Econ Micro exam 2

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The consumer surplus with the tax is

$2,000

At the equilibrium price, producer surplus is

$2,500

What is the consumer surplus if the price is $100

$2,500

The total surplus without the tax is

$20,000

The price paid by buyers after the tax is imposed is

$24

The per-unit burden of the tax on the sellers is

$2

The loss of producer surplus as a result of the tax is

$3

If a consumer places a value of $20 on a particular good and if the price of the good is $25, then the

Consumer does not purchase the good.

Suppose the government imposes a tax of P'-P'''. The area measured by J represents

Consumer surplus after the tax

When a tax is placed on the buyers of a product, buyers pay

More and sellers receive less than they did before the tax.

Suppose that a tax is placed on books. If the sellers pay the majority of the tax, then we know that the

Supply is more inelastic than the demand.

Suppose the government imposes a tax of P'-P'''. The area measured by K+L represents

Tax revenue

When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand

always becomes larger

When the price is P1, consumer surplus is

A+B+C

Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 4 if the price is

$1,400

The tax results in a dead weight loss that amounts to

$1,500

In the after-tax equilibrium, government collects

$1,680 in tax revenue; of this amount, $1,260 represents a burden on buyers and $420 represents a burden on sellers

Chad is willing to pay $5 to get his first cup of morning latte. He buys a cup from a vendor selling latte for $3.75 per cup. Chad's consumer surplus is

$1.25

The amount of tax revenue received by the government is

$10,000

Using the midpoint method, in which range is demand most elastic?

$12 to $15

The producer surplus without the tax is

$12,000

Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $250. His consumer surplus is

$150

At the equilibrium price, total surplus is

$3,500

At Nick's Bakery, the cost to make a cheese danish is $1.50 per danish. As a result of selling ten danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his danishes for

$3.50

If the government imposes a price ceiling of $50 in this market, then producer surplus will decrease by

$300

The per-unit burden of the tax on sellers is

$300

If the government imposes a price floor of $100 in this market, then consumer surplus will decrease by

$325

The loss of consumer surplus as a result of the tax is

$4.50

If the price is $20, then consumer surplus in the market is

$45, and Quilana, Wilbur, and Ming-la purchase the good

The amount of tax revenue received by the government is

$5

The amount of dead weight loss as a result of the tax is

$5,000

Which of the following price ceilings would be binding in this market?

$6

At which price would a price floor be binding?

$7

If the equilibrium price is $200, what is the producer surplus?

$7,500

At the equilibrium price, consumer surplus is

$800

Using the midpoint method, the income elasticity of demand for good Y is

-2.33, and good Y is an inferior good.

Using the midpoint method, what is the price elasticity of demand between $0 an $3?

0.11

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

0.6 percent increase in the quantity demanded.

When the price of a bracelet was $28 each, the jewelry shop sold 128 per month. When it raised the price to $32 each, it sold 112 per month. Using the midpoint method, the price elasticity of demand for bracelets is

1

Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000 packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. using the midpoint method, the price elasticity of demand is about.

1, 43, and an increase in the price will cause hotels' total revenue to decrease.

Using the midpoint method, if the price falls from $150 to $100, the absolute value of the price elasticity of demand is

1.1

If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about

1.60, and supply is elastic.

Using the midpoint method, what is the price elasticity of supply between $4 and $5?

1.80

If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is

2

A manufacturer produces 400 units when the market price is $10 per unit and produce 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about

2.2

Using the midpoint method, the price elasticity of demand between point X and Y is

2.5

If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a

20 percent decrease in the quantity demanded.

Health's income elasticity of demand for concerts is 2. All else equal, this means that if his income increases by 10 percent, he will purchase tickets for

20 percent more concerts.

How many units of the good are sold after the imposition of the price floor?

3

Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by

40%

How many units of the good are sold after the imposition of the price floor?

5

Kristi and Rebecca sell lemonade on the corner. It costs them 7 cents to make each cup. On a certain day, they sell 40 cups. Their producer surplus for the amounts of $19.20. Kristi and Rebecca sold each cup for

55 cents

In which of these instances is demand said to be perfectly inelastic?

A decrease in price of 2% causes an increase in quantity demanded of 0%

Which of the following would likely have the smallest dead weight loss relative to the tax revenue?

