million tires per year is imposed in this market, producer surplus will be $_____. (Note: Enter your answer as an integer with no $ sign and no decimal places. Round to the nearest integer.)

807

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. Suppose instead of a tax the U.S. government creates a subsidy of $5 per tire paid to tire producers. After the subsidy is imposed, the deadweight loss will be $ _____ million. Round your answer to the nearest integer value and enter your answer without the $ sign. Be aware of rounding errors.

9

Demand is given by QD = 100 − 10P and supply is QS = −5 + 5P. The producer surplus is $ _____. (Enter your answer as an integer with no decimal places and no $ sign.)

90

The demand for good A is given by QDA = 120 − 4PA, while the supply for good A is QSA = 10PA + 50. The demand for good B is given by QDB = 150 − 10PB, while the supply for good B is QBB = 50PB − 150. A tax of $5 per unit would be least efficient in which market? A $5 tax per unit would cause the greatest loss in efficiency in market B. A $5 tax per unit would cause the greatest loss in efficiency in market A. The loss in efficiency would be the same in both markets as the tax is the same size. The equilibrium price is the same in both markets and the tax change is also the same. This means the loss in efficiency is also the same in both markets.

A $5 tax per unit would cause the greatest loss in efficiency in market B.

True or False: In 2009, the U.S. government imposed a 35% tariff on tires imported from China. The supply of tires from China is perfectly elastic. Domestic U.S. production of these tires is zero. The price of these tires is $40. Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. The consumer surplus was $1,350.

False

Which of the following best explains why a tax creates a deadweight loss for a market with no market failures? The government only intervenes to make us better off. For this reason, a tax actually makes us better-off by funding government projects. If there are market failures but well-defined property rights, total surplus is maximized at the market equilibrium. A government intervention, such as a tax, causes the market to move away from the market equilibrium and reduce total surplus. If there are no market failures but property rights are poorly defined, total surplus is maximized at the market equilibrium. A government intervention, such as a tax, causes the market to move away from the market equilibrium and reduce total surplus creating a deadweight loss. If there are no market failures and if property rights are well defined, total surplus is maximized at the market equilibrium. A government intervention, such as a tax, causes the market to move away from the market equilibrium and reduce total surplus creating a deadweight loss.

If there are no market failures and if property rights are well defined, total surplus is maximized at the market equilibrium. A government intervention, such as a tax, causes the market to move away from the market equilibrium and reduce total surplus creating a deadweight loss.

Supply of pizza is given by QS = 25P − 150. If the price per pizza falls from $10 to $8, what is the change in producer surplus? Producer surplus will fall by $150. Producer surplus will fall by $600. Producer surplus will fall by $200. Producer surplus will rise by $150.

Producer surplus will fall by $150.

Producer surplus is: the difference between the amount consumers would be willing to pay for a good and the amount they actually have to pay. The difference between the price producers actually receive for their goods and the cost of producing them. the difference between the price producers would be willing to pay for a good and the price they actually have to pay. the difference between the price producers would be willing to pay for a good and the price they receive for it.

The difference between the price producers actually receive for their goods and the cost of producing them.

The demand for mill worker hours is given by QD = 1,000 − 70W, where W is the wage rate per worker hour. The supply of mill worker hours is given by QS = 25W − 140. The local government would like for mill workers to be covered by health-care insurance; however, the mill does not currently provide coverage. For this reason, the local government imposes a $5 tax on the mill for each worker hour it hires. The government plans to use this tax revenue to purchase health-care insurance for the mill workers. What portion of the tax is paid for by mill workers (supply) and what portion is paid for by the mill (demand)? Mill workers pay 0% of the tax, while the mill pays 100% of the tax. This is because the local government is charging the mill for each worker hour hired. Mill workers pay 50% of the tax, while the mill pays 50% of the tax. The mill workers pay 26.32% of the tax imposed on the mill, while the mill pays 73.68% of the tax. The mill workers pay 73.68% of the tax imposed on the mill, while the mill pays 26.32% of the tax.

The mill workers pay 73.68% of the tax imposed on the mill, while the mill pays 26.32% of the tax.

