Exam 2

Refer to Figure 7-8. If the government imposes a price ceiling of $80 in this market, then, assuming those with the highest willingness to pay purchase the good, consumer surplus will be

$1,500.

Refer to Figure 5-14. Over which range is the supply curve in this figure the least elastic

$220 to $430

Refer to Figure 7-8. At the equilibrium price, consumer surplus is

1,225

Refer to Figure 7-26. At the equilibrium price, consumer surplus is

900

Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,

both

When a tax is placed on the sellers of energy drinks, the

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

the quantity sold in a market will increase if the government

decreases a binding price floor in that market.

The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate

decreases, and producer surplus decreases.

Refer to Figure 5-8. An increase in price from $15 to $20 would

. decrease total revenue by $500.

Refer to Figure 6-25. How much tax revenue does this tax generate for the government

150

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is

175

Refer to Figure 7-15. When the price is P1, producer surplus is

C

Dallas buys strawberries, and he would be willing to pay more than he now pays. Suppose that Dallas has a change in his tastes such that he values strawberries more than before. If the market price is the same as before, then

Dallas's consumer surplus would increase.

An increase in price increases consumer surplus.

F

Refer to Figure 7-18. Total surplus amounts to $500 if consumer surplus amounts to

$290 and if the price of the good is $150

Refer to Figure 6-15. For a price ceiling to be binding in this market, it would have to be set at

below 3

For a good that is a necessity,

demand tends to be inelastic.

At present, the maximum legal price for a human kidney is $0. The price of $0 maximizes

niether

Refer to Figure 6-13. If the government imposes a price ceiling of $6 on this market, then there will be

no shortage

If a 20% change in price results in a 15% change in quantity supplied, then the price elasticity of supply is about

0.75, and supply is inelastic.

Refer to Figure 7-2. If the price of the good is $100, then consumer surplus amounts to

125

If Martin sells a shirt for $40, and his producer surplus from the sale is $8, his cost must have been

32

Refer to Figure 6-13. Which of the following statements is correct?

A price floor set at $6.50 would result in a surplus.

If producing a soccer ball costs Jake $5, and he sells it for $40, his producer surplus is $45.

F

If the government removes a binding price ceiling in a market, then the producer surplus in that market will increase

T

Which of the following statements about the effects of rent control is correct?

The short-run effect of rent control is a relatively small shortage of apartments, and the long-run effect of rent control is a larger shortage of apartments.

Refer to Figure 6-7. For a price floor to be binding in this market, it would have to be set at

any above 7

Refer to Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed?

between $3 and $5

A good will have a more inelastic demand, the

broader the definition of the market.

Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten-year period because

buyers tend to be much more sensitive to a change in price when given more time to react.

If a tax is levied on the sellers of a product, then there will be a(n

decrease in quantity demanded.

Which of the following is correct? A tax burden

falls more heavily on the side of the market that is less elastic.

If a market is allowed to move freely to its equilibrium price and quantity, then an increase in supply will

increase consumer surplus.

The price elasticity of demand measures the

magnitude of the response in quantity demanded to a change in price.

Total surplus in a market will increase when the government

removes a binding price ceiling from that market.

Refer to Table 5-9. Which of the three supply curves represents the most elastic supply?

supply curve C

Refer to Table 7-7. You have four essentially identical extra tickets to the Midwest Regional Sweet 16 game in the men's NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You offer to sell the tickets for $325. How many tickets do you sell, and what is the total consumer surplus in the market?

three tickets; $275

Refer to Figure 7-24. If 4 units of the good are produced and sold, then

total surplus is not maximized.

In general, demand curves for luxuries tend to be price elastic.

true

When the price of a good is $5, the quantity demanded is 100 units per month; when the price is $7, the quantity demanded is 80 units per month. Using the midpoint method, the price elasticity of demand is about

.67

Refer to Table 5-4. Using the midpoint method, when price rises from $8 to $12, the price elasticity of demand is

1

Refer to Figure 7-13. If the equilibrium price is $60, what is the producer surplus?

2400

Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. What will be the new equilibrium quantity in this market?

25 - 50

Suppose Lauren, Leslie and Lydia all purchase bulletin boards for their rooms for $15 each. Lauren's willingness to pay was $35, Leslie's willingness to pay was $25, and Lydia's willingness to pay was $30. Total consumer surplus for these three would be

45

Bob purchases a book, and his consumer surplus is $3. If Bob is willing to pay $8 for the book, then the price of the book must be A. $3.

5

Who bears the majority of a tax burden depends on whether the tax is placed on the buyers or the sellers

F

Necessities tend to have inelastic demands, whereas luxuries tend to have elastic demands

True

The flatter the demand curve that passes through a given point, the more elastic the demand.

True

A price floor is

all of above

A binding minimum wage

alters both the quantity demanded and quantity supplied of labor.

If soybean farmers know that the demand for soybeans is inelastic, in order to increase their total revenues they should

reduce the number of acres they plant to decrease their output.

The tax burden falls more heavily on the side of the market that is more inelastic

t

For a particular good, a 2 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

The good is a luxury

Refer to Figure 7-15. When the price falls from P2 to P1, which of the following would not be true?

The total cost of what is now sold by sellers is actually higher than it was before the decrease in the price.

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

There are many close substitutes for this good.

When demand is inelastic, a decrease in price will cause

a decrease in total revenue.

After a binding price floor becomes effective, a

a smaller quantity of the good is bought and sold

Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling becomes effective,

a smaller quantity of the good is bought and sold.

Refer to Figure 7-3. When the price is P1, consumer surplus is

a+b+c

Refer to Figure 6-5. If government imposes a price floor at $9, then the price floor causes

all above

When a binding price floor is imposed on a market,

all above

Producer surplus is the area

below the price and above the supply curve.

If demand is price inelastic, then

buyers do not respond much to a change in price.

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

ceiling

Demand is said to be inelastic if the

quantity demanded changes proportionately less than price

If the government allowed a free market for transplant organs such as kidneys to exist, the

shortage of organs would be eliminated, and there would be no surplus of organs.

Refer to Figure 6-4. A government-imposed price floor of $12 in this market results in

surplus of 4 units

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

the market for wallpaper is in equilibrium.