Econ midterm II
Wendy is willing to pay $50 for a concert ticket and Bruce would like to receive $25. If the market price is $40 for this transaction, then the total surplus would be $15.
false
When a tax is levied on buyers, consumer surplus decreases and producer surplus remains unchanged
false
When market activity generates a negative externality, the level of output in the market equilibrium is lower than the socially optimal level.
false
a buyer is willing to buy a product at a price greater than or or equal to his willingness to pay
false
a tax on insulin is likely to cause a very large deadweight loss to society
false
consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it
false
consumer surplus measures the total benefit to society of participating in a market
false
corrective taxes cause deadweight losses, reducing economic efficiency
false
economists agree that trade ought to be restricted if free trade means that domestic jobs might be lost because of foreign competition
false
economists believe that carbon taxes create deadweight loss
false
economists believe that the optimal level of pollution is zero
false
economists feel that national security concerns never provide a legitimate rationale for trade restrictions
false
government subsidized scholarships are an example of a government policy aimed at correcting negative externalities associated with education.
false
if rosa is willing to pay $450 for hockey tickets and has consumer surplus of $175, the price of the tickets is $625
false
if the government imposes a $3 tax in a market, the equililbrium price will rise by $3
false
if the government imposes a binding price floor in a market, then the consumer surplus in that market will increase
false
if the size of a tax doubles, the deadweight loss doubles
false
if the size of a tax triples, the deadweight loss increases by a factor of six
false
if the world price of a good is greater than the domestic price in a country that can engage in international trade, then that country becomes an importer of that good
false
joel has a 1996 mustang which he sells to Susie, an avid car collector. Susie is pleased since she paid $8000 for the car but would have been willing to pay $11000 for the car. Susie's consumer surplus is $2000
false
let p represent price; let Qs represent quantity supplied; and assume the equation of the supply curve is P =10 +1/4Qs. If 80 units of the good are produced and sold,then producer surplus amounts to $1,200.
false
negative externalities lead markets to produce a smaller quantity of a good than is socially desirable, while positive externalities lead markets to produce a larger quantity of a good than is socially desirable
false
organizers of an outdoor concert in a park surrounded by residential neighborhoods are likely to consider the noise and traffic cost to residential neighborhoods when they assess the financial viability of the concert venture
false
suppose that Austrailia imposes a tariff on imported beef. If the increase in producer surplus is $100 million, the increase in tariff revenue is $200 million, and the reduction in consumer surplus is $500 million, the deadweight loss of the tariff is $300 million
false
the greater the elasticity of demand, holding elasticity of supply constant, the smaller the deadweight loss of a tax
false
the lower the price, the lower the consumer surplus, all else equal
false
the more inelastic are demand and supply, the greater is the deadweight loss of a tax
false
the tax on gasoline causes deadweight losses, as is the case with all taxes
false
to determine the optimal level of output in a market with negative externalitiies, a benevolent social planner would look for the level of output at which private cost equals private value
false
total surplus in a market can be measured as the area below the supply curve plus the area above the demand curve, up to the point of equilibrium
false
trade decisions are based on the principle of absolute advantage
false
trade raises the economic well-being of a nation in the sense that the gains of the winners exceed the losses of the losers. This statement is correct for a nation that exports manufactured goods, but it is not correct for a nation that imports manufactured goods
false
when a country allows international trade and becomes an importer of a good, domestic producers of the good are better off, and domestic consumers of the good are worse off
false
when a good is taxed, the tax revenue collected by the government equals the decrease in the welfare of buyers and sellers caused by the tax
false
when a tax is imposed on buyers, consumer surplus decreases but producer surplus increases
false
when a tax is imposed on sellers, producer surplus decreases but consumer surplus increases
false
when markets open up to international trade, we know that consumer surplus will rise
false
without free trade, the domestic price of a good must be equal to the world price of a good.
