Econ Midterm

A quota is a. a tax placed on imports. b. a limit on the quantity of imports. c. a tax on exports to other countries. d. an excess of exports over imports.

a limit on the quantity of imports.

A legal maximum on the price at which a good can be sold is called a price floor. subsidy. ceiling. support.

ceiling.

An example of a price floor is any restriction on price that leads to a shortage. rent control. the regulation of gasoline prices in the U.S. in the 1970s. the minimum wage.

the minimum wage.

1. Which of the following tools and concepts is useful in the analysis of international trade? a. total surplus b. domestic supply c. equilibrium price d. All of the above are correct.

All of the above are correct.

As the size of a tax rises, the deadweight loss falls, and tax revenue first rises, then falls. rises, and tax revenue first rises, then falls. falls as does tax revenue. rises as does tax revenue.

rises, and tax revenue first rises, then falls.

Buyers and sellers who have no influence on market price are referred to as price setters. price takers. monopolists. market pawns.

price takers.

Efficiency in a market is achieved when the sum of producer surplus and consumer surplus is maximized. all firms are producing the good at the same low cost per unit. no buyer is willing to pay more than the equilibrium price for any unit of the good. a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs.

the sum of producer surplus and consumer surplus is maximized.

A decrease in the number of sellers in the market causes a movement up and to the right along a stationary supply curve. the supply curve to shift to the right. the supply curve to shift to the left. a movement downward and to the left along a stationary supply curve.

the supply curve to shift to the left.

Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is $850. $425. $150. $500.

$500.

Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book? $4. $2. $6. $8.

$8.

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 (i) only (ii) and (iv) only (iii) only

(i) and (iii) only

Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price of beans increases to equal the world price of beans, then a. that country becomes an exporter of beans. b. that country has a comparative advantage in producing beans. c. at the world price, the quantity of beans supplied in that country exceeds the quantity of beans demanded in that country. d. All of the above are correct.

All of the above are correct.

Import quotas and tariffs produce similar results. Which of the following is not one of those results? a. The domestic price of the good increases. b. Consumer surplus of domestic consumers increases. c. Producer surplus of domestic producers increases. d. A deadweight loss is experienced by the domestic country

Consumer surplus of domestic consumers increases.

Denmark is an importer of computer chips, taking the world price of $12 per chip as given. Suppose Denmark imposes a $5 tariff on chips. Which of the following outcomes is possible? a. More Danish-produced chips are sold in Denmark. b. More foreign-produced chips are sold in Denmark. c. Danish consumers of chips become better off. d. Total surplus in the Danish chip market increases.

More Danish-produced chips are sold in Denmark.

Some time ago, the nation of Republica opened up its paper market to international trade. Which of the following results of this policy change is consistent with the notion that Republica has a comparative advantage over other countries in producing paper? a. The price of paper in Republica decreased as a result of the policy change. b. Republica began exporting paper as a result of the policy change. c. The domestic demand curve for paper shifted to the right as a result of the policy change. d. The domestic quantity of paper demanded increased as a result of the policy change.

Republica began exporting paper as a result of the policy change.

When a country allows trade and becomes an importer of bottled water, which of the following is not a consequence? a. The gains of domestic consumers of bottled water exceed the losses of domestic producers of bottled water. b. The losses of domestic producers of bottled water exceed the gains of domestic consumers of bottled water. c. The price paid by domestic consumers of bottled water decreases. d. The price received by domestic producers of bottled water decreases.

The losses of domestic producers of bottled water exceed the gains of domestic consumers of bottled water.

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as (TxQ)/Q. T/Q. T+Q. TxQ.

TxQ.

If macaroni and cheese is an inferior good, then an increase in a consumer's income will cause the demand curve for macaroni and cheese to shift to the left. a consumer's income will cause the demand curve for macaroni and cheese to shift to the right. the price will cause the demand curve for macaroni and cheese to shift to the right. the price will cause the demand curve for macaroni and cheese to shift to the left.

a consumer's income will cause the demand curve for macaroni and cheese to shift to the left.

