Econ 102 exam 2
(Look at figure 9-17 on phone) Relative to the free-trade outcome, the imposition of the tariff a) decreases imports of the good by 24 units and increases domestic production of the good by 8 units b) decreases imports of the good by 16 units and increases domestic production of the good by 16 units c) decreases imports of the good by 16 units and increases domestic production of the good by 8 units d) decreases imports of the good by 24 units and increases domestic production of the good by 24 units
A
(Refer to Figure 8-8 on phone) The tax causes producer surplus to decrease by the area a) D+F b) D+F+G c) D+F+J d) D+F+G+H
A
(look at Figure 9-1) When trade is allowed, a) Guatemalan producers of coffee become better off and Guatemalan consumers of coffee become worse off b) Guatemalan consumers of coffee become better off and Guatemalan producers of coffee become worse off c) both Guatemalan producers and consumers of coffee become better off d) both Guatemalan producers and consumers of coffee become worse off
A
As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit 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
If the government levies a $5 tax per ticket on buyers of NFL game tickets, then the price paid by buyers of NFL game tickets would a) increase by less than $5 b) increase by exactly $5 c) increase by more than $5 d) decrease by an indeterminate amount
A
If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a a) 0.6 percent increase in the quantity demanded b) 1.5 percent increase in the quantity demanded c) 2 percent increase in the quantity demanded d) 6 percent increase in the quantity demanded
A
Suppose that when the average college students income is $10,000 per year, the annual quantity demanded of Patty's Pizza is 50 and the annual quantity demanded of Sue's Subs is 80. Suppose that when the price of Patty's Pizza increases from $8 to $10 per pie, the quantity demanded of Sue's Subs increases from 80 to 100. Suppose also that when the average student's income increases to $12,000 per year, the annual quantity demanded of Patty's Pizza increases from 50 to 60 What can you deduce about the type of good Patty's Pizza is and about the relationship between Patty's Pizza and Sue's Subs? a) Patty's Pizza is a normal good and Patty's Pizza and Sue's Subs are substitutes b) Patty's Pizza is a normal good and Patty's Pizza and Sue's Subs are complements c) Patty's Pizza is an inferior good and Patty's Pizza and Sue's Subs are substitutes d) Patty's Pizza is an inferior good and Patty's Pizza and Sue's Subs are complements
A
Suppose the demand for macaroni is inelastic, the supply of macaroni is elastic, the demand for cigarettes is inelastic, and the supply of cigarettes is elastic. If a tax were levied on the sellers of both of these commodities, we would expect that the burden of a) both taxes would fall more heavily on the buyers than on the sellers b) the macaroni tax would fall more heavily on the sellers than on the buyers, and the burden of the cigarette tax would fall more heavily on the buyers than on the sellers c) the macaroni tax would fall more heavily on the buyers than on the sellers, and the burden of the cigarette tax would fall more heavily on the sellers than on the buyers d) both taxes would fall more heavily on the sellers than on the buyers
A
When a university bookstore prices chemistry textbooks a $200 each, it generally sells 120 books per month. If it lowers the price to $160, sales increase to 160 books per month. Given this information, we know that the price elasticity of demand for chemistry books is about a) 1.29, and a decrease in price from $200 to $160 results in an increase in total revenue b) 1.29, and a decrease in price from $200 to $160 results in a decrease in total revenue c) 0.78, and a decrease in price from $200 to $160 results in an increase in total revenue d) 0.78, and a decrease in price from $200 to $160 results in an decrease in total revenue
A
(Look at table 10-5) If the government charged a fee of $74 per unit of pollution, how many units of pollution would the firms eliminate altogether? a) 7 b) 8 c) 9 d) 10
B
(Refer to Figure 8-8 on phone) The government collects tax revenue that is the area a) L b) B+D c) C+F d) F+G+L
B
(Refer to Figure 8-8 on phone) One effect of the tax is to a) reduce consumer surplus from $180 to $72 b) reduce producer surplus from $96 to $24 c) create a deadweight loss of $72 d) All above are correct
B
(look at figure 6-2 on phone) The price ceiling a) causes a shortage of 45 units of the good b) makes it necessary for sellers to ration the good c) is not binding because it is set below the equilibrium price d) causes a shortage of 40 units of the good
B
Suppose that Bill wants to dine at a fancy restaurant, but the only available table is in the smoking section. Bill hates cig smell. He notices that only one person, Peter, is smoking in the smoking section. Bill values the absence of smoke at $15. Peter values the ability to smoke in a restaurant at $10. In order for Bill to pay Peter not to smoke, he will need to tip the waiter $2 to facilitate the transaction. Which of the following represents an efficient solution? a) Peter continues to smoke because the cost to Bill to pay him not to smoke is between $20 and $25, which exceeds the benefit to him of no smoking ($15) b) Bill offers Peter between $10 and $15 not to smoke, and he pays the waiter $2. Peter accepts, and both parties are better off. c) Bill offers Peter between $10 and $15 not to smoke. and he pays the waiter $2. Peter declines because he has a right to smoke in the smoking section d) Bill offers Peter $5 not to smoke, and he pays the waiter $2. Peter accepts, and both parties are better off
B
Suppose that two supply curves pass through the same point. One is steep, and the other is flat. Which of the following statements is correct? a) The flatter supply curve represents a supply that is inelastic relative to the supply represented by the steeper supply curve b) The steeper supply curve represents a supply that is inelastic relative to the supply represented by the flatter supply curve c) Given two prices with which to calculate the price elasticity of supply, that elasticity would be the same for both curves d) A decrease in demand will increase total revenue if the steeper supple curve is relevant, while a decrease in demand will decrease total revenue if the flatter supply curve is relevant
