ECON ch 6 & 7

15. Suppose I sell one of my guitars for $800, netting myself a producer surplus of $300. What is the lowest price I would have sold my guitar for? a. $800 b. $1100 c. $500 d. $300

c

3. Consider the market for gasoline, and suppose demand for gasoline is less elastic than supply. The government raises the gas tax by $1 and collects it from sellers of gasoline. Who pays more of the tax? a. Buyers, because demand is less elastic than supply. b. Sellers, because supply is more elastic than demand. c. Sellers, because they give the money to the government. d. Both buyers and sellers bear the tax burden equally.

a

1. Suppose the government institutes a binding price ceiling in a market. What is likely to happen? a. Quantity demanded falls, quantity supplied rises, and there is a surplus. b. Quantity demanded rises, quantity supplied falls, and there is a shortage. c. Demand rises, supply falls, and there is a shortage. d. Nothing will happen.

b

11. What does producer surplus measure? a. Societal welfare from the existence of a market. b. Seller welfare from participating in a market. c. Buyer welfare from participating in a market. d. Cost - Willingness to Pay

b

13. If the price of oak lumber increases, what happens to consumer surplus in the market for oak cabinets? a. Consumer surplus increases. b. Consumer surplus decreases. c. Consumer surplus does not change; only producer surplus does d. It depends on why the price of lumber changes.

b

7. Kelly is willing to pay $5.20 for a gallon of gasoline. The price of gasoline at her local gas station is $3.80. If she purchases ten gallons of gasoline, then Kelly's consumer surplus is a. $1.40 b. $14 c. $3.80 d. $52

b

12. Suppose your own demand curve for tomatoes slopes downward. Suppose also that, for the last tomato you bought this week, you paid a price exactly equal to your willingness to pay. Then: a. You should buy more tomatoes before the end of the week. b. You have bought too many tomatoes this week. c. Your consumer surplus on the last tomato you bought is 0. d. Your consumer surplus on all the tomatoes you bought this week is 0.

c

14. 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: a. $2 each. b. $.5 each. c. $3.50 each. d. $5 each.

c

5. What happens when a tax is instituted in a market? Assume neither demand nor supply is perfectly elastic or inelastic. a. The price paid by buyers falls, the price paid by sellers rises, and equilibrium quantity rises. b. It depends who the government collects the tax from. c. The price paid by buyers rises, the price received by sellers falls, and equilibrium quantity falls. d. The price paid by buyers rises, the price received by sellers rises, and the equilibrium quantity falls.

c

6. When will a price floor have an effect on market outcomes? a. When it is set below the equilibrium price. b. When it is set at the equilibrium price. c. When it is set above the equilibrium price. d. All of the above are true.

c

8. Suppose Lauren, Leslie and Lydia all purchase bulletin boards for their rooms for $15 each. Lauren's willingness to pay was $35, Leslie's willingness to pay was $25, and Lydia's willingness to pay was $30. Total consumer surplus for these three would be a. $15 b. $30 c. $45 d. $90

c

9. Celine buys a new MP3 player for $90. She receives consumer surplus of $15 on her purchase if her willingness to pay is: a. $15 b. $90 c. $105 d. $75

c

10. What does consumer surplus measure? a. Price - willingness to pay b. Willingness to pay - cost c. Societal welfare from the existence of a market d. buyer welfare from participating in a market

d

16. Bill created a new software program he is willing to sell for $300. He sells his first copy and enjoys a producer surplus of $250. What is the price paid for the software? a. $50 b. $150 c. $200 d. $550

d

2. Because demand and supply tend to be more elastic over time, which of the following are true? a. Surpluses and shortages become smaller over time. b. Surpluses caused by price floors become larger. c. Shortages caused by price ceilings become larger. d. Both B and C are true.

d

4. Suppose the government wants to tax something to raise revenue. What sort of market is a good candidate for such a tax? a. One where demand is perfectly inelastic. b. One where supply is perfectly elastic. c. One where supply is perfectly inelastic. d. Both A and C would be good candidates.

d