Econ exam 2

A $0.50 tax levied on the buyers of pomegranate juice will shift the demand curve

downward by exactly $0.50

If a country is an exporter of a good, then it must be the case that

the world price is greater than its domestic price

The price of a good that prevails in a world market is called the

world price

Anita sharpens knives in her spare time for extra income. Buyers of her service are willing to pay $3.50 per knife for as many knives as Anita is willing to sharpen. On a particular day, she is willing to sharpen the first knife for $2.00, the second knife for $2.50, the third knife for $3.00, and the fourth knife for $3.50. Assume Anita is rational in deciding how many knives to sharpen. Her producer surplus is

$3.00

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.

(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

(ii) and (iv) only

How is the burden of a tax divided? (i)When the tax is levied on the sellers, the sellers bear a higher proportion of the tax burden.(ii)When the tax is levied on the buyers, the buyers bear a higher proportion of the tax burden.(iii)Regardless of whether the tax is levied on the buyers or the sellers, the buyers and sellers bear an equal proportion of the tax burden.(iv)Regardless of whether the tax is levied on the buyers or the sellers, the buyers and sellers bear some proportion of the tax burden

(iv) only

A seller's willingness to sell is

-measured by the seller's cost of production. -related to her supply curve, just as a buyer's willingness to buy is related to his demand curve. -less than the price received if producer surplus is a positive number

Denmark is an importer of computer chips and adds a $5 per chip tariff to the world price of $12 per chip. Suppose Denmark removes the tariff. Which of the following outcomes is not possible?

More Danish-produced chips are sold in Denmark

tax incidence

depends on the elasticities of supply and demand

When a buyer's willingness to pay for a good is equal to the price of the good, the

buyer is indifferent between buying the good and not buying it.

consumer surplus is

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

What is the fundamental basis for trade among nations?

comparative advantage

The principle of comparative advantage asserts that

countries can become better off by specializing in what they do best

If the government removes a tax on a good, then the price paid by buyers will

decrease, and the price received by sellers will increase

A drought in California destroys many red grapes. As a result of the drought, the consumer surplus in the market for red grapes

decreases, and the consumer surplus in the market for red wine decreases

If the government wants to reduce the burning of fossil fuels, it should impose a tax on

either buyers or sellers of gasoline

A country has a comparative advantage in a product if the world price is

higher than that country's domestic price without trade

A consumer's willingness to pay directly measures

how much a buyer values a good.

If the government removes a tax on a good, then the quantity of the good sold will

increase

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

increase by less than $1,000

Assume, for Canada, that the domestic price of tomatoes without international trade is higher than the world price of tomatoes. This suggests that, in the production of tomatoes

other countries have a comparative advantage over Canada and Canada will import tomatoes

A seller is willing to sell a product only if the seller receives a price that is at least as great as the

sellers cost of production

a tax on an imported good is called

tariff