Micro Homework 3

In the above figure, the amount of the tax per unit imposed on the sellers is

$2.00

The figure tells us about the market for red roses. The consumer surplus is ________ a day.

$200

In the above figure, the price paid by the buyer before the tax is ________ per compact disc, and the price paid by the buyer after the tax is ________ per compact disc.

$20; $30

Joe is willing to pay $4 for his first slice of pizza and $3 for his second slice of pizza. If the price is $2, on his two slices of pizza Joe receives a total consumer surplus of

$3

In the above figure, what is the total tax revenue collected by the government?

$400 million

The above figure shows the market for neckties after the government has imposed a tax. How much deadweight loss results from this tax?

$50

The figure illustrates the market for bagels. Initially the market is in equilibrium, Then the number of bagels produced is cut from 20 to 10 an hour and the price rises to $2.00 per bagel. Consumer surplus decreases by ________.

$7.50 an hour

In the above figure, if the minimum wage is equal to ________, there would be ________ hours of labor employed.

$8 per hour; 2,000

Which of the following CORRECTLY characterize principals and agents in important examples of the principal-agent problem?

-In the lawyer/client relationship, the client is the principal and the lawyer is the agent. -In the doctor/patient relationship, the patient is the principal and the doctor is the agent. ***Both of the above answers are correct***

The figure above shows the demand for and supply of labor of students in Smallville. If the minimum wage is set at $4 per hour, how many hours of students' labor are unemployed?

0 hours

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt. In the figure above, with the tariff the United States imports ________ million shirts per year.

16

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. In the figure above, with international trade ________ million shirts per year are produced in the United States.

16

The figure above shows the demand for and supply of rental housing in Smallton. If a rent ceiling is set at $800, how many apartment units are rented?

3,000

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt. In the figure above, the deadweight loss from the tariff is ________.

32 million

If 10 firms share the sales of the market equally, the four-firm concentration ratio is ________ percent.

40

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. In the figure above, with international trade American consumers buy ________ million shirts per year.

48

In an oligopoly with two firms, one firm's share of the market is 70 percent. The Herfindahl-Hirschman Index is ________.

5800

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt. In the figure above, the U.S. government's revenue from the tariff is ________.

64 million

Using the above figure, which of the following quantities of CDs has the largest deadweight loss?

7 million

The figure above shows the demand for and supply of labor of students in Smallville. If the minimum wage is set at $4 per hour, how many hours do students work?

9,000 hours

Which of the following statements concerning tariffs is NOT true?

A tariff leaves the price of imports unchanged.

A tariff is

A tax on imported goods

If the government restricts the selling of corn so that the quantity is less than the equilibrium quantity, then the policy I. creates a deadweight loss. II. decreases total surplus.

Both I and II are correct.

A price floor is a price

Both answers A and C are correct - below which a seller cannot legally sell - that creates a surplus of the good if it is set above the equilibrium price

Which of the following about corporations is TRUE?

Corporations' profits are taxed independently of their owners' incomes.

Which of the following outcomes is NOT a result of a tax imposed on sellers of gasoline?

Demand decreases, the market becomes more efficient, and the price rises.

At the current level of output, the marginal social benefit from a slice of pizza is less than the marginal social cost of producing a slice of pizza. Resources will be used more efficiently if ________ slices of pizza are produced and ________ other goods are produced.

Fewer, More

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. In the figure above, with international trade the United States ________ million shirts per year.

Imports 32

When a market is in equilibrium, the total amount of consumer surplus must be ________ the total amount of producer surplus.

None of the above answers are correct.

The figure above shows Clara's demand for CDs. The price for a CD is $15. Which statement is TRUE?

When Clara buys 6 CDs, she receives a total of $45 of consumer surplus.

A low four-firm concentration ratio suggests

a high degree of competition.

A rent ceiling results in a shortage of apartments. As a result, there is

a loss of both consumer and producer surplus.

A firm with two or more owners who have unlimited liability is known as

a partnership.

In the figure above, the demand curve shifts rightward from D0 to D1 so that D1 is the relevant demand curve. Suppose the government imposes a rent ceiling of $300 per month. In the short run there will be

a shortage of 200,000 apartments.

A proprietorship is a firm with

a single owner who has unlimited liability.

In the above figure, a sales tax of $1 per unit imposed on sellers ________ the price buyers pay and ________ the price that suppliers keep for themselves.

affects; affects

When a sales tax is imposed on sellers, the supply curve shifts so that the vertical distance between the old and the new supply curve equals the

amount of the sales tax.

If instead of working on his own as a consultant making $25,000, Joe takes a job at a bank, the $25,000 is

an opportunity cost.

In order to have an effect, a price ceiling must be set ________.

below the equilibrium price

The market demand curve

can also be the marginal social benefit curve.

Firms organize production by using a mix of

command and incentive systems.

