MicroEcon Exam 2
The loss in consumer surplus resulting from the tax due to buyers paying a higher price on units still purchased is represented by area
1 (B)
A price ceiling is a price regulation such that transactions cannot occur __________ this regulated price.
Above
A price floor is a price regulation such that transactions cannot occur above this regulated price.
False
Assuming a normal upward sloping supply curve and downward sloping demand curve, a rise in the minimum wage will help all teenagers because they receive higher wages than they would otherwise.
False
Based on your answer to the previous question, a binding price floor will cause a shortage of this good.
False
Price Ceiling
Rent Control
negative externality examples
coal fired electricity, pollution
The tax revenue collected by the government from this tax is repented by area
1+3 (B+D)
The loss in consumer surplus resulting from the tax due to buyers no longer buying some units is represented by area
2 (C)
The DWL arising from this tax is represented by area
2+4 (C+E)
The loss in producer surplus resulting from the tax due to sellers receiving a lower price on units still sold is represented by area
3 (D)
The loss in producer surplus resulting from the tax due to sellers no longer selling some units is represented by area
4 (E)
In order for a price floor to be binding, it must be set _________ the equilibrium price.
Above
A price floor is a price regulation such that transactions cannot occur __________ this regulated price.
Below
In order for a price ceiling to be binding, it must be set ________ the equilibrium price.
Below
Relative to the free-market equilibrium, a binding price floor will cause the Qd to _________ and the Qs to ________ thereby causing a _________ of this good.
Decrease, Increase, Surplus
Based on your answers to the two previous questions, the price received by sellers after paying the tax will be the same as the initial equilibrium price.
False
If free trade is allowed and a country exports a good, domestic producers of the good are worse off and domestic consumers of the good are better off when compared to the before-trade domestic equilibrium.
False
If the world price for a good exceeds a country's before-trade domestic price for that good, the country should import that good.
False
In order for a price ceiling to be binding, it must be set above the equilibrium price.
False
Relative to the free-market equilibrium, a binding ceiling will cause the Qd to decrease and the Qs to increase.
False
Assuming a normal upward sloping S curve and a normal downward sloping D curve, if a tax is levied on the sellers of a product, the new price paid by consumers will be _________ the initial equilibrium price and the new price received by sellers will be __________ the initial equilibrium price.
Greater Than, Less Than
Relative to the free-market equilibrium, a binding price ceiling will cause the Qd to ________ and the Qs to _______ thereby causing a ________ of this good.
Increase, Decrease, Shortage
The burden of the tax will fall on the side of the market that is
Less Elastic
Price Floor
Minimum wage
Which policy is most efficient
Policy 3 (Lowest Cost one)
Binding price floor
Policy success requires Q decrease and inelastic D
A price ceiling is a price regulation such that transactions cannot occur above this regulated price.
True
Assuming a normal upward sloping S curve and a normal downward sloping D curve, if a tax is levied on the sellers of a product, the new equilibrium price in the market will be greater than the initial equilibrium price, but not by the full amount of the tax.
True
Assuming a normal upward sloping S curve and a normal downward sloping D curve, if a tax is levied on the sellers of a product, the new quantity that will be transacted (bought and sold) in this market with the tax in place will be less than the initial equilibrium quantity.
True
Assuming a normal upward sloping S curve and a normal downward sloping D curve, if a tax is levied on the sellers of a product, the price consumers pay will be the same as the new equilibrium price in the market.
True
Based on your answer to the previous question, a binding price ceiling will cause a shortage of this good.
True
If a market generates a negative externality in production, the marginal social cost curve is above the supply curve (marginal private cost curve).
True
In order for a price floor to be binding, it must be set above the equilibrium price.
True
Relative to the free-market equilibrium, a binding price floor will cause the Qd to decrease and the Qs to increase.
True
The ultimate burden of a tax lands most heavily on the side of the market that is less elastic.
True
internalizing the externality
altering incentives so that people take account of the external effects of their actions (tax or subsidy)
welfare analysis
an economic tool that analyzes the total costs and benefits of alternative policies to different groups, such as producers and consumers
Assuming a normal upward sloping S curve and a normal downward sloping D curve, if a tax is levied on the sellers of a product, the new quantity that will be transacted (bought and sold) in this market with the tax in place will be ________ the initial equilibrium quantity.
less than
import quota
limit the quantity of a good that can be produced abroad and sold domestically
normative economics
makes prescriptions about the way the economy should work
smoking cigarettes is a form of ________ externality
negative
negative externalities
over do it
Binding price ceiling
policy success requires Q decrease and inelastic S
Market of import quota
restriction on supply -> raises price -> increase domestic industry -> produce more -> generate money
postive economics
the branch of economic analysis that describes the way the economy actually works
Coase Theorem
the proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own
positive externalities
under do it
negative externality
when the impact on the bystander is adverse