Microeconomics II

Jeff decides that he would pay as much as $3,000 for a new laptop computer. He buys the computer and realizes consumer surplus of $700. How much did Jeff pay for his computer? a. $2,300 b. $700 c. $3,000 d. $3,700

a. $2,300

Figure 7-1 Refer to Figure 7-1. If the price of the good is $150, then consumer surplus amounts to a. $250. b. $300. c. $200. d. $150.

a. $250.

Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The per-unit burden of the tax on sellers is a. $3. b. $1. c. $5. d. $2.

a. $3.

Refer to Figure 6-10. A price ceiling set at a. $6 will be binding and will result in a shortage of 10 units. b. $16 will be binding and will result in a shortage of 10 units. c. $16 will be binding and will result in a shortage of 4 units. d. $6 will be binding and will result in a shortage of 6 units.

a. $6 will be binding and will result in a shortage of 10 units.

Refer to Figure 6-18. The per-unit burden of the tax on sellers is a. $6. b. $10. c. $8. d. $14.

a. $6.

Figure 7-22 Refer to Figure 7-22. If the price decreases from $80 to $70 due to a shift in the supply curve, consumer surplus increases by a. $750. b. $500. c. $250. d. $1000.

a. $750.

Figure 7-4 Refer to Figure 7-4. Which area represents the increase in consumer surplus when the price falls from P1 to P2? a. ABDG b. ABC c. BDF d. AFG

a. ABDG

Figure 7-10 Refer to Figure 7-10. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers? a. ABGD b. ACH c. DGH d. BCG

a. ABGD

If the government removes a tax on a good, then the quantity of the good sold will a. increase. b. decrease. c. not change. d. All of the above are possible.

a. increase.

Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The amount of deadweight loss resulting from this tax is a. $120. b. $25. c. $80. d. $50.

b. $25.

Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The per-unit burden of the tax on buyers is a. $3. b. $4. c. $2. d. $1.

c. $2.

Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The amount of tax revenue collected by the government is a. $80. b. $120. c. $50. d. $30.

c. $50.

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about a. 0.1, and X and Y are substitutes. b. -1.2, and X and Y are complements. c. 1.2, and X and Y are substitutes. d. -0.1, and X and Y are complements.

c. 1.2, and X and Y are substitutes.

Table 7-1 Buyer Willingness To Pay Calvin $150.00 Sam $135.00 Andrew $120.00 Lori $100.00 Refer to Table 7-1. If the price of the product is $110, then who would be willing to purchase the product? a. Calvin, Sam, and Andrew b. Calvin, Sam, Andrew, and Lori c. Calvin d. Calvin and Sam

a. Calvin, Sam, and Andrew

Refer to Figure 6-1. A binding price ceiling is shown in a. panel (b) only. b. panel (a) only. c. both panel (a) and panel (b). d. neither panel (a) nor panel (b).

a. panel (b) only.

A tax imposed on the buyers of a good will raise the a. price paid by buyers and lower the equilibrium quantity. b. effective price received by sellers and raise the equilibrium quantity. c. effective price received by sellers and lower the equilibrium quantity. d. price paid by buyers and raise the equilibrium quantity.

a. price paid by buyers and lower the equilibrium quantity.

Figure 6-30 Panel (a) Panel (b) Panel (c) Refer to Figure 6-30. In which market will the majority of the tax burden fall on sellers? a. the market shown in panel (a). b. the market shown in panel (b). c. the market shown in panel (c). d. All of the above are correct.

a. the market shown in panel (a).

Figure 7-21 Refer to Figure 7-21. When the price is P1, area B+C represents a. total surplus. b. producer surplus. c. consumer surplus. d. None of the above is correct.

a. total surplus.

Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $250. His consumer surplus is a. $650. b. $150. c. $250. d. $400.

b. $150.

Figure 7-5 Refer to Figure 7-5. If the price of the good is $12, then consumer surplus is a. $11. b. $16. c. $13. d. $9.

b. $16.

Buyers of a good bear the larger share of the tax burden when the (i) supply is more elastic than the demand for the product. (ii) demand in more elastic than the supply for the product. (iii) tax is placed on the sellers of the product. (iv) tax is placed on the buyers of the product. a. (ii) only b. (i) only c. (i) and (iv) only d. (i) and (iii) only

b. (i) only

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. Refer to Figure 8-8. The tax causes producer surplus to decrease by the area a. D+F+G+H. b. D+F. c. D+F+G. d. D+F+J.

b. D+F.

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the a. larger is the price elasticity of demand. b. smaller is the price elasticity of supply. c. larger is the amount of the tax. d. All of the above are correct.

b. smaller is the price elasticity of supply.

Table 7-10 The following table represents the costs of five possible sellers. Seller Cost Abby $1,600 Bobby $1,300 Dianne $1,100 Evaline $900 Carlos $800 Refer to Table 7-10. Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 2 if the price is a. $1,100. b. $1,650. c. $1,050. d. $1,700.

c. $1,050.

