Micro. Exam 2
Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $350. His consumer surplus is
$50
A price floor
All of the above are correct
In which of the following circumstances would a buyer be indifferent about buying a good?
All of the above are correct.
Producer surplus equals
Amount received by sellers- Costs of sellers.
A shortage results when
a binding price ceiling is imposed.
In the market for oil in the short run, demand
and supply are both inelastic.
Consumer surplus in a market can be represented by the
area below the demand curve and above the price.
Total surplus in a market is total area
below the demand curve and above the supply curve, up to the equilibrium quantity.
Producer surplus is the area
below the price and above the supply curve.
If a tax is imposed on a market with inelastic demand and elastic supply,
buyers will bear most of the burden of the tax.
The cross-price elasticity of demand can tell us whether goods are
complements or substitutes.
The term tax incidence refers to the
division of the tax burden between buyers and sellers.
When a tax is imposed on the buyers of a good, the demand curve shifts
downward by the amount of the tax.
Demand is elastic if elasticity is
greater than 1.
A price ceiling that is not binding will
have no effect on the market price.
To determine whether a good is considered normal or inferior, one could examine the value of the
income elasticity of demand for that good.
a tax on the buyers of coffee will
increase the effective price of coffee paid by buyers, decrease the price of coffee received by sellers, and decrease the equilibrium quantity of coffee.
If the demand for donuts is elastic, then a decrease in the price of donuts will
increase total revenue of donut sellers
a price ceiling
is a legal maximum on the price at which a good can be sold.
A price floor is binding if it
leads to surplus.
Suppose a tax is imposed on the buyers of a good or service. The burden of the tax will
on both the buyers and the sellers.
Suppose you are in charge charge of setting prices at a local sandwich shop. The business needs to increase its total revenue and your job is on the line. If the demand for the sandwiches is elastic, you
should decrease the price of sandwiches.
A tax of $0.10 per Snickers bar on the sellers of Snickers will cause the
supply curve for Snickers to shift up by $0.10.
Consumer surplus is
the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
When a tax is placed on the sellers of lemonade,
the burden of the tax will be shared by the buyers and sellers, but the division of the burden is not always equal.
If a consumer places a value of $15 on a particular good and if the price of the good is $17, then
the consumer does not purchase the good.
A key determinant of the price elasticity of supply is
the length of the time period.
Which of the following is NOT a determinant of the price elasticity of demand for a good?
the steepness or flatness of the supply curve for the good
Price controls are usually enacted
when policymakers believe that the market price of a good or service is unfair to buyers or sellers.
If a tax is levied on the sellers of a product, the demand curve
will not shift.