A competitive market is one in which there are so many buyers and so many sellers that each has a negligible impact on the price of the product. is only one seller, but there are many buyers. are many sellers, and they compete with one another in such a way that some sellers are always being forced out of the market. are many sellers, and each seller has the ability to set the price of his product.

are so many buyers and so many sellers that each has a negligible impact on the price of the product.

What is the fundamental basis for trade among nations? a. shortages or surpluses in nations that do not trade b. misguided economic policies c. absolute advantage d. comparative advantage

comparative advantage

The principle of comparative advantage asserts that a. not all countries can benefit from trade with other countries. b. the world price of a good will prevail in all countries, regardless of whether those countries allow international trade in that good. c. countries can become better off by exporting goods, but they cannot become better off by importing goods. d. countries can become better off by specializing in what they do best.

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

A tax of $0.25 is imposed on each bag of potato chips that is sold. The tax decreases producer surplus by $600 per day, generates tax revenue of $1,220 per day, and decreases the equilibrium quantity of potato chips by 120 bags per day. The tax decreases the equilibrium quantity from 6,000 bags per day to 5,880 bags per day. decreases total surplus from $3,000 to $1,800 per day. decreases consumer surplus by $645 per day. creates a deadweight loss of $15 per day.

creates a deadweight loss of $15 per day.

When the nation of Isoland opens up its steel market to international trade, that change a. creates winners and losers, regardless of whether Isoland ends up exporting or importing steel. b. results in a decrease in total surplus, regardless of whether Isoland ends up exporting or importing steel. c. creates winners, but no losers, if Isoland ends up exporting steel. d. creates losers, but no winners, if Isoland ends up importing steel.

creates winners and losers, regardless of whether Isoland ends up exporting or importing steel.

Both tariffs and import quotas a. increase the quantity of imports and raise the domestic price of the good. b. increase the quantity of imports and lower the domestic price of the good. c. decrease the quantity of imports and raise the domestic price of the good. d. decrease the quantity of imports and lower the domestic price of the good.

decrease the quantity of imports and raise the domestic price of the good.

If the demand for leather decreases, producer surplus in the leather market may increase, decrease, or remain the same. decreases. increases. remains the same.

decreases.

When a country allows trade and becomes an exporter of a good, a. domestic producers gain and domestic consumers lose. b. domestic producers lose and domestic consumers gain. c. domestic producers and domestic consumers both gain. d. domestic producers and domestic consumers both lose.

domestic producers gain and domestic consumers lose.

A $1.50 tax levied on the buyers of pomegranate juice will shift the demand curve downward by exactly $1.50. upward by less than $1.50. downward by less than $1.50. upward by exactly $1.50.

downward by exactly $1.50.

Which of the following is not an example of a public policy? equilibrium laws rent-control laws taxes minimum-wage laws

equilibrium laws

For any country, if the world price of copper is higher than the domestic price of copper without trade, that country should a. export copper, since that country has a comparative advantage in copper. b. import copper, since that country has a comparative advantage in copper. c. neither export nor import copper, since that country cannot gain from trade. d. neither export nor import copper, since that country already produces copper at a low cost compared to other countries.

export copper, since that country has a comparative advantage in copper.

The world price of a pound of almonds is $4.50. Before Uruguay allowed trade in almonds, the price of a pound of almonds there was $3.00. Once Uruguay began allowing trade in almonds with other countries, Uruguay began a. exporting almonds and the price per pound in Uruguay remained at $3.00. b. exporting almonds and the price per pound in Uruguay increased to $4.50. c. importing almonds and the price per pound in Uruguay remained at $3.00. d. importing almonds and the price per pound in Uruguay increased to $4.50.

exporting almonds and the price per pound in Uruguay increased to $4.50.

Consider a good to which a per-unit tax applies. The greater the price elasticities of demand and supply for the good, the smaller the deadweight loss from the tax. more equitable is the distribution of the tax burden between buyers and sellers. more efficient is the tax. greater the deadweight loss from the tax.

greater the deadweight loss from the tax.

If the world price of apples is higher than Argentina's domestic price of apples without trade, then Argentina a. should import apples. b. has a comparative advantage in apples. c. should produce just enough apples to meet its domestic demand. d. should refrain altogether from producing apples.

has a comparative advantage in apples.

The nation of Wheatland forbids international trade. In Wheatland, you can buy 1 pound of corn for 3 pounds of fish. In other countries, you can buy 1 pound of corn for 2 pounds of fish. These facts indicate that a. Wheatland has a comparative advantage, relative to other countries, in producing corn. b. other countries have a comparative advantage, relative to Wheatland, in producing fish. c. the price of fish in Wheatland exceeds the world price of fish. d. if Wheatland were to allow trade, it would import corn.

if Wheatland were to allow trade, it would import corn.

Deadweight loss measures the loss of total revenue to business firms due to the price wedge caused by the tax. in revenue to the government when buyers choose to buy less of the product because of the tax. of equality in a market due to government intervention. in a market to buyers and sellers that is not offset by an increase in government revenue.

in a market to buyers and sellers that is not offset by an increase in government revenue.

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. decrease by an indeterminate amount. increase by more than $1,000. increase by exactly $1,000.

increase by less than $1,000.

A rightward shift of a demand curve is called a(n) decrease in demand. decrease in quantity demanded. increase in quantity demanded. increase in demand.

increase in demand.

If the government removes a binding price ceiling from a market, then the price paid by buyers will increase, and the quantity sold in the market will increase. decrease, and the quantity sold in the market will decrease. decrease, and the quantity sold in the market will increase. increase, and the quantity sold in the market will decrease.

increase, and the quantity sold in the market will increase.

As more people become self-employed, which allows them to determine how many hours they work per week, we would expect the deadweight loss from the Social Security tax to increase, and the revenue generated from the tax to increase. increase, and the revenue generated from the tax to decrease. decrease, and the revenue generated from the tax to increase. decrease, and the revenue generated from the tax to decrease.

increase, and the revenue generated from the tax to decrease.

An increase in the size of a tax is most likely to increase tax revenue in a market with elastic demand and inelastic supply. elastic demand and elastic supply. inelastic demand and inelastic supply. inelastic demand and elastic supply.

inelastic demand and inelastic supply.

If a decrease in income increases the demand for a good, then the good is a(n) normal good. complementary good. substitute good. inferior good.

inferior good.

If the size of a tax increases, tax revenue increases. decreases. may increase, decrease, or remain the same. remains the same.

may increase, decrease, or remain the same.

When markets fail, public policy can always remedy the problem and increase economic efficiency. potentially remedy the problem and increase economic efficiency. in theory, remedy the problem, but in practice, public policy has proven to be ineffective. do nothing to improve the situation.

potentially remedy the problem and increase economic efficiency.

In a free, competitive market, what is the rationing mechanism? price buyer bias seller bias government law

price

Assume a market is perfectly competitive. When a new producer enters the market, the market is no longer a competitive market. price in the market does not change. price in the market decreases. price in the market increases.

price in the market does not change.

When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy, a. producer surplus increases and total surplus increases in the market for that good. b. producer surplus increases and total surplus decreases in the market for that good. c. producer surplus decreases and total surplus increases in the market for that good. d. producer surplus decreases and total surplus decreases in the market for that good.

producer surplus increases and total surplus decreases in the market for that good.

Consumer surplus is a good measure of economic welfare if policymakers want to maximize total benefit. respect the preferences of buyers. minimize deadweight loss. respect the preferences of sellers.

respect the preferences of buyers.

A supply curve can be used to measure producer surplus because it reflects the actions of sellers. sellers' costs. the amount that will be purchased by consumers in the market. quantity supplied.

sellers' costs.

Market failure is the inability of buyers to interact harmoniously with sellers in the market. some unregulated markets to allocate resources efficiently. buyers to place a value on the good or service. a market to establish an equilibrium price.

some unregulated markets to allocate resources efficiently.

A minimum wage that is set above a market's equilibrium wage will result in an excess demand for labor, that is, unemployment. demand for labor, that is, a shortage of workers. supply of labor, that is, a shortage of workers. supply of labor, that is, unemployment.

supply of labor, that is, unemployment.

A tax on an imported good is called a a. quota. b. tariff. c. supply tax. d. trade tax

tariff

A major difference between tariffs and import quotas is that a. tariffs create deadweight losses, but import quotas do not. b. tariffs help domestic consumers, and import quotas help domestic producers. c. tariffs raise revenue for the government, but import quotas create surplus for those who get the licenses to import. d. All of the above are correct

tariffs raise revenue for the government, but import quotas create surplus for those who get the licenses to import.

If the demand curve and the supply curve for a good are straight lines, then the deadweight loss that results from a tariff is represented on the supply-and-demand graph by a. the area of one triangle. b. the area of one rectangle. c. the combined areas of two different triangles. d. the combined areas of two different rectangles

the combined areas of two different triangles.

If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price, a. the country will be an exporter of the good. b. the country will be an importer of the good. c. the country will be neither an exporter nor an importer of the good. d. Additional information is needed about demand to determine whether the country will be an exporter of the good, an importer of the good, or neither.

the country will be an importer of the good.

Buyers are able to buy all they want to buy and sellers are able to sell all they want to sell at prices above and below the equilibrium price, but not at the equilibrium price. the equilibrium price but not above or below the equilibrium price. prices at and above the equilibrium price. prices at and below the equilibrium price.

the equilibrium price but not above or below the equilibrium price.

When a country allows trade and becomes an importer of a good, a. everyone in the country benefits. b. the gains of the winners exceed the losses of the losers. c. the losses of the losers exceed the gains of the winners. d. everyone in the country loses.

the gains of the winners exceed the losses of the losers.

When a nation first begins to trade with other countries and the nation becomes an importer of corn, a. this is an indication that the world price of corn exceeds the nation's domestic price of corn in the absence of trade. b. this is an indication that the nation has a comparative advantage in producing corn. c. the nation's consumers of corn become better off and the nation's producers of corn become worse off. d. All of the above are correct.

the nation's consumers of corn become better off and the nation's producers of corn become worse off.

Labor taxes may distort labor markets greatly if the number of hours many part-time workers want to work is very sensitive to the wage rate. labor supply is highly inelastic. many workers choose to work 40 hours per week regardless of their earnings. "underground" workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes.

the number of hours many part-time workers want to work is very sensitive to the wage rate.

A movement along the demand curve might be caused by a change in income. the prices of substitutes or complements. the price of the good or service that is being demanded. expectations about future prices.

the price of the good or service that is being demanded.

If the minimum wage exceeds the equilibrium wage, then the minimum wage will not be binding. the quantity demanded of labor will exceed the quantity supplied. the quantity supplied of labor will exceed the quantity demanded. there will be no unemployment.

the quantity supplied of labor will exceed the quantity demanded.

Suppose Iran imposes a tariff on lumber. For the tariff to have any effect, it must be the case that a. Iran is an exporter of lumber. b. the domestic quantity of lumber supplied exceeds the domestic quantity of lumber demanded at the world price without the tariff. c. the world price without the tariff is less than the price of lumber without trade. d. the world price without the tariff is greater than the price of lumber without trade.

the world price without the tariff is less than the price of lumber without trade.

Trade enhances the economic well-being of a nation in the sense that a. both domestic producers and domestic consumers of a good become better off with trade, regardless of whether the nation imports or exports the good in question. b. the gains of domestic producers of a good exceed the losses of domestic consumers of a good, regardless of whether the nation imports or exports the good in question. c. trade results in an increase in total surplus. d. trade puts downward pressure on the prices of all goods.

trade results in an increase in total surplus.

In a market, the marginal buyer is the buyer who is willing to buy exactly one unit of the good. whose willingness to pay is lower than that of all other buyers and potential buyers. who would be the first to leave the market if the price were any higher. whose willingness to pay is higher than that of all other buyers and potential buyers.

who would be the first to leave the market if the price were any higher.

Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is $550. $350. $150. $200.

$150.

Bill created a new software program he is willing to sell for $200. He sells his first copy and enjoys a producer surplus of $150. What is the price paid for the software? $350. $150. $200. $50.

$350.

Which of the following tools help us evaluate how taxes affect economic well-being? (i) consumer surplus (ii) producer surplus (iii) tax revenue (iv) deadweight loss (iii) and (iv) only (i), (ii), (iii), and (iv) (i), (ii), and (iii) only (i) and (ii) only

(i), (ii), (iii), and (iv)

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) only (iv) only (i) and (iii) only (ii) and (iv) only

(ii) and (iv) only

A nonbinding 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. (iii) only (ii) and (iv) only (i) and (iii) only (i) only

(iii) 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. (i), (ii), and (iii) only (iv) only (i), (ii), and (iv) only (i) and (ii) only

(iv) only

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? 8. 200. 50. 40.

50.

Alex is willing to pay $10, and Bella is willing to pay $8, for 1 pound of ribeye steak. When the price of ribeye steak increases from $9 to $11, neither Bella nor Alex experiences a decrease in consumer surplus. Bella experiences a decrease in consumer surplus, but Alex does not. both Bella and Alex experience a decrease in consumer surplus. Alex experiences a decrease in consumer surplus, but Bella does not.

Alex experiences a decrease in consumer surplus, but Bella does not.

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the All of the above are correct. less elastic is the demand for the good. smaller is the amount of the tax. less elastic is the supply of the good

All of the above are correct

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. All of the above are correct. less than the price received if producer surplus is a positive number.

All of the above are correct.

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is tripled, the height of the triangle that represents the deadweight loss triples. base of the triangle that represents the deadweight loss triples. deadweight loss of the tax increases by a factor of nine. All of the above are correct.

All of the above are correct.

If a binding price floor is imposed on the video game market, then You Answered a surplus of video games will develop. the quantity of video games demanded will decrease. the quantity of video games supplied will increase. All of the above are correct.

All of the above are correct.

In a market economy, supply and demand are important because they can be used to predict the impact on the economy of various events and policies. determine how much of each good gets produced. play a critical role in the allocation of the economy's scarce resources. All of the above are correct.

All of the above are correct.

Dallas buys strawberries, and he would be willing to pay more than he now pays. Suppose that Dallas has a change in his tastes such that he values strawberries more than before. If the market price is the same as before, then Dallas would be wise to buy fewer strawberries than before. Dallas's consumer surplus would be unaffected. Dallas's consumer surplus would increase. Dallas's consumer surplus would decrease.

Dallas's consumer surplus would increase.

Kate is a personal trainer whose client William pays $80 per hour-long session. William values this service at $100 per hour, while the opportunity cost of Kate's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. After the tax, what is likely to happen in the market for personal training? Kate will no longer offer personal training services to William because she must charge more than $100 in order to cover her opportunity costs and pay the tax. Kate and William will agree to a new price somewhere between $85 and $100. Kate and William will agree to a new price somewhere between $70 and $110. The price will remain at $80, and Kate will pay the $10 tax.

Kate and William will agree to a new price somewhere between $85 and $100.

Assume Leo buys coffee beans in a competitive market. It follows that Leo will negotiate with sellers whenever he buys coffee beans. None of the above is correct. Leo cannot influence the price of coffee beans even if he buys a large quantity of them. Leo has a limited number of sellers from which to buy coffee beans.

Leo cannot influence the price of coffee beans even if he buys a large quantity of them.

Which of the following is not a characteristic of a perfectly competitive market? All of the above are characteristics of a perfectly competitive market. There are many sellers. Buyers must accept the price the market determines. Sellers set the price of the product.

Sellers set the price of the product.

In which of the following cases is it most likely that an increase in the size of a tax will decrease tax revenue? The price elasticity of demand and the price elasticity of supply are both small. The price elasticity of demand is large, and the price elasticity of supply is small. The price elasticity of demand and the price elasticity of supply are both large. The price elasticity of demand is small, and the price elasticity of supply is large.

The price elasticity of demand and the price elasticity of supply are both large.

Assume the price of gasoline is $2.00 per gallon, and the equilibrium quantity of gasoline is 10 million gallons per day with no tax on gasoline. Starting from this initial situation, which of the following scenarios would result in the largest deadweight loss? The price elasticity of demand for gasoline is 0.1; the price elasticity of supply for gasoline is 0.4; and the gasoline tax amounts to $0.20 per gallon. The price elasticity of demand for gasoline is 0.1; the price elasticity of supply for gasoline is 0.6; and the gasoline tax amounts to $0.20 per gallon. There is insufficient information to make this determination. The price elasticity of demand for gasoline is 0.2; the price elasticity of supply for gasoline is 0.6; and the gasoline tax amounts to $0.30 per gallon.

The price elasticity of demand for gasoline is 0.2; the price elasticity of supply for gasoline is 0.6; and the gasoline tax amounts to $0.30 per gallon.

If a tax shifts the demand curve upward (or to the right), we can infer that the tax was levied on sellers of the good. both buyers and sellers of the good. We cannot infer anything because the shift described is not consistent with a tax. buyers of the good.

We cannot infer anything because the shift described is not consistent with a tax.

If a surplus exists in a market, then we know that the actual price is above the equilibrium price, and quantity demanded is greater than quantity supplied. above the equilibrium price, and quantity supplied is greater than quantity demanded. below the equilibrium price, and quantity supplied is greater than quantity demanded. below the equilibrium price, and quantity demanded is greater than quantity supplied.

above the equilibrium price, and quantity supplied is greater than quantity demanded.

If a shortage exists in a market, then we know that the actual price is above the equilibrium price, and quantity demanded is greater than quantity supplied. below the equilibrium price, and quantity supplied is greater than quantity demanded. below the equilibrium price, and quantity demanded is greater than quantity supplied. above the equilibrium price, and quantity supplied is greater than quantity demanded.

below the equilibrium price, and quantity demanded is greater than quantity supplied.

Producer surplus is the area between the supply and demand curves. under the supply curve. under the demand curve and above the price. below the price and above the supply curve.

below the price and above the supply curve.

Consider the market for portable air conditioners in equilibrium. A summer of unseasonably cool weather would cause the equilibrium price to increase and the equilibrium quantity to decrease. both the equilibrium price and quantity to increase. the equilibrium price to decrease and the equilibrium quantity to increase. both the equilibrium price and quantity to decrease.

both the equilibrium price and quantity to decrease.

In a market economy, supply and demand determine both the quantity of each good produced and the price at which it is sold. neither the quantity of each good produced nor the price at which it is sold. the price at which each good is sold but not the quantity of each good produced. the quantity of each good produced but not the price at which it is sold.

both the quantity of each good produced and the price at which it is sold.

Policymakers use taxes when they realize that price controls alone are insufficient to correct market inequities. both to raise revenue for public purposes and to influence market outcomes. to raise revenue for public purposes but not to influence market outcomes. only in those markets in which the burden of the tax falls clearly on the sellers.

both to raise revenue for public purposes and to influence market outcomes.

It does not matter whether a tax is levied on the buyers or the sellers of a good because sellers always bear the full burden of the tax. None of the above is correct; the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax. buyers and sellers will share the burden of the tax. buyers always bear the full burden of the tax.

buyers and sellers will share the burden of the tax.

A tax on the buyers of personal computer external hard drives encourages Both a) and b) are correct. buyers to demand a smaller quantity at every price. sellers to supply a smaller quantity at every price. buyers to demand a larger quantity at every price.

buyers to demand a smaller quantity at every price.

