History

For widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. A tax of $15 per unit is imposed on widgets. The tax reduces the equilibrium quantity in the market by 200 units. The deadweight loss from the tax is

$1,500.

At Sarah's Bakery, the cost of making one cake is $1.00. If Sarah sells 20 cakes and gains producer surplus of $40.00, then Sarah must be selling her cakes for

$3.00 each.

Jacob's annual income in 2020 increased from $10,000 to $11,000. If the amount of tax Jacob paid increased from $500 to $600 in 2020, we know that his marginal tax rate is

10%

Founding of the City of Rome

753 BC

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

deadweight loss.

A drought in Spain destroys many red grapes causing the prices of both red grapes and red wine to rise. As a result, the consumer surplus in the market for red grapes

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

The deadweight loss from a tax per unit of good will be smallest in a market with

inelastic supply and inelastic demand.

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

price floor.

The maximum price that a buyer will pay for a good is called

willingness to pay.

Suppose a tax of $5 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units. The tax decreases consumer surplus by $450 and decreases producer surplus by $300. The deadweight loss from the tax is

$250.

Flu shots provide a positive externality. Suppose that the market for vaccinations is perfectly competitive. Without government intervention in the vaccination market, which of the following statements is correct?

At the current output level, the marginal social benefit exceeds the marginal private benefit.

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.

Which of the following statements about a well-maintained yard best conveys the general nature of the externality?

Ed is allergic to his roommate's cat.

Education yields positive externalities. For example,

a more educated population tends to result in lower crime rates.

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

a surplus of drones will develop.

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 Janine and Henry experience an increase in consumer surplus.

Negative externalities lead markets to produce

greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels.

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

is set above the equilibrium price.

Minimum-wage laws dictate

only a minimum wage that firms may pay workers.

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

quantity demanded of physicals increases, and the quantity supplied of physicals decreases

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

quantity demanded of physicals increases, and the quantity supplied of physicals decreases.

A tax levied on the sellers of a good shifts the

supply curve upward (or to the left).

Suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages. The tax would shift

supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially sweetened beverages.

If a sawmill creates too much noise for local residents,

the government can raise economic well-being through noise-control regulations.