ECON Exam #2

The United States has imposed taxes on some imported goods that have been sold here by foreign countries at below their cost of production. These taxes

harm the United States as a whole, because they reduce consumer surplus by an amount that exceeds the gain in producer surplus and government revenue

Trade enhances the economic well-being of a nation in the sense that

trade results in an increase in total surplus

Suppose the government has imposed a price floor on cellular phones. Which of the following events could transform the price floor from one that is binding to one that is not binding?

traditional land line phones become more expensive

When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy

producer surplus increases and total surplus decreases in the market for that good

A supply curve can be used to measure producer surplus because it reflects

sellers' costs

A binding price floor will reduce a firm's total revenue

when demand is elastic

When a binding price ceiling is imposed on a market to benefit buyers

some buyers benefit, and some buyers are harmed

if a price ceiling is binding then

the binding price ceiling is below equilibrium

Which of the following quantities decrease in response to a tax on a good?

the equilibrium quantity in the market for the good, producer surplus, and the well-being of buyers of the good

A seller's willingness to sell is

- measured by the seller's cost of production - related to her supply curve, just as a buyer's willingness to buy is related to his demand curve - less than the price received if producer surplus is a positive number

Which of the following will cause a decrease in producer surplus?

income increases and buyers consider the good to be inferior

If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would

increase by less than $1,000

Raisin bran and milk are complementary goods. A decrease in the price of raisins will

increase consumer surplus in the market for raisin bran and increase producer surplus in the market for milk

The nation of Falconia forbids international trade. In Falconia, you can obtain a computer by trading 3 bicycles. In other countries, you can obtain a computer by trading 5 bicycles. These facts indicate that

If Falconia were to allow trade, it would export computers

Suppose consumer income increases, If grass seed is a normal good, the equilibrium price of grass seed will

increase, and producer surplus in the industry will increase

If the government removes a binding price ceiling from a market, then the price paid by buyers will

increase, and the quantity sold in the market will increase

Suppose a country begins to allow international trade in steel. Which of the following outcomes will be observed regardless of whether the country finds itself importing steel or exporting steel?

The sum of consumer surplus and producer surplus for domestic traders of steel increases

Which of the following will cause an increase in consumer surplus?

a technological improvement in the production of the good

Producer surplus is the area

below the price and above the supply curve

Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will increase the price paid by buyers of picture frames by

between %0.50 and $1

The demand for salt is inelastic, and the supply of salt is elastic. The demand for caviar is elastic, and the supply of caviar is inelastic. Suppose that a tax of $1 per pound is levied on the sellers of salt, and a tax of $1 per pound is levied on the buyers of caviar. We would expect that most of the burden of these taxes will fall on

buyers of salt and sellers of caviar

Suppose a certain country imposes a tariff on a good. Which of the following results of the tariff is possible?

consumer surplus decreases by $200; producer surplus increases by $100; and government revenue from the tariff amounts to $50

If the government removes a binding price floor from a market, then the price paid by buyers will

decrease, and the quantity sold in the market will increase

A rough in California destroys many red grapes. As a result of the drought, the consumer surplus in the market for red grapes

decreases, and the consumer surplus in the market for red wine decreases

When a country allows trade and becomes an exporter of a good

the gains of domestic producers of the good exceed the losses of the domestic consumers of the good

Which of the following statements is correct regarding the imposition of a tax on gasoline?

the incidence of the tax depends upon the price elasticity of demand and supply

When a country allows trade and becomes an exporter of a good, which of the following is NOT a consequence?

the losses of domestic consumers of the good exceed the gains of domestic producers of the good

Suppose the government has imposed a price ceiling on laptop computers. Which of the following events could transform the price ceiling from one that is not binding into one that is binding?

the number of firms selling laptop computers decreases

If the price floor is binding, then

the price floor is above equilibirum

Which of the following will cause an increase in producer surplus?

the price of a subsitiute increases

If the current allocation of resources in the market for hammers is inefficient, then it must be the case that

the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources