Micro Exam Two

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 a. $250 b. $500 c. $750 d. $1,000

a. $250

If a government imposes a binding price ceiling on a market, then the price paid by buyers will a. decrease, and quantity sold in the market will decrease b. Increase, and the quantity sold in the market will increase c. Increase, and the quantity sold in the market will decrease d. decrease, and the quantity sold in the market will increase

a. decrease, and quantity sold in the market will decrease

Look at the table: If the price is $110, who would be willing to purchase the product? a. Calvin b. Calvin and Sam c. Calvin, Sam, and Andrew d. Calvin, Sam, Andrew, and Sasha

c. Calvin, Sam, and Andrew

If the government removes a binding price floor from a market, then the price paid by buyers will a. Increase, and quantity sold in the market will increase b. Increase and quantity sold in the market will decrease c. Decrease and quantity sold in the market will increase d. Decrease and quantity sold in the market will decrease

c. Decrease and quantity sold in the market will increase

Government can improve market outcomes for a. public goods but not common resources b. common resources but not public goods c. both public goods and common resources d. neither public goods nor common resources

c. both public goods and common resources

At Q3 a. the marginal consumer values this product less than the social cost of producing it b. every consumer values this product less than the social cost of producing it c. the cost to society is equal to the value to society d. the marginal consumer values this product more than the private cost

a. the marginal consumer values this product less than the social cost of producing it

Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The table below shows each resident's willingness to pay for each acre of the park. Acres Sophia Amber Cedric Refer to Table 11-1. Suppose the cost to build the park is $9 per acre and that the residents have agreed to split the cost of building the park equally. If the residents vote to determine the size of park to build, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the largest park size for which the majority of residents would vote "yes?" a. 0 acres b. 1 acre c. 2 acres d. 3 acres

c. 2 acres

Look at the figure below. If the Supply curve is S, the demand curve is D, and the Equilibrium price is $100, what is the producer surplus? a. 625 b. 1250 c. 2500 d. 5000

c. 2500

On hot summer days, electricity-generating capacity is sometimes stretched to the limit. at these times, electric companies may ask people to voluntarily cut back on their use of electricity. An economist would suggest that a. every electric customer has an incentive to prevent the system from overloading, so this voluntary approach is most efficient b. it would be more efficient if the electric company raised its rates for the electricity at peak times c. it would be more efficient to have a lottery to decide who had to cut back their use of electricity at peak times d. it would be more efficient force everyone to cut their usage of electricity by the same amount

??

Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week. Assume Erin is required to pay a tax of $40 when she hires someone to clean her house for a week. Which of the following is correct? a. Erin will now clean her own house b. Ernesto will continue to clean Erins house, but his producer surplus will decline c. Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase d. Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline

a. Erin will now clean her own house

The Pennsylvania turnpike is a tolled freeway running through the state of Pennsylvania. Motorists must pay tolls at various points along the turnpike based on the distance they traveled on the freeway. Suppose that despite the tolls, many motorists in the urban areas use the turnpike causing traffic to slow during peak times. What type of good would the turnpike be classified as in this case? a. private good b. club good c. common resource d. public good

a. private good

Suppose that in a particular market, the supply curve is highly inelastic and the demand curve is highly elastic. If a tax is imposed in this market, then the a. sellers will bear greater burden of tax than buyers b. buyers will bear greater burden of tax than sellers c. buyers and sellers are likely to share the burden of tax equally d. buyers and sellers will not share the burden equally, but it is impossible to determine whose burden will be greater without more information

a. sellers will bear greater burden of tax than buyers

Look at the figure below. Suppose the government imposes a tax of (P' - P'''). The area measured by K+L represents a. tax revenue b. consumer surplus before the tax c. producer surplus after tax d. total surplus before tax

a. tax revenue

Which of the following is a disadvantage of government provision of a public good? a. the government lacks information about the value people place on the good b. the government does not provide enough of any public good c. the private sector can provide all public goods at a lower cost d. there are no disadvantages of government provision of a public good

a. the government lacks information about the value people place on the good

You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field. Assume the ticket has no resale value. Willie Nelson is performing on the same night, and his concert is your next-best alternative activity. Tickets to see Willie Nelson cost $40. On any given day, you would be willing to pay up to $50 to see and hear Willie Nelson perform. Assume there are no other costs of seeing either event. Based on this information, at a minimum, how much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game? a. $0 b. $10 c. $40 d. $50

b. $10

Look at the figure below. The socially optimal price and quantity are a. $3.00 and 60 units b. $2.80 and 48 units c. $2.07 and 76 units d. $1.50 and 100 units

b. $2.80 and 48 units

The OSHA has determined that the probability of a worker dying from exposure to a hazardous chemical used in the production of fertilizer is 0.008. the cost of imposing a regulation that would ban the chemical is 31 million. if the value of a human life is equal to 8 million, how many people must the policy affect in order for the benefits to exceed costs? a. 248 b. 485 c. 3,101 d. 3,876

b. 485

If the market price of an apple increases from 0.80 to 1.05, then the consumer surplus a. Increases by 0.75 b. Decreases by 0.95 c. Decreases by 0.75 d. Decreases by 1.00

