Economics Practice Test 1

Refer to Figure 6-6. Which of the following price ceilings would be binding in this market?

$6

Refer to Figure 7-3. When the price is P1, consumer surplus is

A+B+C

Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to new buyers entering the market?

ABC

Refer to Figure 7-10. Which area represents producer surplus when the price is P1?

BCG

A legal maximum on the price at which a good can be sold is called a price

Ceiling

Refer to Figure 7-20. Total surplus can be measured as the area

JNL

If a price ceiling is not binding then

The equilibrium is below the price ceiling

A price ceiling will be binding only if it is set

below the equilibrium price

Refer to Figure 6-2. The price ceiling

causes a shortage of 85 units

Refer to Figure 6-6. If the government imposes a price floor of $6 on this market,then there will be

no surplus

To say that a price ceiling is binding is to say that the price ceiling

results in a shortage, is set below the equilibrium price, and causes quantity demanded to exceed quantity supplied

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

Suppose Larry, Moe, and Curly are bidding in an auction for a mint-condition video of Charlie Chaplin's first movie

willingness to pay

Refer to Figure 7-4. Which area represents the increase in consumer surplus when the price falls from P1 to P2?

ABDG

Refer to Figure 7-10. Which area represents the increase in producer surplus when the price rises from P1 to P2 due to new producers entering the market?

DGH

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposesa price floor of $3 per tube. As a result of the price floor,

Quantity demanded decreases, quantity supplied increases, and there is a surplus

Refer to Figure 6-1. A binding price ceiling is shown in

panel (b) only

If a nonbinding price ceiling is imposed on a market then the

quantity sold in the market will stay the same

Refer to Table 7-16. If each producer has one unit available for sale, and if the market equilibrium price is $70, how much is the combined total cost of all participating sellers in the market?

$100

Refer to Table 7-1. If price of the product is $135, then the total consumer surplus is

$15

Refer to Figure 7-10. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?

ABGD

Refer to Figure 7-4. Which area represents consumer surplus at a price of P1?

BDF

Refer to Figure 7-3. When the price rises from P1 to P2, consumer surplus

decreases by an amount equal to B+C

To say that a price ceiling is nonbinding is to say that the price ceiling

is set above the equilibrium price

Refer to Figure 6-1. In which panel(s) of the figure would there be a shortage of the good at the price ceiling?

panel (b) only