econ exam 2

Bob purchases a book, and his consumer surplus is $3. If Bob is willing to pay $8 for the book, then the price of the book must be

$5

Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?

.65

If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a

0.6 percent increase in the quantity demanded.

If a 15% change in price results in a 20% change in quantity supplied, then the price elasticity of supply is about

1.33, supply is elastic

If the government imposes a binding price floor in a market, then the consumer surplus in that market will increase.

False

If the current allocation of resources in the market for wallpaper is efficient, then it must be the case that

The market for wallpaper is in equilibrium

When the price falls from P2 to P1, which of the following would not be true?

The total cost of what is now sold by sellers is actually higher than it was before the decrease in the price

Suppose sellers of liquor are required to send $5.00 to the government for every bottle of liquor they sell. Further, suppose this tax causes the price paid by buyers of liquor to rise by $3.00 per bottle. Which of the following statements is correct?

This tax causes the supply curve for liquor to shift upward by $5.00 at each quantity of liquor.

A binding minimum wage creates a surplus of labor.

True

A tax on sellers reduces the size of a market.

True

Suppose you sell a kayak for $600, but you were willing to sell it for $450. The buyer was willing to pay $650. The total surplus is $200.

True

When a free market for a good reaches equilibrium, anyone who is willing and able to sell at the market price can sell the good.

True

If a binding price floor is imposed on the market for eBooks, then

a surplus of eBooks will develop.

A price floor will be binding only if it is set

above the equilibrium price

Producer surplus is the area

below the price and above the supply curve

Total surplus is represented by the area

between the demand and supply curves up to the point of equilibrium

Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,

both Janine and Henry experience an increase in consumer surplus.

Dawn's bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit of the lower prices to

both existing customers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices.

Suppose there is an early freeze in California that reduces the size of the lemon crop. What happens to consumer surplus in the market for lemons?

consumer surplus decreases

If a tax is levied on the sellers of a product, then there will be a(n)

decrease in quantity demanded

When demand is elastic, an increase in price will cause

decrease in total revenue

When demand is inelastic, a decrease in price will cause

decrease in total revenue

A tax on the sellers of coffee mugs

decreases the size of the coffee mug market

Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts?

it increases

If the demand for leather increases, consumer surplus in the leather market

may increase, or remain the same

consumer surplus

measures the benefit buyers receive from participating in a market

Total surplus in a market will increase when the government

neither a nor b is correct

At the present, the maximum legal price for a human kidney is $0. The price of 0 maximizes

neither consumer nor producer surplus

If a tax is imposed on a market with inelastic supply and elastic demand, then

sellers will bear most of the burden of the tax

If the government allowed a free market for transplant organs such as kidneys to exist, the

shortage of organs would be eliminated, and there would be no surplus of organs

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 too many close substitutes for this