Test 1

Refer to Figure 7-22. Assume demand increases, which causes the equilibrium price to increase from $50 to $70. The increase in producer surplus would be

$1,600.

Refer to Figure 7-19. At the equilibrium price, consumer surplus is

$100.

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

$750.

The market for gluten-free bread is represented in the graph. When the market is in equilibrium, consumer surplus is

$80.

Refer to the figure. If there is no tax placed on the good in the market, total surplus is the area

A+B+C+D+E+F.

When the government imposes a binding price ceiling, it causes a surplus of the good. T/F

False

Taxes create market inefficiencies that can be measured as deadweight loss. T/F

True

Refer to the graph. If the price falls from P2 to P1, area B represents the

additional consumer surplus to initial consumers.

Assuming apricots and nectarines are substitutes for peaches. Which of the following would shift the demand curve for peaches to the right?

an increase in the price of apricots

Refer to Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. How much will buyers pay per unit after the tax is imposed?

between $5 and $7

Refer to Table 7-6. If the market price of an apple increases from $1.40 to $1.60, then consumer surplus

decreases by $0.45.

Refer to Figure 7-22. At the equilibrium price, consumer surplus is

$1,000.

Refer to Table 7-3. If there is only one unit of the good and if the buyers bid against each other for the right to purchase it, then the consumer surplus will be

$10 or slightly less.

Refer to Figure 7-19. At the equilibrium price, producer surplus is

$150.

Refer to Table 7-6. If the market price of an apple is $1.40, then the market quantity of apples demanded per day is

3.

Refer to the figure. If the per-unit tax is placed on the good in the market, the deadweight loss is the area

E + F

A movement along the downward-sloping demand curve for frozen margaritas can be caused by a change in weather. T/F

False

As the size of a tax increases, the size of the deadweight loss first increases, then decreases. T/F

False

A $2 tax levied on the producers of a good has the same effect on buyers and sellers as a $2 tax levied on the consumers of the good. T/F

True

A policymaker that wants to raise tax revenue while minimizing the deadweight loss should tax goods with inelastic supply and demand rather than goods with elastic supply and demand. T/F

True

If demand decreases, both the equilibrium price and quantity decrease. T/F

True

Which of the following would not be a result of a binding price ceiling on child care?

an increase in the quantity of child care supplied

This graph illustrates the market for gluten free chocolate cake. If the current price is $30 per cake, we expect the

price to increase due to the shortage of cake.

The deadweight loss from a tax

reflects the inefficiency in resource allocation because the tax distorts incentives.

An advance in technology would shift the

supply curve to the right.

The deadweight loss from a tax is likely to be smallest when

supply is inelastic and demand is inelastic.

Refer to the labor market graph. The imposition of an $8 minimum wage would cause

unemployment of 35 labor hours.

Refer to Table 7-6. If the market price of an apple is $1.40, then consumer surplus amounts to

$0.60.

Refer to Figure 7-22. Assume demand increases, which causes the equilibrium price to increase from $50 to $70. The increase in producer surplus to producers already in the market would be

$1,200.

Refer to Table 7-11. If the sellers bid against each other for the right to sell the good to a consumer, then the good will sell for

$100 or slightly less.

Refer to Figure 7-22. At the equilibrium price, producer surplus is

$2,500

Refer to Table 7-11. If Evan, Selena, and Angie sell the good, and the resulting producer surplus is $300, then the price must have been

$200.

Refer to Figure 7-19. At the equilibrium price, total surplus is

$250.

Refer to Figure 7-19. If the government imposes a price ceiling of $55 in this market, then total surplus will be

$250.00.

At Nick's Bakery, the cost to make a cheese danish is $1.50 per danish. As a result of selling ten danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his danishes for

$3.50 each.

Refer to Table 7-11. If Evan, Selena, Angie, and Kris sell the good, and the resulting producer surplus is $700, then the price must have been

$300.

Suppose your sister inherits an antique doll from your Great Aunt Sadie. The doll has a sentimental value of $500 to you. If your sister sells you the doll for $200, your consumer surplus is

$300.