To fully understand how taxes affect economic well-being, we must assume that economic well-being is not affected if all tax revenue is spent on goods and services for the people who are being taxed. take into account the fact that almost all taxes reduce the welfare of buyers, increase the welfare of sellers, and raise revenue for the government. compare the reduced welfare of buyers and sellers to the amount of revenue the government raises. compare the taxes raised in the United States with those raised in other countries, especially France.

compare the reduced welfare of buyers and sellers to the amount of revenue the government raises.

Hot dogs and hot dog buns are complements. An increase in the price of flour used to make hot dogs buns will decrease consumer surplus in the market for hot dog buns and increase producer surplus in the market for hot dogs. increase consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs. increase consumer surplus in the market for hot dogs and increase producer surplus in the market for hot dog buns. decrease consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs.

decrease consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs.

If a tax is levied on the sellers of a product, then there will be a(n) decrease in quantity demanded. increase in quantity demanded. upward shift of the demand curve. downward shift of the demand curve.

decrease in quantity demanded.

If the government removes a tax on a good, then the price paid by buyers will decrease, and the price received by sellers will decrease. decrease, and the price received by sellers will increase. increase, and the price received by sellers will decrease. increase, and the price received by sellers will increase.

decrease, and the price received by sellers will increase.

Equilibrium price must decrease when demand decreases and supply does not change, when demand does not change and supply increases, and when demand increases and supply decreases simultaneously. decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously. increases and supply does not change, when demand does not change and supply decreases, and when demand decreases and supply increases simultaneously. increases and supply does not change, when demand does not change and supply decreases, and when demand increases and supply decreases simultaneously.

decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously.

A tax levied on the buyers of a good shifts the demand curve downward (or to the left). supply curve upward (or to the left). supply curve downward (or to the right). demand curve upward (or to the right).

demand curve downward (or to the left).

If the number of buyers in a market decreases, then supply will decrease. demand will increase. demand will decrease. supply will increase.

demand will decrease.

A tax imposed on the buyers of a good will lower the price paid by buyers and raise the equilibrium quantity. price paid by buyers and lower the equilibrium quantity. effective price received by sellers and lower the equilibrium quantity. effective price received by sellers and raise the equilibrium quantity.

effective price received by sellers and lower the equilibrium quantity.

A decrease in the size of a tax is most likely to increase tax revenue in a market with elastic demand and inelastic supply. inelastic demand and inelastic supply. elastic demand and elastic supply. inelastic demand and elastic supply.

elastic demand and elastic supply.

If the labor supply curve is nearly vertical, a tax on labor raises a small amount of tax revenue. results in a large tax burden on the firms that hire labor. has little impact on the amount of work that workers are willing to do. has a large deadweight loss.

has little impact on the amount of work that workers are willing to do.

A consumer's willingness to pay directly measures the cost of a good to the buyer. the extent to which advertising and other external forces have influenced the consumer's preferences. consumer surplus. how much a buyer values a good.

how much a buyer values a good.

A market demand curve shows how quantity demanded changes when the number of sellers changes. the sum of all prices that individual buyers are willing and able to pay for each possible quantity of the good. how much of a good all buyers are willing and able to buy at each possible price. the relationship between price and the number of buyers in a market.

how much of a good all buyers are willing and able to buy at each possible price.

PlayStations and PlayStation games are complementary goods. A technological advance in the production of PlayStations will increase consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. decrease consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games. decrease consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. increase consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games.

increase consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games.

If Kindle e-readers and Nook e-readers are substitutes, a higher price for Nooks would result in a(n) increase in the demand for Kindles. decrease in the demand for Nooks. increase in the demand for Nooks. decrease in the demand for Kindles.

increase in the demand for Kindles.

If suppliers expect the price of their product to fall in the future, then they will decrease supply now. increase supply in the future but not now. increase supply now. decrease supply in the future but not now.

increase supply now.

