ECON 300 Ch. 3 Quiz

When demand and supply are linear, consumer surplus is equal to:

The area between the demand curve and the price, out to the quantity that is exchanged.

When demand and supply are linear, producer surplus is equal to:

The area between the supply curve and the price, out to the quantity that is exchanged.

If the government provides a certain amount of a good to consumers in addition to what the private market provides:

market price will fall, and market quantity will rise by less than the additional amount provided by the government.

As the size of a per-unit tax increases:

the deadweight loss resulting from the tax gets bigger.

If a tax and a quota raise prices by the same amount:

the tax and the quota result in the same amount of deadweight loss.

When demand and supply are linear, consumer surplus is calculated as the area of a triangle:

with a base equal to the quantity sold and a height equal to the difference between the market price and the demand choke price.

When demand and supply are linear, producer surplus can be calculated:

with a base equal to the quantity sold and a height equal to the difference between the market price and the supply choke price.

If the supply equation for a good is QS = 400P − 8,000 and the price is 100, then producer surplus is:

$1.28 million.

If the demand equation for a good is QD = 800 − 2P and price increases from $150 to $200, then consumer surplus decreases by:

$22,500.

https://d2l.arizona.edu/content/enforced/785531-319-2192-5W1ECON300101/csfiles/home_dir/Screen%20Shot%202016-05-25%20at%2010.51.59%20AM.png?_&d2lSessionVal=lGQvTQUtz3YocDypxMbKWEv3v In this graph, producer surplus is equal to:

12.

http://assessments.bfwpub.com/QM4PRODUCTION_res/topicresources/1657297977/image002.jpg In this graph, consumer surplus is equal to:

32.

When demand is inelastic and supply is elastic:

buyers bear most of the economic burden of a tax.

A binding price ceiling:

causes a shortage, has an uncertain effect on consumer surplus, and reduces producer surplus.

A binding price floor:

causes a surplus, reduces consumer surplus, and has an uncertain effect on producer surplus.

All else equal, a negative supply shock:

causes consumer surplus to decrease but has an uncertain effect on producer surplus.

If more substitutes for pens become available:

consumer surplus for pens decreases.

If the legal burden of a tax is passed from sellers to buyers:

deadweight loss is unchanged.

If the government subsidizes the production of a good:

deadweight loss results because too much of the good is exchanged.

The government wants to transfer welfare from buyers to sellers by collecting a $1 tax on a good from buyers and subsidizing sellers $1 for each unit of the good sold. This policy will:

decrease the equilibrium price

A per-unit tax on a good that sellers are legally responsible for paying:

decreases supply, increases the equilibrium price, and decreases consumer surplus.

When a price ceiling is binding, the resulting deadweight loss tends to be smaller than the resulting transfer from producers to consumers if:

demand and supply are more price inelastic.

A nonbinding price floor:

does not cause any deadweight loss.

All else equal, a demand increase:

has an uncertain effect on consumer surplus but causes producer surplus to increase.

A quota limiting the production of a good to a quantity less than the market equilibrium quantity:

lowers consumer surplus, may cause producer surplus to increase, and creates a deadweight loss.

When demand is elastic and supply is inelastic:

sellers bear most of the economic burden of the tax.