Refer to Table 7-3. If there is only one unit of the good and if the buyers bid against each other for the right to purchase it, then the good will sell for

$35 or slightly more.

Refer to Figure 7-22. Assume demand increases, which causes the equilibrium price to increase from $50 to $70. The increase in producer surplus due to new producers entering the market would be

$400.

Refer to Table 7-3. If the price is $20, then consumer surplus in the market is

$45, and Quilana, Wilbur, and Ming-la purchase the good.

Refer to Table 7-11. If the sellers bid against each other for the right to sell the good to a consumer, then the producer surplus will be

$50 or slightly less.

Suppose you inherit an antique doll from your Great Aunt Sadie. The doll has a sentimental value of $100 to you. Jane is a collector who is willing to pay $800 for your doll. If you sell the doll to Jane for $600, your producer surplus is ___ and Jane's consumer surplus is _____, respectively:

$500; $200.

The market for gluten-free breakfast cereal is shown in the graph. The after-tax price paid by buyers and price received by sellers are, respectively,

$6.00 $4.00

Ronnie operates a lawn-care service. On each day, the cost of mowing the first lawn is $15, the cost of mowing the second lawn is $25, and the cost of mowing the third lawn is $40. His producer surplus on the first three lawns of the day is $100. If Ronnie charges all customers the same price for lawn mowing, that price is

$60.

Refer to Figure 7-19. If the government imposes a price floor of $55 in this market, then total surplus will be

$62.50 lower than it would be without the price floor.

Refer to the same graph. If the government imposes a price floor of $55 in this market, then total surplus will be

$62.50 lower than it would be without the price floor.

Kristi and Rebecca sell lemonade on the corner for $0.50 per cup. It costs them $0.10 to make each cup. On a certain day, their producer surplus is $20. How many cups did Kristi and Rebecca sell?

50.

Refer to the figure. If the per-unit tax is placed on the good in the market, the consumer surplus is the area _____ and the producer surplus is the area ____, respectively.

A; D.

In 2015, the minimum wage according to federal law was $7.25 per hour. Increasing minimum wage to $8 per hour (approximately a 10% increase) will probably lead to:

All of the above

Suppose buyers of vodka are required to send $5.00 to the government for every bottle of vodka they buy. Further, suppose this tax causes the effective price received by sellers of vodka to fall by $3.00 per bottle. Which of the following statements is correct?

All of the above are correct.

The equilibrium price in the market for gluten-free muffins is $5, and at this price, 300 gluten-free muffins are bought and sold. At a quantity of 200 gluten-free muffins, the market is not efficient because:

All of the above are correct.

Refer to Table 7-3. Who experiences the largest loss of consumer surplus when the price of the good increases from $20 to $22?

All three buyers experience the same loss of consumer surplus.

Refer to the graph. Which of the following is correct?

At P3, producer surplus is smaller than at P1.

Refer to the figure. If the per-unit tax is placed on the good in the market, the tax revenue is the area

B + C

Suppose that cold temperatures cause a decrease in the supply of tea. What should happen in the market for coffee, assuming tea and coffee are substitutes?

Both the equilibrium price and quantity will increase.

Refer to Figure 8-19. The original tax can be represented by the vertical distance AB. Suppose the government is deciding whether to lower the tax to CD or raise it to FG. Which of the following statements is correct?

Compared to the original tax, the larger tax will decrease tax revenue and increase deadweight loss.

Refer to Figure 8-19. The original tax can be represented by the vertical distance AB. Suppose the government is deciding whether to lower the tax to CD or raise it to FG. Which of the following statements is not correct?

Compared to the original tax, the larger tax will increase tax revenue.

The diagram below pertains to the demand for turkey in the United States. All else equal, buyers expecting turkey to be more expensive in the future would cause a current move from

DB to DA.

Changes in the price of chocolate cake cause the demand curve for chocolate cake to shift, whereas changes in income cause a movement along the demand curve for chocolate cake. T/F

False

Consumer surplus increases when the price increases. T/F

False

Producer surplus is the difference between willingness to pay and price paid for a good. T/F

False

Refer to Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. Which of the following is correct?