A tax levied on the sellers of blueberries increases sellers' costs, reduces profits, and shifts the supply curve up. decreases sellers' costs, increases profits, and shifts the supply curve down. decreases sellers' costs, increases profits, and shifts the supply curve up. increases sellers' costs, reduces profits, and shifts the supply curve down.

increases sellers' costs, reduces profits, and shifts the supply curve up.

A deadweight loss is a consequence of a tax on a good because the tax imposes a loss on buyers that is greater than the loss to sellers. induces buyers to consume less, and sellers to produce less. increases the equilibrium price in the market. induces the government to increase its expenditures.

induces buyers to consume less, and sellers to produce less.

When the government imposes taxes on buyers or sellers of a good, society is better off because the government's tax revenues exceed the deadweight loss. gains efficiency but loses equality. moves from an elastic supply curve to an inelastic supply curve. loses some of the benefits of market efficiency.

loses some of the benefits of market efficiency.

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it maximizes both the total revenue for firms and the quantity supplied of the product. maximizes the combined welfare of buyers and sellers. minimizes costs and maximizes output. minimizes the level of welfare payments.

maximizes the combined welfare of buyers and sellers.

There is no shortage of scarce resources in a market economy because quantity supplied is always greater than quantity demanded in market economies. the government makes shortages illegal. resources are abundant in market economies. prices adjust to eliminate shortages.

prices adjust to eliminate shortages.

Cost is a measure of the seller's willingness to sell. seller's willingness to buy. producer shortage. seller's producer surplus.

seller's willingness to sell.

If a tax is levied on the buyers of a product, then the demand curve will become flatter. shift up. shift down. not shift.

shift down.

Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the supply of the product is more elastic than the demand for the product. tax is placed on the sellers of the product. tax is placed on the buyers of the product. demand for the product is more elastic than the supply of the product.

supply of the product is more elastic than the demand for the product.

One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the tax reduces the welfare of both buyers and sellers. supply curve for the good shifts upward by the amount of the tax. equilibrium quantity of the good is unchanged. price the buyer effectively pays is lower.

tax reduces the welfare of both buyers and sellers.

In markets, prices move toward equilibrium because of buyers' ability to affect market outcomes. government regulations placed on market participants. the actions of buyers and sellers. increased competition among sellers.

the actions of buyers and sellers.

A market supply curve shows suppliers' responses, in terms of the amounts they will supply, to the demands of buyers. how quantity supplied changes when consumer income changes. the average quantity supplied by producers at all possible prices. the total quantity supplied at all possible prices.

the total quantity supplied at all possible prices.

An outcome that can result from either a price ceiling or a price floor is a shortage. a surplus. an enhancement of efficiency. undesirable rationing mechanisms.

undesirable rationing mechanisms.

A $2.00 tax levied on the sellers of birdhouses will shift the supply curve downward by exactly $2.00. upward by less than $2.00. downward by less than $2.00. upward by exactly $2.00.

upward by exactly $2.00.

At the equilibrium price of a good, the good will be purchased by those buyers who consider the good a necessity. value the good less than price. value the good more than price. have the money to buy the good.

value the good more than price.

The study of how the allocation of resources affects economic well-being is called consumer economics. welfare economics. willingness-to-pay economics. macroeconomics.

welfare economics.

Price controls are usually enacted as a means of raising revenue for public purposes. All of the above are correct. when policymakers tax a good. when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

Another way to think of the marginal seller is the seller who would leave the market first if the price were any lower. requires the highest price of any potential seller in the market. would leave the market last if the price falls. will accept the lowest price of any seller in the market.

would leave the market first if the price were any lower.

Consider the market for gasoline. Buyers would lobby for a price floor, whereas sellers would lobby for a price ceiling. and sellers would lobby for a price ceiling. and sellers would lobby for a price floor. would lobby for a price ceiling, whereas sellers would lobby for a price floor.

would lobby for a price ceiling, whereas sellers would lobby for a price floor.

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is positive, and the consumer would purchase the product. There is not enough information given to answer this question. zero. negative, and the consumer would not purchase the product.

zero.