Micro exam 3

Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for $3,000. Michael's consumer surplus is

$500

The average tax rate equals

(total tax ÷ total income) × 100

The amount of deadweight loss from a tax depends upon the

-price elasticity of demand. -price elasticity of supply. -amount of the tax per unit.

A tax on the seller of coffee mug

Decrease the size of the coffee mug market

Which of the following is true when the price of a good or service rises?

Some buyers exit the market

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 large

If an allocation of resources is efficient, then

all potential gains from trade among buyers are sellers are being realized.

Producer surplus measures the

benefits to sellers of participating in market

enry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,

both Janine and Henry experience an increase in consumer surplus.

When a country allows trade and becomes an importer of a good,

consumer surplus increases and producer surplus decreases

If the average tax rate ________ as income increases, then the tax is a ________ tax

does not change; proportional

If the United States imposed a tariff on the amount of salmon imported from Chile, the result would be ________ salmon prices in the United States and ________ in the quantity of salmon demanded in the United State

higher; a decrease

Imports ________ society's total surplus because of the ________ in price and ________ in consumption.

increase; fall; increase

The deadweight loss from a tax of $2 per unit will be smallest in a market with

inelastic supply and inelastic demand

Market power and externalities are examples of

market failure.

Consumer surplus

measures the benefit buyers receive from participating in a market

As a result of the decrease in price

new buyers enter the market, increasing consumer surplus

When a nation exports a good, its ________ surplus decreases, and when it imports a good, its ________ surplus decreases

onsumer; producer

When it comes to taxes, horizontal equity means that

people with the same incomes pay the same amount of tats

The marginal tax rate is the

percentage of an additional dollar of income paid in tax

Suppose everybody paid the same total amount of tax regardless of their income. This type of tax system would be

regressive

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on, the

tax revenue increases at first, but it eventually peaks and then decreases.

Vertical equity is the idea that

taxpayers with a greater ability to pay should bear a greater share of the taxes.

Welfare economics is the study of how

the allocation of resources affects economic well-being

Consumer surplus is

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

If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price,

the country will be an importer of the good.

tax incidence refers to

the division of the burden tax between the buyer and seller

Trade raises the economic well-being of a nation in the sense that

the gains of the winners exceed the losses of the losers

When a country allows trade and becomes an importer of a good

the gains of the winners exceed the losses of the losers