Homework 7

An example of an effective price ceiling would be the government setting the apartment rent at ________ per bedroom when the market price is at $400 per bedroom. a) $375 b) $500 c) $775 d) $1200

$375

In the figure below, consumer surplus is area ​[A+B+E] if price is a) P1 b) P2 c) P3 d) Above P3

a) P1

The sum of consumer surplus and producer surplus is _______ at the market equilibrium. a) greatest b) smallest c) zero d) negative

a) greatest

A tax on the consumer side a) shifts the demand curve down and to the left b) shifts the demand curve up and to the right c) shifts the supply curve up and to the left d) shifts the supply curve down and to the right

a) shifts the demand curve down and to the left

Highway tolls are taxes imposed on a) the consumer side (i.e., road users). b) the supply side (i.e., road builders). c) both the consumer and the supplier sides. d) neither the consumer nor the supplier side.

a) the consumer side (i.e., road users).

If the per unit tax is $4 and the quantity transacted is Q=1,000 (without tax) and Q'=900 (after tax), what would be the government tax revenue? a) $4,000 b) $3,600 c) $400 d) $360

b) $3,600

Suppose that Maria is willing to pay $40 for a haircut, and her stylist Juan is willing to accept as little as $25 for a haircut. What possible price for the haircut would be beneficial to both Maria and Juan? a) $20 b) $30 c) $45 d) $65

b) $30

Suppose that Maria is willing to pay $40 for a haircut, and her stylist Juan is willing to accept as little as $25 for a haircut. If the state where Maria and Juan live instituted a tax on services that included a $5 per haircut tax on stylists and barbers, what is one price (including the tax) that will make both Maria and Juan better off? a) $28 b) $32 c) $42 d) $45

b) $32

In the figure below, producer surplus is area G if price is a) below P1 b) P1 c) P2 d) P3

b) P1

In the figure below, the area of (A+B+C) represents a) producer surplus at the market equilibrium. b) consumer surplus at the market equilibrium. c) consumer surplus plus producer surplus at the market equilibrium. d) consumer surplus minus producer surplus at the market equilibrium.

b) consumer surplus at the market equilibrium

An income tax ______ the number of people in the workforce. a) increases b) decreases c) increases or decreases d) does not change

b) decreases

When a consumer's maximum willingness to pay for a product is $7 and the price is $6.5 and the sales tax is $x, the consumer would: a) buy the product if x=1 b) not buy the product if x=0.6 c) not buy the product if x=0.4 d) always buy the product no matter what value x takes.

b) not buy the product if x=0.6

Assuming the government establishes a price floor above the equilibrium price, which of the following statements is not correct? a) The current equilibrium price cannot be achieved. b) Price will go down. c) Price will go up. d) Sellers are motivated to offer a larger quantity to the market.

b) price will go down

If the most someone is willing to pay for an airline ticket to Las Vegas is $300 and the market price of the ticket is $200. Now the government decides to impose a tax of $50 per ticket, driving up the price to $250. This buyer will get consumer surplus of a) $150 b) $100 c) $50 d) The buyer will not purchase the ticket, and consumer surplus would be zero.

c) $50

In the figure below, an effective price control at P=P1 would result in a deadweight loss of a) Area B+C b) Area C c) Area C+F d) Area F

c) Area C+F

A government-imposed maximum price will have no economic impact if a) it is below the equilibrium price. b) it is at or below the equilibrium price. c) it is above the equilibrium price. d) none of the above; A government-imposed maximum price will always have an economic impact.

c) it is above the equilibrium price.

A deadweight loss occurs ____ in a market. a) when there is efficient production b) when CS + PS is maximized c) when quantity traded does not equal to the equilibrium level d) when some consumers do not buy the product

c) when quantity traded does not equal to the equilibrium level

Suppose the government forced all bread manufacturers to sell their products at a "fair price" that was half the current, free-market price. To keep it simple, assume that people must wait in line to get bread at the controlled price. Would consumer surplus rise, fall, or can't you tell with the information given? a) consumer surplus increases b) consumer surplus decreases c) consumer surplus stays the same d) Indeterminate with the given information.

d) Indeterminate with the given information.

Deadweight loss refers to a) An increase in consumer surplus. b) The difference between consumer and producer surplus. c) The sum of consumer and producer surplus. d) The reduction in economic surplus when the market deviates from the equilibrium level.

d) The reduction in economic surplus when the market deviates from the equilibrium level.

A shortage in the supply of rice will occur if a _______ is set ________ the equilibrium price. a) price floor; below b) price floor; above c) price ceiling; above d) price ceiling; below

d) price ceiling; below