One-half of the burden of the tax will fall on buyers, and one-half of the burden of the tax will fall on sellers.

Pens are normal goods. What will happen to the equilibrium price of pens if the price of pencils rises, consumers experience an increase in income, writing in ink becomes fashionable, people expect the price of pens to rise in the near future, the population increases, fewer firms manufacture pens, and the wages of pen-makers increase?

Price will rise.

Refer to Table 7-3. If the market price for the good is $20, who will purchase the good?

Quiana, Wilbur, and Ming-la only

Assuming the graph is drawn to scale, which of the following is true regarding the burden of the tax in market above?

Sellers pay a larger share of the tax because supply is more inelastic than demand.

What will happen to the equilibrium price of new textbooks if more students attend college, paper becomes cheaper, textbook authors accept lower royalties, and fewer used textbooks are sold?

The price change will be ambiguous.

Changes in the price of cheese cause a movement along the supply of cheese, whereas changes in input prices cause the supply of cheese to shift. T/F

True

The market equilibrium maximizes the sum of the producer and consumer surplus. T/F

True

Which of the following is an example of the law of demand?

When tuition at State U rises, fewer students enroll in courses at State U.

In 1971 a pocket calculator cost more than $75. In 2015 a calculator of the same quality cost less than $10. Which of the following explanations is most consistent with these facts?

a change in technology

Which of the following would shift the supply curve of iPhones to the right?

a decrease in wages paid to workers making the iPhones.

Consider the market for portable air conditioners in equilibrium. When a heat wave strikes the equilibrium price

and quantity both increase.

Refer to Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. How much will sellers receive per unit after the tax is imposed?

between $3 and $5

Refer to Figure 6-19. Suppose a tax of $2 per unit is imposed on this market. What will be the new equilibrium quantity in this market?

between 50 units and 100 units

The market for gluten-free breakfast cereal is shown in the graph above. Suppose the government enacts a $2 tax per unit, imposed on the sellers. The policy will cause:

buyers and sellers to each bear a $1 burden of the tax.

Refer to Figure 8-19. If the government changed the per-unit tax from $5.00 to $2.50, then the price paid by buyers would be $7.50, the price received by sellers would be $5, and the quantity sold in the market would be 1.5 units. Compared to the original tax rate, this lower tax rate would

decrease government revenue and decrease the deadweight loss from the tax.

Refer to Figure 8-19. If the government changed the per-unit tax from $5.00 to $7.50, then the price paid by buyers would be $10.50, the price received by sellers would be $3, and the quantity sold in the market would be 0.5 units. Compared to the original tax rate, this higher tax rate would

decrease government revenue and increase the deadweight loss from the tax.

The market for gluten-free bread is characterized by an inelastic demand and an elastic supply. What would happen to the deadweight loss of a tax, if the supply would also be inelastic?

decrease.

Suppose that the City of Bloomington imposes a $1 per-tire recycling fee on buyers whenever they purchase a new tire. We can illustrate the tax on a graph by shifting the demand curve

down by $1; the price paid by buyers would rise by less than $1.

A market is a:

group of buyers and sellers of a particular good or service.

Welfare economics is the study of

how the allocation of resources affects economic well-being.

This graph illustrates the market for fine wine. If the current price is $50 per bottle, we expect the

price to decrease due to the surplus of wine.

Rent controls cause

shortages of apartments which are larger in the long run than in the short run.

Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the

supply curve will shift downward by $20, and the price paid by buyers will decrease by less than $20.

Refer to Figure 7-22. If 110 units of the good are bought and sold, then

the marginal cost to sellers is greater than marginal value to buyers.

The market of chocolate cupcakes is in equilibrium at a price of $4 and a quantity of 300 chocolate cupcakes. The government levies a $1 per unit tax, which decreases the quantity bought and sold to 250. Which of the following statements is incorrect?

the tax revenue collected as a result of the new tax is $300.