econ test 2

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

suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages. The tax would shift

supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially sweetened beverages

Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, producer surplus

might increase or decrease

Which of the following causes the price paid by buyers to be different than the price received by sellers?

tax on the good

Producer surplus is

the amount a seller is paid minus the cost of production

According to the Coase theorem, private parties can solve the problem of externalities if

the cost of bargaining is small

Suppose the government places a per-unit tax on a good. the smaller the price elasticities of demand and supply for the good, the

smaller the deadweight loss from the tax

Consider the U.S. market for chocolate, a market in which the government has imposed a nonbinding price ceiling. Which of the following events could convert the price ceiling from a nonbinding to a binding price ceiling?

south American cocoa bean producers refuse to ship to chocolate producers in the united states

a tax levied on the sellers of a good shifts the

supply curve upward by the size of the tax

suppose there is currently a tax of $50 per ticket on airline tickets. sellers of airline tickets are required to pay the tax to the government. if the tax is reduced from $50 per ticket to $30 per ticket, then the

supply curve will shift downward by $20, and the effective price received by sellers will increase by less than $20

At nicks bakery, the cost to make a cheese danish is $1.50 per danish. as a result of selling 10 danishes, nick experiences a producer surplus in the amount of $20. nick must be selling his danishes for

$3.50

Will 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

Suppose Peter, Paul, and Mary are the only three consumers in the market for tambourines. peter values a tambourine at $30, Paul values a tambourine at $20, and Mary Values a tambourine highest at $40. If the price of tambourines is $35, what is their consumer surplus?

$5

Suppose a tax of $4 per unit is imposed on a vaping liquid, and the tax causes the equilibrium quantity of vaping liquid to decrease from 2,000 units to 1,700 units. The tax decreases consumer surplus by $3,000 and decreases producer surplus by $4,400. The deadweight loss of the tax is

$600

Cameron lives in an apartment building and gets a $700 benefit from playing his stereo. Renee, who lives next door to Cameron and often loses sleep due to the music coming from Cameron's stereo, bears a $1,000 cost from the noise. At which of the following offers from Renee could both Renee and Cameron benefit from the silencing of Cameron's stereo?

$750

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

$8

Scenario 10-1The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 1,000th gallon of gasoline entails the following: • a private cost of $3.10;• a social cost of $3.55; • a value to consumers of $3.70. Refer to Scenario 10-1. Let QMARKET represent the equilibrium quantity of gasoline, and let QOPTIMUM represent the socially optimal quantity of gasoline. Which of the following inequalities is correct?

1,000< Qoptimum< Qmarket

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?

50

Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week. If Erin pays Ernesto $90 to clean her house, Erin's consumer surplus is

Erin will now clean her own house

Which of the following statements is correct?

Government should tax goods with negative externalities and subsidize goods with positive externalities.

Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle. Which of the following statements is correct?

The effective price received by sellers is $0.40 per bottle less than it was before the tax

suppose that flue shots create a positive externality equal $8 per shot. Further suppose that the government offers a $11-per-shot subsidy to consumers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

The equilibrium quantity is greater than the socially optimal quantity

if a binding price floor is imposed on the video game market, then

a surplus of video games will develop

Education yields positive externalities. For example,

a more educated population tends to result in lower crime rates

Which of the following is an example of a positive externality?

a neighbor plants beautiful flowers in her front yard

which of the following observations would be consistent with the imposition of a binding price ceiling on a market? after the price ceiling is established

a smaller quantity of the good is bought and sold

The majority of economists prefer corrective taxes to command-and control regulation as a way to correct the problem of pollution because

all of the above are correct (the market-based solution raises revenue for the government, the market-based solution is less costly to society, the market-based solution can result in a greater reduction in pollution

which of the following causes a shortage of a good?

binding price ceiling

Which of the following would cause a shortage?

binding price ceiling is imposed on a market

When the government places a new tax on a good

both buyers and sellers are made worse off

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 the government puts a tax on a market with inelastic demand and elastic supply then

buyers will bear most of the burden of the tax

if the government were to limit the release of air pollution produced by a glue factory to 75 parts per million, the policy would be considered a

command-and-control policy

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 consumer surplus would increase

the decrease in total surplus that results from a market distortion, such as a tax, is called a

deadweight loss

Introducing a binding price floor into a market will

decrease consumer surplus and have ambiguous implications for producer surplus

The surgeon general announces that eating chocolate increase tooth decay. as a result the equilibrium price of chocolate

decreases, and producer surplus decreases

A drought in California destroys many red grapes causing the prices of both red grapes and red wine to rise. as a result the consumer surplus in the market for red grapes

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

suppose that a tax is placed on books. if the buyers pay the majority of the tax, then we know that the

demand is more inelastic than the supply

The distinction between efficiency and equality can be described as follow

efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society

most economists prefer corrective taxes to regulation as a way to correct the problem of pollution because the market-based solution

encourages the firms with the lowest costs of reducing pollution to reduce the most

negative externalities lead markets to produce

greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels

Suppose that a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will

increase producer surplus

When Monique drives to work every morning, she drives on a congested highway. What Monique does not realize is that when she enters the highway each morning she increases the travel time of all other drivers on the highway. In this case, the external cost of Monique's highway trip

increases the social cost about the private cost

Josiah installed a metal sculpture in his front yard. A positive externality arises if the sculpture

increases the value of other properties in the neighborhood

the deadweight loss from a tax per unit of good will be smallest in a market with

inelastic supply and inelastic demand

A positive externality

is a benefit to someone other than the producer and consumer of the good.

A negative externality

is a cost to a bystander

Suppose televisions are a normal good and buyers of televisions experience a decrease in income. As a result, consumer surplus in the television market

may increase, decrease, or remain unchanged

Suppose a tax is created that the buyers of a good must pay to the government. This will raise the

price paid by buyers and lower the equilibrium quantity

Moving production from a high-cost producer to a low-cost producer will

raise total surplus

Dioxin emission that results from the production of paper is a good example of a negative externality because

self-interested paper producers will not consider the full cost of the dioxin pollution they create

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

smaller is the price elasticity of supply

in some cases, tradable pollution permits may be better than a corrective tax because

the government can set a maximum level of pollution using permits

which of the following is NOT an advantage of corrective taxes?

they subsidize the production of goods with positive externalities

we can say that the allocation of resources is efficient if

total surplus is maximized

A sellers opportunity cost measures the

value of everything she must give up to produce a good

Zaria and Hannah are roommates. Zaria assigns a $30 value to smoking cigarettes. Hannah values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem?

zaria pays hannah $16 so that zaria can smoke

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

zero