Econ Chapters 6 and 7

Consumer surplus is the area A) below the demand curve and above the market price B) below the demand curve and above the supply curve C) above the demand curve and below the market price D) below the supply curve and above the market price E) above the supply curve and below the market price

A) below the demand curve and above the market price

A price floor makes prices A) below the price floor illegal B) above the price floor illegal C) above the equilibrium price illegal D) below the equilibrium price illegal E) none of the above answers is correct

A) below the price floor illegal

The marginal cost of a good or service A) can be derived from the production possibilities frontier B) can be calculated from the marginal benefit of that good or service C) decreases as more of the good or service is produced D) graphs as a positively sloped curve, so it cannot be derived from the production possibilities frontier, which is downward sloping E) none of the above answers are correct

A) can be derived from the production possibilities frontier

Mandy saved her allowance to buy a 12 pack of cream soda. When Mandy's brother saw the soda, he took four. Sodas were allocated between Mandy and her brother through A) force B) majority rule C) personal characteristics D) first come first served E) sharing equally

A) force

Seventy percent of Austin's chess club wanted to purchase new chess sets and thirty percent did not. The club purchased the sets. Which method of allocation best describes the choice to purchase the sets? A) majority rule B) force C) command D) sharing equality E) lottery

A) majority rule

Honda will sell its vehicles to anyone who wants to and can buy one. Honda is using a ____ allocation method. A) market price B) majority rule C) command D) contest E) first come first served

A) market price

Suppose the equilibrium price of cotton is $100 per ton. A price support set at ____ than $100 per ton ______. A) more; creates a surplus that the government must buy B) less; increases a producer surplus C) more; increases consumer surplus D) less; increases consumer surplus E) more; decreases marginal cost

A) more; creates a surplus that the government must buy

To achieve allocative efficiency, an economy A) must produce on its PPF B) must leave some resources unemployed C) must have increases in technology D) does not necessarily need to be production efficient E) can produce either on or within its PPF

A) must produce on its PPF

The buyers pay all of the tax when the demand is A) perfectly inelastic B) unit elastic C) more inelastic than the supply D) more elastic than the supply E) perfectly elastic

A) perfectly inelastic

Neither the demand nor the supply of gasoline is perfectly elastic or inelastic. When the government increases the federal tax on gasoline, the effect on buyers is that the price they pay A) rises B) falls C) does not change D) rises if the demand is inelastic and falls if the demand is elastic E) rises if the supply is inelastic and falls if the supply is elastic

A) rises

When the marginal benefit and marginal cost of sodas are equal, then A) the allocatively efficient amount of sodas is being produced B) more sodas should be produced to reach the allocatively efficient quantity C) the allocatively inefficient amount of sodas is being produced D) the production of sodas might be allocatively inefficient but it is definitely production inefficient E) fewer sodas should be produced to reach the allocatively efficient quantity

A) the allocatively efficient amount of sodas is being produced

The incidence of a tax refers to A) the division of the burden of a tax between buyers and sellers B) the deadweight loss that a tax generates C) the division of the burden of a tax between the public and the government D) the inefficiency of a tax E) the revenue collected by government because of a tax

A) the division of the burden of a tax between buyers and sellers

The demand curve for pizza is downward sloping and the supply curve is upward sloping. If the government imposes a $2 tax on a pizza, ____ the tax. A) only producers pay B) both producers and consumers pay C) neither producers nor consumers pay D) only consumers pay E) the government pays

B) both producers and consumers pay

In a competitive labor market, a minimum wage law set above the equilibrium wage rate A) creates a shortage of labor B) creates a surplus of labor C) has no impact D) lowers the wage rate paid to workers E) causes equality between the quantity of labor supplied and the quantity demanded

B) creates a surplus of labor

If neither the demand nor supply of a good is perfectly elastic or inelastic, a tax on the good ____ consumer surplus and ____ producer surplus. A) increases; decreases B) decreases; decreases C) decreases; does not change D) increases; increases E) decreases; increases

B) decreases; decreases

University of Colorado reserves 5,000 free tickets to each home football game for students. Students must stand in line to receive their ticket. Football tickets are allocated through which method? A) market price B) first come first served C) force D) personal characteristics E) sharing equally

B) first come first served

A rent ceiling set below the equilibrium rent decreases the quantity of housing supplied because A) the supply of housing increases B) landlords of previously barely profitable apartments refuse to rent them C) the supply curve of housing immediately shifts leftward D) demand for housing will increase E) fewer tenants will search for housing

B) landlords of previously barely profitable apartments refuse to rent them

In 2009, tickets to a Presidential Town Hall meeting were distributed through a random selection of those who registered on a website. The tickets were allocated by which method? A) first come first served B) lottery C) majority rule D) contest E) personal characteristics

B) lottery

The producer surplus is found by subtracting the ____ and then adding the difference for all units sold. A) price from marginal cost B) marginal cost from price C) marginal cost from marginal benefit D) marginal benefit from total benefit E) deadweight loss from the price

B) marginal cost from price

For resource use to be efficient, when the marginal benefit of a slice of pizza exceeds the marginal cost ____. A) allocative efficiency is reached only if the marginal benefit exceeds the marginal cost by as much as possible B) more slices of pizza should be produced C) no more slices of pizza should be produced D) fewer slices of pizza should be produced E) none of the above answers is correct

B) more slices of pizza should be produced

Neither the demand nor the supply of gasoline is perfectly elastic or inelastic. When the government increases the federal tax on gasoline, the effect on buyers is that the price they pay A) falls B) rises C) does not change D) rises if the demand is inelastic and falls if the demand is elastic E) rises if the supply is inelastic and falls if the supply is elastic