A head tax (that is, a tax everyone must pay regardless of what one does or buys)

A price ceiling is

A legal maximum on the price at which a good can be sold

If a binding price floor is imposed on the market for eBooks, then

A surplus of eBooks will develop

A price floor will be binding only if it is set

Above the equilibrium price.

When a tax is imposed in a market, it will

Affect the behavior of both buyers and sellers.

Suppose the equilibrium price of a physical examination by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling,

All of the above are correct

The price ceiling

All of the above are correct

A price floor is

All of the above are correct.

If government imposes a price floor at $9, then the price floor causes

All of the above are correct.

The incidence of a tax is

Always determined by the interaction of the demand and supply side of the market

When demand is inelastic, an increase in price will cause

An increase in total revenue

The dead weight loss of the tax is represented by the

Area of the triangle bounded by the points A.B. and C

A price ceiling is binding when it is set

Below the equilibrium price, causing a shortage.

A surplus results when a

Binding price floor is imposed on a market.

A good will have a more inelastic demand, the

Broader the definition of the market

If demand is price inelastic, then

Buyers do not respond much to a change in price

When the price rises from P1 to P2, which of the following statements in not true?

Buyers place a higher value on the good after the price increase.

If a tax is imposed on a market with inelastic demand and elastic supply, then

Buyers will bear most of the burden of the tax.

If the price of the product is $130, then who would be willing to purchase the product

Calvin and Sam

If the price is $1,150, who would be willing to supply the product?

Carlos, Dianne, and Evaline

The original tax can be represented by the vertical distance AB. Suppose the government is deciding whether to lower the tax to CD or raise it to FG. Which of the following statements is correct?

Compared to the original tax, the larger tax will decrease tax revenue and increase dead weight loss.

If the price of Vanilla Coke is $6.90, who will purchase the good?

David and Laura

The decrease in total surplus that results from a market distortion, such as a tax, is called a

Dead weight loss

The imposition of the tax causes the price received by sellers to

Decrease by $2

The imposition of the tax causes the quantity sold to

Decrease by 1 unit

If the government levies a $500 tax per car on sellers of cars, then the price received by sellers of cars would

Decrease by less than $500

If the government changed the per-unit tax from $5.00 to $7.50, then the price paid by buyers would be $10.50, the price received by sellers would be $3, and the quantity sold in the market would be 0.5 units. Compared to the original tax rate, this higher tax rate would

Decrease government revenue and increase the dead weight loss from the tax

When the price falls from P2 to P1, producer surplus

Decreases by and amount equal to A+B

When the price rises from P1 to P2, consumer surplus

Decreases by and amount equal to B+C

If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the

Demand for the good is said to be inelastic

Who is a marginal seller when the price is $1,100?

Dianne

A tax imposed on the sellers of a good will lower the

Effective price received by sellers and lower the equilibrium quantity

Using the midpoint method, if the price falls from $200 to $150, the price elasticity of demand is

Elastic

When the price of an eBook is $15, the quantity demanded is 400 eBooks per day. When the price falls to $10, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is

Elastic

The dead weight loss form a $3 tax will be largest in a market with

Elastic supply and elastic demand

Demand is said to have unit elasticity if the price elasticity of demand is

Equal to 1

The midpoint method is used to compute elasticity because it

Gives the same answer regardless of the direction of change.

A good will have a more elastic demand, the

Greater the availability of close substitutes

If the price decreased from $36 to $12, total revenue would

Increase by $4800, and demand is elastic between points X and Z

Sellers' total revenue would increase if the price

Increased from $6 to $9

An increase in price causes an increase in total revenue when demand is

Inelastic

There are very few, if any, good substitutes for automotive tires. Therefore, the demand for automotive tires would tend to be

Inelastic

To say that a price ceiling is nonbinding is to say that the price ceiling

Is set above the equilibrium price.

Suppose the market is initially in equilibrium. Then the government imposes a price control, as represented by the solid horizontal line on the graph. If the price control is a price floor, then the price control

Means that some firms will not be able to sell all that they want

The price that sellers effectively receive after the tax is imposed is

P1

The equilibrium price before the tax is imposed is

P2

The per-unit burden of the tax on sellers is

P2-P1

The per unit burden of the tax on buyers is

P3-P2

For which pairs of good is the cross-price elasticity most likely to be negative?