Table 7-16 Refer to Table 7-16. Both the demand curve and the supply curve are straight lines. At equilibrium, producer surplus is a. $64. b. $32. c. $24. d. $48.

c. $24.

A binding price floor (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price... a. (ii) and (iv) only b. (iii) only c. (i) and (iii) only d. (i) only

c. (i) and (iii) only

A binding price ceiling (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price... Answers: a. (i) and (iii) only b. (iv) only c. (ii) and (iv) only d. (ii) only

c. (ii) and (iv) only

All else equal, what happens to consumer surplus if the price of a good decreases? a. Consumer surplus decreases. b. Consumer surplus may increase, decrease, or remain unchanged. c. Consumer surplus increases. d. Consumer surplus is unchanged.

c. Consumer surplus increases.

Figure 6-20 Refer to Figure 6-20. Suppose a tax of $5 per unit is imposed on this market. Which of the following is correct? a. Buyers and sellers will share the burden of the tax equally. b. Buyers will bear more of the burden of the tax than sellers will. c. Sellers will bear more of the burden of the tax than buyers will. d. Any of the above is possible.

c. Sellers will bear more of the burden of the tax than buyers will.

According to Arthur Laffer, the graph that represents the amount of tax revenue (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like a. an upward-sloping line or curve. b. a horizontal straight line. c. an upside-down U. d. a U.

c. an upside-down U.

A tax imposed on the sellers of a good will lower the a. price paid by buyers and raise the equilibrium quantity. b. price paid by buyers and lower the equilibrium quantity. c. effective price received by sellers and lower the equilibrium quantity. d. effective price received by sellers and raise the equilibrium quantity.

c. effective price received by sellers and lower the equilibrium quantity

A decrease in the size of a tax is most likely to increase tax revenue in a market with a. inelastic demand and elastic supply. b. elastic demand and inelastic supply. c. elastic demand and elastic supply. d. inelastic demand and inelastic supply.

c. elastic demand and elastic supply.

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. Refer to Figure 8-23. If the economy is at point B on the curve, then an increase in the tax rate will a. decrease the deadweight loss of the tax and increase tax revenue. b. increase the deadweight loss of the tax and increase tax revenue. c. increase the deadweight loss of the tax and decrease tax revenue. d. decrease the deadweight loss of the tax and decrease tax revenue.

c. increase the deadweight loss of the tax and decrease tax revenue.

Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The consumer surplus after this tax is a. $80. b. $40. c. $30. d. $10.

d. $10.

Refer to Figure 6-10. A price floor set at a. $6 will be binding and will result in a surplus of 10 units. b. $16 will be binding and will result in a surplus of 4 units. c. $6 will be binding and will result in a surplus of 6 units. d. $16 will be binding and will result in a surplus of 10 units.

d. $16 will be binding and will result in a surplus of 10 units.

George produces cupcakes. His production cost is $10 per dozen. He sells the cupcakes for $16 per dozen. His producer surplus per dozen cupcakes is Answers: a. $16. b. $10. c. $26. d. $6.

d. $6.

Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then the deadweight loss of the tax is a. $12. b. $8. c. $9. d. $6.

d. $6.

Figure 7-12 Refer to Figure 7-12. If the equilibrium price rises from $200 to $350, what is the producer surplus to new producers? a. $3,750 b. $15,000 c. $30,000 d. $7,500

d. $7,500

The vertical distance between points A and B represents the tax in the market. Refer to Figure 6-18. The per-unit burden of the tax on buyers is a. $6. b. $14. c. $24. d. $8.

d. $8.

Refer to Figure 8-14. Which of the following statements is correct? a. Supply 1 is more elastic than supply 2. b. Demand 2 is more elastic than demand 1. c. Demand 1 is more elastic than supply 1. d. All of the above are correct.

d. All of the above are correct.

If the tax on a good is doubled, the deadweight loss of the tax a. increases by 50 percent. b. triples. c. doubles. d. quadruples.

d. quadruples.

Figure 7-24 Refer to Figure 7-24. If 6 units of the good are produced and sold, then a. consumer surplus equals producer surplus. b. consumer surplus is greater than producer surplus. c. producer surplus is maximized. d. the sum of consumer surplus and producer surplus is maximized.

d. the sum of consumer surplus and producer surplus is maximized.

If the price elasticity of supply for a window manufacturer is 1.5, a. a 10% increase in the price of windows results in a 15% increase in the quantity of windows supplied. b. supply is considered to be inelastic. c. the manufacturer is likely operating very near capacity. d. All of the above are correct.

a. a 10% increase in the price of windows results in a 15% increase in the quantity of windows supplied.

A deadweight loss is a consequence of a tax on a good because the tax a. imposes a loss on buyers that is greater than the loss to sellers. b. induces buyers to consume less, and sellers to produce less. c. increases the equilibrium price in the market. d. induces the government to increase its expenditures.

b. induces buyers to consume less, and sellers to produce less.

Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The producer surplus after this tax is a. $45. b. $60. c. $15. d. $30.

c. $15. .