International trade arises from

comparative advantage

Total surplus is defined as

consumer surplus + producer surplus.

Deadweight loss is the decrease in ________ from producing an inefficient amount of a product.

consumer surplus and producer surplus

Marginal benefit is the benefit received from ________.

consuming one more unit of a good or service

Unlimited liability is NOT a characteristic of

corporations.

A minimum wage set above the equilibrium wage will

create a surplus of labor

Tariffs ________ a deadweight loss and import quotas ________ a deadweight loss.

create; create

A U.S. tariff imposed on items that can be produced more cheaply abroad

creates a deadweight loss.

If the price of a pizza increases and the demand curve for pizza does not shift, then the consumer surplus from pizza will ________.

decrease

An import quota on sugar

decreases the imports of sugar and raises its price.

The sellers pay the entire sales tax levied on a good when demand is perfectly ________ or supply is perfectly ________.

elastic; inelastic

In the figure above, when production is 3 units with a price of $3, the producer surplus in this market equals

f+g

You are in the business of producing and selling hamburgers, french fries, pizza, and ice cream. The mayor plans to impose a tax on one of these products. Based on the elasticities in the above table, as a profit-minded business person who seeks to avoid taxes whenever possible, which good would you least like to have taxed?

hamburgers

A rent ceiling set above the equilibrium rent

has no effect on the market outcome.

The ________ the Herfindahl-Hirschman Index (HHI), the ________ the industry.

higher; less competitive

When a tax is imposed on a good or service, buyers respond only to the price that ________ the tax, and sellers respond to the price that ________ the tax.

includes; excludes

A tariff is imposed on a good. This will ________ the domestic producer surplus, ________ the domestic consumer surplus, and ________ total surplus in the home country.

increase; decrease; decrease

A country opens up to trade and becomes an importer of a sugar. In the sugar market, consumer surplus will ________, producer surplus will ________, and total surplus will ________.

increase; decrease; increase

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. In the figure above, international trade ________ total surplus in the United States by ________.

increases; $128 million

A minimum wage ________.

is a price floor in the labor market

The United States has a comparative advantage in producing airplanes if

it can produce them at a lower opportunity cost than can other nations.

A price ceiling ________.

makes it illegal to charge a higher price than the specified price

Which of the following is NOT a solution to a principal-agent problem?

managerial hierarchy

A person will choose to buy a good as long as

marginal benefit is at least as great as price.

In the above figure

marginal social cost equals marginal social benefit when 300,000 purses are produced.

Overproduction compared to the efficient amount implies that for the last unit produced

marginal social cost exceeds marginal social benefit.

The most important goal of the firm is to

maximize its profits.

Under ________, there are many firms selling slightly different products.

monopolistic competition

A market structure in which one firm produces a good or service that has no close substitutes is called

monopoly

If demand for a good is very inelastic and supply for the good is very elastic, a sales tax imposed on sellers will cause the price received by sellers

not to change very much.

A market structure in which a small number of firms compete is called

oligopoly.

The CORRECT ranking of the four basic market structures from most competitive to least competitive is

perfect competition, monopolistic competition, oligopoly, monopoly.

A market structure in which many firms are selling an identical product is called

perfect competition.

Producer surplus is the ________ summed over the quantity sold.

price received for a good minus its marginal cost

A country opens up to trade and imports clothing. In the clothing market, surplus has been redistributed from

producers to consumers.

In the above figure, the tax incidence is

split equally so that the buyers and sellers pay the same amount.

A corporation is a firm owned by

stockholders who have limited liability.

When the competitive market is using its resources efficiently, the

sum of the total amount of consumer surplus plus the total amount of producer surplus is maximized.

A sales tax imposed on sellers shifts the supply curve leftward for the taxed good because the

tax is paid by the seller to the government and is, therefore, like a cost of production.

The profits of a partnership are

taxed as personal income.

How a sales tax is divided between buyers and sellers is determined by

the elasticities of supply and demand.

Marginal cost is best defined as

the extra cost of producing one more unit of output.

A key difference between tariffs and quotas is that

the government receives revenue with tariffs, but the importer receives added profit with quotas.

If the United States imposes a tariff on imported cars, the

the price in the United States rises but neither the U.S. demand curve nor the U.S. supply curve shift.

A tax is imposed on the sale of a product. As long as neither the supply nor the demand is perfectly elastic or inelastic

the price paid by the consumers increases by less than the amount of the tax.

The above figure shows the demand and supply curves for housing As a result of a rent ceiling at $500, the deadweight loss is represented by the area

triangle eca

Consumer surplus is the ________ summed over the quantity bought.

value of a good or service minus the price paid for the good or service

Underproduction of good ________ create a deadweight loss and overproduction of a good ________ create a deadweight loss.

will, will

A principal-agent problem occurs when hiring workers to work for a firm because

workers' interests are not always the same as the interests of the owners of the firm.