B
Tom walks Bethany's dog once a day for $50 per week. Bethany values this service at $60 per week, while the opportunity cost of Tom's time is $30 per week. The government places a tax of $35 per week on dog walkers. After the tax, what is the loss in total surplus? a) $50 b) $30 c) $25 d) $0
B
(Look at figure 9-17 on phone) The deadweight loss caused by the tariff is a) $24 b) $72 c) $96 d) $144
C
(look at Figure 9-1) When trade in coffee is allowed, consumer surplus in Guatemala a) increases by the area B+D b) increases by the area C+F c) decreases by the area B+D d) decreases by the area D+G
C
(look at Table 7-1 on phone) If price of the product is $135, then the total consumer surplus is a) $-50 b) $-35 c) $15 d) $150
C
(look at figure 10-6) Which price and quantity combination represents the social optimum? a) P0 and Q1 b) P2 and Q1 c) P1 and Q0 d) P2 and Q0
C
(look at figure 7-17 on phone) If the demand curve is D and the supply curve shifts left from S to S', what is the change in producer surplus when comparing the new equilibrium with the original equilibrium? a) Producer surplus increases by $225 b) Producer surplus increases by $675 c) Producer surplus decreases by $225 d) Producer surplus decreases by $675
C
Hilda's Hair Hysteria earned $3,750 in total revenue last month when it sold 150 haircuts. This month it earned $3,600 in total revenue when it sold 120 haircuts. The price elasticity of demand for Hilda's Hair Hysteria is a) 1.054 b) 5.444 c) 1.222 d) .8181
C
In the market for widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. The equilibrium quantity in the market for widgets is 250 per month when there is no tax. Then a tax of $6 per widget is imposed. As a result, the government is able to raise $750 per month in tax revenue. We can conclude that the after-tax quantity of widgets is a) 75 per month b) 100 per month c) 125 per month d) 150n per month
C
Which of the following statements is correct? a) The marginal benefit of the positive externality is measured by P3 - P1 b) The marginal cost of the negative externality is measured by P3-P2 c) The marginal cost of the negative externality is measured by P3-P1 d) The marginal cost of the negative externality is measured by P3-P0
C
(Look at figure 9-17 on phone) With trade and a tariff, consumer surplus is a) $808 and producer surplus is $200 b) $808 and producer surplus is $392 c) $1,024 and producer surplus is $200 d) $1,024 and producer surplus is $392
D
(look at 6-32 on phone) Which of the following statements is NOT accurate regarding the situation reflected by this diagram? a) the price will reflect the scarcity of the good when a price floor is imposed at a price of $8 b) the price will reflect the scarcity of the good when a price ceiling is imposed at a price of $10 c) the price will reflect the scarcity of the good when a price ceiling is imposed at a price of $12 d) the price will reflect the scarcity of the good when a price floor is imposed at a price of $14
D
Caroline sharpens knives in her spare time for extra income. Buyers of her service are willing to pay $2.95 per knife for as many knives as Caroline is willing to sharpen. On a particular day, she is willing to sharpen the first knife for $2.00, the second knife for $2.25, the third knife for $2.75, and the fourth knife for $3.50. Assume Caroline is rational in deciding how many knives to sharpen. Her producer surplus is a) $0.95 b) $1.15 c) $1.30 d) $1.85
D
Kristi and Rebecca sell lemonade on the counter for $.50 per cup. It costs them $0.10 to make each cup. On a certain day, their producer surplus is $20. How many cups did Kristi and Rebecca sell? a) $40 b) $200 c) $8 d) $50
D
Suppose that 300 bottles of soda are demanded at a particular price. If the price of a bottle of soda rises from that price by 6 percent, the number of bottles of soda demanded falls to 275. Using the midpoint approach to calculate the price elasticity of demand, it follows the a) demand for bottles of soda in this price range is perfectly elastic b) price increase will increase the total revenue of soda sellers c) price elasticity of demand for bottles of soda in this price range is about 0.69 d) price elasticity of demand for bottles of soda in this price range is about 1.45
D
Suppose that when the average college students income is $10,000 per year, the annual quantity demanded of Patty's Pizza is 50 and the annual quantity demanded of Sue's Subs is 80. Suppose that when the price of Patty's Pizza increases from $8 to $10 per pie, the quantity demanded of Sue's Subs increases from 80 to 100. Suppose also that when the average student's income increases to $12,000 per year, the annual quantity demanded of Patty's Pizza increases from 50 to 60 Using the midpoint method, what is the income elasticity of demand for pizza and what does the value indicate about the demand for pizza? a) the income elasticity is 0.18 so pizza is a normal good b) the income elasticity is -1 so pizza is an inferior good c) the income elasticity is 1 so pizza is unitary elastic d) the income elasticity is 1 so pizza is a normal good
D
The price of sugar that prevails in international trade is called the a) export price of sugar b) import price of sugar c) comparative-advantage price of sugar d) world price of sugar
D
Which of the following statements about the price elasticity of demand is correct? a) The price elasticity of demand for a good measures the willingness of buyers of the good to buy less of the good as its price increases b) Price elasticity of demand reflects the many economic, psychological, and social forces that shape consumer tastes c) Other things equal, if good x has close substitutes and good y does not have close substitutes, then the demand for good x will be more elastic than the demand for good y d) All of the above
D
Which of the following statements is true? a) Free trade benefits a country when it exports but harms it when it imports b) "Voluntary" limits on Canadian exports of hogs are better for the United States than U.S. tariffs placed on Canadian hog exports c) Tariffs and quotas differ in that tariffs work like a tax and therefore impose deadweight losses, whereas quotas do not impose deadweight losses d) Free trade benefits a country both when it exports and when it imports
D