Peanut butter and jelly

For which pairs of goods is the cross-price elasticity most likely to be positive?

Pens and Pencils

Economists compute the price elasticity of demand as the

Percentage change in quantity demanded divided by the percentage change in price

Which of the following expressions represents a cross-price elasticity of demand?

Percentage change in quantity demanded of bread divided by percentage change in price of butter

Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be

Positive

A legal minimum on the price at which a good can be sold is called a

Price floor

A tax imposed on the buyers of a good will raise the

Price paid by buyers and lower the equilibrium quantity

Which of the following is not a function of prices in a market system?

Prices ensure an equal distribution of goods and services among consumers

A perfectly inelastic demand implies that buyers

Purchase the same amount as before when the price rises or falls.

If the market price for the good is $20, who will purchase the good?

Quilana, wilbur and Ming-la only

A tax imposed on the seller s of a good will

Raise the price buyers pay and lower the effective price sellers receive.

If the market price is $105

Sam's consumer surplus is $30 and total consumer surplus is $90

A seller is willing to sell a product only if the seller receives a price that is at least as great as the

Seller's cost of production

Which of the following statements is correct?

Supply curve C is more inelastic than supply curve D

If a price floor is not binding, then

The equilibrium price is above the price floor.

Based upon the diagram.

The incidence of the tax falls more heavily on sellers.

Which demand curve is perfectly inelastic?

The line that is perfectly vertical

Which of the following price changes would result in no change in sellers' total revenue?

The price decreases from $24 to $18

The amount of dead weight loss that results from a tax of a given size is determined by

The price elasticities of demand and supply

The price elasticity of supply measures how much

The quantity supplied responds to changes in the price of the good.

The Laffer curve relates

The tax rate to tax revenue raised by the tax

we can say that the allocation of resources is efficient if

Total surplus is maximized

Total surplus in a market is equal to

Value to buyers-costs of sellers.

Which of the following statements is not correct?

When the price is $6, there is a surplus of 8 units.

At the equilibrium price of a good, the good will be sold by those sellers

Whose cost is less than price.

If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is

Zero, and the supply curve is vertical.

If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?

a 5 percent increase in the price of the good

A government-imposed price floor is $12 in this market results in

a surplus of 4 units

If the solid horizontal line on the graph represents a price floor, than the price floor is

binding and creates a surplus of 60 units of the good

When a tax is placed on the buyers of lemonade, the

burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal.

When quantity demanded responds strongly to changes in price, demand is said to be

elastic

Suppose that 50 ice cream cones are demanded at a particular price. If the price of ice cream cones rises from that price by 4 percent, the number of ice cream cones demanded falls to 46. Using the midpoint approach to calculate the price elasticity of demand, it follows that the

demand for ice cream cones in this price range is elastic

When the price of chai tea lattes is $5, Maxine buys 20 per month. When the price is $4, she buys 30 per month. Maxine's demand for chai tea Lattes is

elastic, and her demand curve would be relatively flat

An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 per minute. Using the midpoint method, supply is

elastic, and the price elasticity of supply is 1.74

A government-imposed price of $6 in this market could be an example of i binding price ceiling ii non-binding price ceiling iii binding price floor iv non-binding price floor

i and iv only

If price increases form $10 to $20, total revenue will

increase by $120 so demand must be inelastic in the price range.

If the price elasticity of supply is 0.8, and the price increased by 5%, quantity supplied would

increases by 4%

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

inelastic

The dead weight loss from a tax

is larger, the larger is the amount of the tax per unit

Consumer surplus

is measured using the demand curve for a product

Consumer surplus

is the amount a consumer is willing to pay minus the amount the consumer actually pays.

Willingness to pay

measures the value that a buyer places on a good

Based upon the diagram

more of the incidence of the tax is on sellers, since supply is more inelastic than demand.

Which supply curve represents perfectly inelastic supply?

s1 the vertical one

After a binding price floor becomes effective,

smaller quantity of the good is bought and sold

Consumer surplus is

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

Which demand curve is perfectly elastic?

the line that is perfectly horizontal

If a price ceiling is not binding, then

there will be no effect on the market price or quantity sold.

Which of the following is likely to have the most price inelastic demand?

toothpaste


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