b. Decreases by 0.95

Look at the figure below. When the price falls from P2 to P1, producer surplus a. Decreases by an amount equal to C b. Decreases by an amount equal to A+B c. Decreases by an amount equal to A+C d. Increases by an amount equal to A+B

b. Decreases by an amount equal to A+B

The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 200th gallon of gasoline entails the following - a private cost of $3.03 -a social cost of $3.23 -a value to consumers of $3.39 The production of the 200th gallon of gasoline entails an: a. external cost of $0.16 b. external cost of $0.20 c. external benefit of $0.16 d. external benefit of $0.20

b. external cost of $0.20

In the figure above, the vertical distance between points E and F represents a tax in the market. The imposition of the tax causes the price paid by buyers to a. decrease by $3 b. increase by $3 c. decrease by $2 d. increase by $2

b. increase by $3

When a tax is placed on the sellers of a product, buyers pay a. more, and sellers receive more than they did before the tax b. more, and sellers receive less than they did before the tax c. less, and sellers receive more than they did before the tax d. less, and sellers receive less than they did before the tax

b. more, and sellers receive less than they did before the tax

A television broadcast is an example of a good that is a. private b. not rival in consumption c. social d. excludable

b. not a rival in consumption

A free rider is a person who a. will only purchase a product on sale b. receives the benefit of a good but avoids paying for it c. can produce a good at no cost b. rides public transit regularly

b. receives the benefit of a good but avoids paying for it

Which of the following is not a typical solution to the Tragedy of the Commons? a. taxing use of common resource b. turning common resource into a club good c. turning common resource into a private good d regulating the use of the common resource

b. turning common resource into a club good

Suppose there is currently a tax of $80 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $80 per ticket to $64 per ticket, then the a. Demand curve will shift upward by $16, and the price paid by buyers will decrease by less than $16 b. Demand curve will shift upward by $16, and the price paid by buyers will decrease by $16 c. Supply curve will shift downward by $16, and the effective price received by sellers will increase by less than $16 d. Supply curve will shift downward by $16, and the effective price received by sellers will increase by $16

c. Supply curve will shift downward by $16, and the effective price received by sellers will increase by less than $16

Suppose the government imposes a 20-cent tax on the sellers of artificial sweetened beverages. The tax would shift a. demand, raising both the equilibrium price and quantity in the market for artificially sweetened beverages b. Demand, lowering the equilibrium price and raising the equlibrium quantity in the market for artificially sweetened beverages c. Supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially sweetened beverages d. Supply, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially sweetened beverages

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

Suppose that the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. As a result, a. the demand for treadmills will increase b. the supply for treadmills will decrease c. a shortage of treadmills will develop d. a surplus of treadmills will develop

c. a shortage of treadmills will develop

Look at the figure above. Suppose a tax of $2 per unit is imposed on this market. What will be the new equilibrium quantity in this market? a. Less than 60 units b. 60 units c. between 60 and 100 units d. more than 100 units

c. between 60 and 100 units

Which of the following is usually true about government-provided goods? a. these goods have a zero opportunity cost b. these goods are not scarce c. people do not have to pay an explicit fee to enjoy these goods d. the invisible hand is at work to ensure these goods are provided in the market

c. people do not have to pay an explicit fee to enjoy these goods

If a sawmill creates too much noise for local residents, a. noise restrictions will force residents to move out of the area b. a sense of social responsibility will cause owners of the mill to reduce noise levels c. the government can raise economic well-being through noise control regulations d. the government should avoid intervening because the market will always allocate resourses efficiently

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

What happens to the surplus in a market when the government imposes a tax? a. total surplus increases by the amount of the tax b. total surplus increases but by less than the amount of the tax c. total surplus decreases d. total surplus unaffected by the tax

c. total surplus decreases

a. Only a price ceiling of $3.00 b. Only a price ceiling of $6.00 c. Only a price floor of $6.00 d. Either a price ceiling of $3.00 or price floor of $6.00

d. Either a price ceiling of $3.00 or price floor of $6.00

Which of the following will cause a decrease in consumer surplus? a. an increase in the number of sellers of the good b. a technological improvement in the production of the good c. a decrease in the production cost of a good d. an imposition of a binding price floor in the market

d. an imposition of a binding price floor in the market

Suppose the equilibrium price of a stick of deodorant is $4, and the government imposes a price floor of $5 per stick. As a result of this price floor, the a. demand curve for deodorant shifts to the left b. Supply curve for deodorant shifts to the right c. Quantity demanded of deodorant decreases, and the quantity of deodorant that firms want to supply increases d. quantity supplied of deodorant stays the same

d. quantity supplied of deodorant stays the same

If a price ceiling is not binding, then... a. there will be a surplus in the market b. there will be a shortage in the market c. the market will be less efficient than it would be without the price ceiling d. there will be no effect on the market price of quantity sold

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

The maximum price that a buyer will pay for a good is called a. consumer surplus b. producer surplus c. efficiency d. willingness to pay

d. willingness to pay