MicroEconomics

Michael values a stainless steel refrigerator for his new house at $3500, but he succeeds in buying one for $3,000. Michael Consumer surplus is. A. $500 B. $3,000 C. $3,500 D. 6,500

A. $500

Relative to a situation in which gasoline is not taxes, the imposition of a tax on gasoline causes the quantity of gasoline demanded to A. Decrease and the quantity of gasoline supplied to decrease. B. Decrease and the quantity of gasoline supplied to increase. C. Increase and the quantity of gasoline supplied to decrease. D. Increase and the quantity of gasoline supplied to increase.

A. Decrease and the quantity of gasoline supplied to decrease.

For any country, if the world price of zinc is higher than the domestic price of zinc without trade, that country should A. Export Zinc, since that country has a comparative advantage in Zinc. B. Import Zinc, since that country has a comparative advantage in Zinc. C. Neither Export nor import Zinc, since that country cannot gain from trade. D. Neither export nor import Zinc, since that country already produces zinc at a low cost compared to other country.

A. Export Zinc, since that country has a comparative advantage in Zinc.

Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts. A. It Increases B. It decreases C. It remains unchanged. D. It may increase, decrease, or remain unchanged.

A. It Increases

The demand for potted plants is more elastic than the demand for wallpaper. The deadweight loss would be larger in the market for A. Potted plants than in the market for wallpaper because the quantity of potted plants would fall by more than the quantity of wallpaper. B. Potted plants than in the market for wallpaper because the quantity of wallpaper would fall by more than the quantity of potted plants. C. Wallpaper than in the market for potted plants because the quantity of potted plants would fall by more then the quantity of wallpaper. D. Wallpaper than in the market for potted plants because the quantity of wallpaper would fall by mire than the quantity of potted plants.

A. Potted plants than in the market for wallpaper because the quantity of potted plants would fall by more than the quantity of wallpaper.

As a tax on a good increases from $1 per unit to $2 per unit to $3 per unity and so on, the A. Tax revenue increases at first, but it eventually peaks and then decreases. B. Deadweight loss increases at first, but it eventually peaks and then decreases. C. Tax Revenue always increases, and the deadweight loss always increases. D. Tax Revenue always decreases, and the deadweight loss always increases.

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

Efficiency is attained when A. Total Surplus is Maximized B. Producer surplus is Maximized C. All Resources are being used D. Consumer surplus is maximized and producer surplus is minimized.

A. Total Surplus is Maximized

Consumer Surplus is equal to A. Value to Buyers- Amount Paid by Buyers B. Amount Paid by Buyers- Cost of Sellers C. Value to Buyers- Cost of Sellers. D. Value to Buyers-Willingness to Pay of Buyers.

A. Value to Buyers- Amount Paid by Buyers

Suppose there is an early freeze in California that reduces the size of the lemon crop. What happens to consumer surplus in the market for lemons? A. Consumer surplus increases. B. Consumer Surplus decreases. C. Consumer Surplus is not affected by this change in market forces. D. We would have to know whether the demand for lemons is elastic or inelastic to make this determination.

B. Consumer Surplus decreases.

Suppose the government increases the size of a tax by 40 percent. The deadweight loss from a tax. A. Increases by 40 percent. B. Increases more than 40 percent C. Increases but by less than 40 percent D. decreases by 40 percent

B. Increases more than 40 percent

When a tax is placed on a product, the price paid by buyers A. Rises, and the price received by sellers rises. B. Rises, and the price received by sellers falls. C. Falls, and the prices received by sellers rises. D. Falls, and the price received by sellers falls.

B. Rises, and the price received by sellers falls.

Suppose Larry, Moe and Curly are bidding in an auction for a mini-condition video of Charlie Chaplin's first movie. Each has a maximum amount that he will bid. This maximum is called. A. A Resistance Price B. Willingness to Pay C. Consumer Surplus D. Producer Surplus

B. Willingness to Pay

When a good is taxed, the burden of the tax A. falls more heavily on the side of the market that is more elastic. B. falls more heavily on the side of the market that is more inelastic. C. falls more heavily on the side of the market that is closer to unit elastic. D. is distributed independently of relative elasticities of supply and demand.

B. falls more heavily on the side of the market that is more inelastic.

Moving production from a high-cost producer to a low-cost producer will A. lower total surplus B. raise total surplus C. lower producer surplus D. raise producer surplus but lower consumer surplus

B. raise total surplus

A supply curve can be used to measure producer surplus because it reflects. A. The actions of sellers. B. Quantity Supplied. C. Seller's Costs D. The amount will be purchased by consumers in the market.

C. Seller's Costs

If the labor supply curve is nearly vertical, a tax on labor. A. has a large deadweight loss. B. raises a small amount of tax revenue. C. has little impact on the amount of work that workers are willing to do. D. results in a large tax burden on the firms that hire labor.

C. has little impact on the amount of work that workers are willing to do.

Suppose a tax is imposed on the sellers of fast-food French Fries. The burden of the tax will A. Fall entirely on the buyers of fast-food French Fries. B. Fall entirely on the sellers of fast-food French Fries. C. Be shared equally by the buyers and sellers of fast-food French Fries D. Be shared by the buyers and sellers of fast-food French Fries but not necessarily equally.

D. Be shared by the buyers and sellers of fast-food French Fries but not necessarily equally.

Which of the following statements is not correct. A. A seller would be eager to sell her product at a price higher than her cost. B. A seller would refuse to sell her product at a price lower than her cost. C. A seller would be indifferent about selling her product at a price equal to her cost. D. Since Sellers cannot set the price for their product, they must be willing to sell their product at any price.

D. Since Sellers cannot set the price for their product, they must be willing to sell their product at any price.