A price ceiling is: a price regulation that sets the lowest price that can be paid legally for a good or service. a price regulation that sets a price at a level above equilibrium price. what you pay to have the roof on your house replaced. a price regulation that sets the highest price that can be paid legally for a good or service.

a price regulation that sets the highest price that can be paid legally for a good or service.

In 2009, the U.S. government imposed a 35% tax on tires imported from China. The original proposal was for a 55% tax. We know that, compared to a 35% tax, a 55% tax would: be either more or less efficient depending on the elasticities of supply and demand. have no impact on efficiency. be more efficient. be less efficient.

be less efficient.

If demand is inelastic and supply is elastic, and a tax is imposed on the market, which group will pay most of the tax? buyers Half will be paid by the seller and half by the buyer. It is impossible to answer this question without additional information about the specific market. sellers

buyers

The difference between the price consumers would be willing to pay for a good and the price they actually have to pay is called ____________.

consumer surplus

Consumer surplus measures the full benefit of the new product because it tells us how much: consumers use it. producers get paid for it above what they are willing to accept. consumers are willing to pay for it. consumers value the product over and above the price they pay.

consumers value the product over and above the price they pay.

The deadweight loss from a price ceiling will be larger as: demand becomes less elastic and supply becomes more elastic. demand becomes more elastic and supply becomes less elastic. demand and supply become less elastic. demand and supply become more elastic.

demand and supply become more elastic.

The price at which quantity demanded is reduced to zero is called the _____________.

demand choke price

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. If a price ceiling of $30 is imposed in this market, there will be: excess demand of 17.46. excess demand of 28.25. excess supply of 17.46. excess supply of 28.25.

excess demand of 28.25.

Demand is given by QD = 105 − 1.5P, where QD is in millions of tires per year. Supply is QS = 1.5873P − 15.873. If a price floor of $50 is imposed in this market, there will be: excess supply of 33.49. excess supply of 47.93. excess demand of 47.93. excess demand of 33.49.

excess supply of 33.49.

The _____ represented by the size of the _____ gets much bigger as the size of a tax becomes larger. benefit; transferred surplus inefficiency; transferred surplus inefficiency; deadweight loss benefit; deadweight loss

inefficiency; deadweight loss

Economists emphasize the importance of _____ in raising a society's standard of living. innovation and new products increased production increased consumption increased total surplus

innovation and new products

A subsidy causes a deadweight loss since people only make a purchase because the subsidy lowers the price. The amount they value the extra quantity is __________ it costs the government to move them to buy it.

less than

A subsidy causes a deadweight loss since people only make a purchase because the subsidy _____ the price. The amount they value the extra quantity is _____ than it costs the government to move them to buy it. lowers; more raises; less lowers; less raises; more

lowers; less

The difference between the price producers actually receive for their goods and the cost of producing them is called ____________.

producer surplus

Taxes drive a wedge between the price buyers pay and the price ___________ receive.

sellers

Economists emphasize the importance of innovation and new goods in raising society's: standard of living. price floors. price ceilings. quotas.

standard of living.

With all other factors held constant, the _____ the demand curve _____ the consumer surplus. flatter; the bigger slope of; has no effect on steeper; the bigger steeper; the smaller

steeper; the bigger

A payment by the government to a buyer or seller of a good or service is called a ___________.

subsidy

Consumer surplus is: the difference between the price consumers actually have to pay for a good and the price they would be willing to pay. the difference between the price producers actually receive and the price at which they are willing to sell their good or service. the difference between the price at which producers are willing to sell their good or service and the price they actually receive. the difference between the price consumers would be willing to pay for a good and the price they actually have to pay.

the difference between the price consumers would be willing to pay for a good and the price they actually have to pay.

The main determinant of the DWL from a tax as a share of the revenue it generates is how much: the quantity changes when the tax is added. the quantity traded increases when the tax is added. producer surplus is transferred to consumer surplus. consumer surplus is transferred to producer surplus.

the quantity changes when the tax is added.

Tax incidence is: who really bears the burden of a tax. always paid by the seller. always paid by the buyer. always paid half by the seller and half by the buyer.

who really bears the burden of a tax.

A general rule of thumb is that the deadweight loss of a tax rises: with the square root of the tax increase. with the square of the tax rate. with the cube of the tax increase. linearly with the tax increase.

with the square of the tax rate.