Econ 2113 Rupp Test 2

Refer to figure 2-7. The effective price that sellers receive after the tax is imposed is

$10

Refer to figure 2-15. At the equilibrium price, the producer surplus is

$200

Refer to figure 2-11. If the price of a good is $150, then consumer surplus amounts to

$250

Refer to figure 2-16. At the equilibrium price, total surplus is

$250

Refer to figure 2-13. At the equilibrium price, consumer surplus is

$300

Refer to figure 2-9. In the after tax equilibrium, how much revenue does the government collect from the tax on this good?

$420

Refer to table 2-14. If the market price is $900, the producer surplus in the market is

$550

Refer to figure 2-7. The per-unit burden of the tax on buyers is

$8

When demand is unit elastic, price elasticity of demand equals

-1, and total revenue does not change when price changes

Suppose that when the price of good X falls from $10 to $8, the quantity demanded of good Y rises from 20 units to 25 units. Using the midpoint method, the cross-price elasticity of demand is

-1.0, and X and Y are compliments

Reta's income elasticity of demand for steak dinners is 1.50. All else equal, this means that if her income increases by 20 percent, she will buy

30 percent more steak dinners

If the price elasticity of demand for a good is -0.4, then a 10 percent increase in price results in a

4 percent decrease in the quantity demanded

Refer to table 2-1. Which of the following is consistent with the elasticities given in table 2-1?

A has fewer substitutes than B

Refer to figure 2-12. Which area represents consumer surplus at a price of P1?

ABD

Refer to figure 2-3. As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity of demand. Which of the three demand curves would produce the smallest elasticity (in absolute value)

D3

Refer to figure 2-17. Suppose the government imposes a tax of P' - P'''. Total surplus after the tax is measured by the area

J + K + L + M

Refer to table 2-10. If the price of the product is $15, then who would be willing to purchase the product?

Lori, Audrey, and Zach

For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?

There are many close substitutes for this good

Refer to figure 2-5. In panel (b), there will be

a surplus of wheat

When demand is elastic, a decrease in price will cause

an increase in total revenue

Refer to figure 2-8. Suppose a tax of $5 per unit is imposed on this market. What will be the new equilibrium quantity in this market?

between 25 and 30 units

Refer to figure 2-6. In this market the minimum wage of $7.25 is

binding and creates unemployment

When a tax is levied on buyers of tea,

buyers of tea and sellers of tea both are made off worse

Suppose that in a particular market, the supply curve is highly elastic and the demand curve is highly inelastic. If a tax is imposed in this market, then the

buyers will bear a greater burden of the tax than the sellers

Total surplus in a market is equal to

consumer surplus + producer surplus

Refer to figure 2-4. The price ceiling shown in panel (b)

creates a shortage

Deadweight loss is the

decline in total surplus that results from a tax

To fully understand how taxes affect economic well being, we must compare the

decrease in total surplus to the increase in revenue raised by the governemnt

A tax on the buyers of cereal will increase the price of cereal paid by buyers,

decrease the effective price of cereal received by sellers, and decrease the equilibrium quantity of cereal

A tax on the seller of coffee mugs

decreases the size of the coffee mug market

Refer to figure 2-2. Between point A and point B on the graph, demand is

elastic, but not perfectly elastic

If the price of milk rises, when is the price elasticity of demand likely to be the lowest?

immediately after the price increase

If the price elasticity of supply is 0.8, and price increased by 5%, quantity supplied would

increase by 4%

If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would

increase by less than $1,000

A person who takes a prescription drug to control high cholesterol most likely has a demand for that drug that is

inelastic

An increase in price causes an increase in total revenue when demand is

inelastic

The price elasticity of demand for eggs

is computed as the percentage change in quantity demanded of eggs divided by the percentage change in price of eggs

Refer to figure 2-4. The price ceiling shown in panel (a)

is not binding

The tax incidence

is the manner in which the burden of a tax is shared among participants in a market

Suppose the demand for peaches decreases. What will happen to producer surplus in the market for peaches?

it decreases

Last year, Joan bought 50 pounds of hamburger when her households income was $40,000. This year, her household income was only $30,000 and Joan bought 60 pounds of hamburger. All else constant, Joan's income elasticity of demand for hamburger is

negative, so Joan considers hamburger to be an inferior good

The presence of price control in a market for a good or service usually is an indication that

policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers

In a free, competitive market, what is the rationing mechanism?

price

In a competitive market free of government regulation

price adjust until quantity demanded equals quantity supplied

A perfectly inelastic demand implies that buyers

purchase the same amount as before when the price rises or falls

The price elasticity of demand measures how much

quantity demanded responds to a change in price

When a tax is placed on a product, the price paid by buyers

rises, and the price received by sellers falls

Refer to figure 2-17. Suppose the government imposes a tax of P' - P'''. The area measured by K + L represents

tax revenue

Consumer surplus is

the amount the buyer is willing to pay for a good minus the amount the buyer actually pays

Producer surplus is

the amount the seller is paid minus the cost of production

Income elasticity of demand measures how

the quantity demanded changes as consumer income changes

The price elasticity of supply measures how much

the quantity supplied responds to changes in the price of the good

If a price ceiling is not binding, then

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