false
producer surplus is the cost of production minus the amount a seller is paid
false (what a seller would accept minus what products are worth)
We can conclude that international trade is beneficial because regardless of whether the country imports or exports a good, the overall increase in well-being outweighs the losses associated with trade
true
When a driver enters a crowded highway he increases the travel times of all other drivers on the highway. This is an example of a negative externality
true
a congestion toll imposed on a highway driver to force the driver to take into account the increase in travel time she imposes on all other drivers is an example of internalizing the externality
true
a corrective tax places a price on the right to pollute
true
buyers and sellers neglect the external effects of their actions when deciding how much to demand or supply
true
consumer surplus can be measured as the area between the demand curve and the equilibrium price
true
deadweight loss measures the decrease in total surplus that results from a tariff or quota
true
economists use the government's tax revenue to measure the public benefit from a tax
true
efficiency is related to the size of the economic pie, whereas equality is related to how the pie gets sliced and distributed
true
even if possible, it would be inefficient to prohibit all polluting activity
true
for any given quantity, the price on a demand curve represents the marginal buyer's willingness to pay
true
free markets allocate (a) the supply of goods to the buyers who value them most highly and (b) the demand for goods to the sellers who can produce them at least cost
true
free trade causes job losses in industries in which a country does not have a comparitive advantage, but it also casues job gains in industries in which the country has a comparitive advantage
true
government can be used to solve externality problems that are too costly for private parties to solve
true
if a tariff is placed on watches, the price of both domestic and imported watches will rise by the amount of the tariff
true
if the government removes a binding price ceiling in a market, then the producer surplus in that market will increase
true
if the social value of producing robots is greater than the private value of producing robots, the private market produces too few robots
true
in a competitive market, sales go to those producers who are willing to supply the product at the lowest price
true
in a market characterized by externalities, the market equilibrium fails to maximize the total benefit to society as a whole
true
in order to calculate consumer surplus in a market, we need to know willingness to pay and price
true
markets sometimes fail to allocate resources efficiciently
true
normally, noth buyers and sellers of a good become worse off when the good is taxed
true
If Belgium exports chocolate to the rest of the world, then Belgian chocolate producers benefit from higher producer surplus, Belgian chocolate consumers are worse off because of lower consumer surplus, and total surplus in Belgium increases because of the exports of chocolate.
true
suppose there is an increase in supply that reduces market price. Consumer surplus increases because (1) consumer surplus received by existing buyers increases and (2) new buyers enter the market
true
tariffs cause deadweight loss because they move the price of an imported product closer to the equilibrium without trade, thus reducing the gains from trade
true
taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade
true
the cost of production plus producer surplus is the price a seller is paid
true
the government can internalize externalities by taxing goods that have negative externalities and subsidizing goods that have positive externalities
true
the idea that tax cuts would increase the quantity of labor supplied, thus increasing tax revenue, became known as supply-side economics
true
the more elastic are supply and demand in a market, the greater are the distortions caused by a tax on that market, and the more likely it is that a tax cut in that market will raise tax revenue
true
the nation of Aviana soon will abadon its no trade policy and adopt a free trade policy. If the world price of goose meat is $3 per pound and the domestic price of goose meat without trade is $2 per pound, then Aviana should export goose meat.
true
the nation of Spritzland used to prohibit international trade, but now trade is allowed, and Spritzland is exporting wristwatches. Relative to the previous no-trade situation, total surplus in the market for wristwatches in Spritzland has increased
true
the patent system gives firms greater incentive to engage in research and other activities that advance technology
true
the social cost of pollution includes the private costs of the producers plus the costs to those bystanders adversely affected by the pollution
true
total surplus - value to buyers =costs to sellers
true
when a country that imports shoes imposes a tariff on shoes, buyers of shoes in that country become worse off and sellers of shoes in that country become better off
true
when demand increases so that market price increases, producer surplus increases because (1) producer surplus received by existing sellers increases, and (2) new sellers enter the market
true
when firms internalize a negative externality, the market supply curve shifts to the left.
true
when markets open up to international trade, we know that total surplus will rise
true
when the government imposes taxes on buyers and sellers of a good, society loses some of the benefits of market efficiency
true