B) rises

Imposing a sales tax on sellers of a product has an effect that is similar to which of the following? A) a decreases in consumers' preferences for the good B) an increase in demand for the good C) an increase in the costs of production D) a decrease in people's willingness to work E) anything that decreases the demand and shifts the demand curve leftward

C) an increase in the costs of production

Suppose the demand for barley is perfectly elastic. The supply curve of barley is upward sloping. If a tax is imposed on barley, A) the tax is split evenly between barley buyers and sellers B) barley buyers pay the entire tax C) barley sellers pay the entire tax D) the government pays the entire tax E) who pays the tax depends on whether the government imposes the tax on barley sellers or on barley buyers

C) barley sellers pay the entire tax

Consumer surplus is the area A) below the supply curve and above the market price B) above the supply curve and below the market price C) below the demand curve and above the market price D) below the demand curve and above the supply curve E) above the demand curve and below the market price

C) below the demand curve and above the market price

When a price ceiling below the equilibrium price is imposed on a good, production of the good A) does not change B) either increases or decreases depending on whether the supply of the good increases or decreases when the price ceiling is imposed C) decreases D) is frozen at the pre ceiling level E) increases

C) decreases

A sales tax imposed on sellers of a good A) decreases both the demand and the supply and shifts both the demand and supply curves leftward B) decreases the demand and shifts the demand curve rightward C) decreases the supply and shifts the supply curve leftward D) decreases the supply and shifts the supply curve rightward E) has no effect on either the demand or the supply

C) decreases the supply and shifts the supply curve leftward

When a price support is set below the equilibrium price, producers ____ the quantity supplied and consumers ____ the quantity demanded. A) increase; decrease B) decrease; increase C) do not change; do not change D) decrease; decrease E) increase; increase

C) do not change; do not change

When a tax is imposed on a good, at the after-tax equilibrium the marginal benefit of the last unit produced ____ the marginal cost. A) can be calculated but is not comparable to B) equals C) is greater than D) is less than E) the premise of the question is incorrect because after a tax is imposed, it becomes impossible to determine the marginal benefit and the marginal cost

C) is greater than

A price ceiling in the market for fuel oil that is below the equilibrium price will A) increase the supply of fuel oil B) lead to the quantity supplied of fuel oil exceeding the quantity demanded C) lead to the quantity demanded of fuel oil exceeding the quantity supplied D) decreases the demand for fuel oil E) have no effect in the market for fuel oil

C) lead to the quantity demanded of fuel oil exceeding the quantity supplied

Marginal cost is the opportunity cost of producing A) the first unit and only the first unit B) every unit possible C) one more unit of a good or service D) zero units E) none of the above answers is correct

C) one more unit of a good or service

The marginal benefit of a taco is measured by A) the amount of another good a person must give up to get one more taco B) the price of the taco C) the amount of another good a person is willing to give up to get one more taco D) a point on the PPF E) the opportunity cost of producing another taco

C) the amount of another good a person is willing to give up to get one more taco

Hester owns an ice cream shop. It costs her $2 per cone to make 10 ice cream cones. If she sells 10 cones for $4 each, her producer surplus on the 10 cones is equal to A) $40 B) $2 C) $4 D) $20 E) $10

D) $20

Marginal benefit is the A) opportunities given up to get one more unit of a good or service B) minimum amount of other goods or services we are willing to give up C) total benefits we receive from consuming a good or service D) additional benefit we receive from consuming one more unit of a good or service E) the benefit we receive from consuming one more unit of a good or service minus the cost of the producing one more unit of the good or service

D) additional benefits we receive from consuming more unit of a good or service

A price floor A) does not create a black market if it is set above the equilibrium price B) changes the equilibrium price if it is imposed in black markets C) changes the price and quantity if it is set below the equilibrium price D) changes the price and quantity if it is set above the equilibrium price E) changes the price and quantity only if it equals the equilibrium price

D) changes the price and quantity if it is set above the equilibrium price

The deadweight loss from a tax A) equals the amount collected as revenue from the tax B) is the tax revenue the government collects when people die C) is the split of a tax between the amount paid and the amount collected D) is called the excess burden of the tax E) equals the amount collected as revenue from the tax plus the excess burden of the tax

D) is called the excess burden of the tax

A price support lead to inefficiently because A) the price changed is less than the equilibrium price B) producers must pay a subsidy to the government C) producer surplus is less than the consumer surplus D) output is more than the efficient, equilibrium quantity E) the marginal benefit of the last unit produced is larger than the marginal cost

D) output is more than the efficient, equilibrium quantity

Suppose the demand for peaches in South Carolina is perfectly elastic. If the supply curve is upward sloping and a tax is imposed on peaches from South Carolina, then A) peach buyers and sellers evenly split the tax B) peach buyers pay all of the tax C) the government does not collect any revenue from the tax D) peach sellers pay all of the tax E) the tax does not change the equilibrium quantity of peaches

D) peach sellers pay all of the tax

In the market for cotton, suppose the equilibrium price is $10 per ton and the equilibrium quantity is 100 tons, If the government then imposes a price support of $20 per ton, A) marginal cost decreases B) the deadweight loss is decreases C) consumer surplus increases D) the market price increases E) the market price decreases

D) the market price increases

Neither the supply of nor demand for a good is perfectly elastic or perfectly inelastic. So, imposing a tax on the good results in a ____ in the price received and kept by sellers and a ____ in the price paid by buyers. A) rise; rise B) fall; fall C) no change; rise D) rise; fall E) fall; rise

E) fall; rise

To achieve allocative efficiency, an economy A) must leave some resources unemployed B) must have increases in technology C) does not necessarily need to be production efficient D) can produce either on or within its PPF E) must produce on its PPF

E) must produce on its PPF