econ 102 test 1

Chad is willing to pay $5.00 to get his first cup of morning latté; He buys his first cup from a vendor for $3.75 per cup. Chads consumer surplus is

$1.25

kristi sells purses. her cost is $35 per purse. on a certain day, she sells 12 purses, and her producer surplus for that day amounts to $180. kristi sold each purse for

$50

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

125 per month

if the tax on a good is increased from $1 per unit to $4 per unit, the deadweight loss from the tax increases by a factor of

16

Allen tutors in his spare time for extra income. Buyers of his service are willing to pay $40 per hour for as many hours Allen is willing to tutor. On a particular day, he is willing to tutor the first hour for $10, the second hour for $18, the third hour for $28, and the fourth hour for $40. Assume Allen is rational in deciding how many hours to tutor. His producer surplus is

64$

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as

T*Q

rent control laws dictate

a maximum rent that landlords may charge tenants

if a binding price floor is imposed on the video game market, then

a surplus of video games will develop

a tariff is a tax placed on

an imported good and it raises the domestic price of the good above the world price

which would not shift in the supply curve for mp3 players?

an increase in the price of mp3 players

according to Arthur Laffer, the graph that represents the amount of tax revenue (measured on the y axis) as a function of the size of the tax (on the x axis) looks like

an upside-down U

when a tax is placed on the buyers of cell phones, the size of the cell phone mareket

and the effective price received by sellers both decrease

when a tax is placed on the sellers of cell phones, the size of the cell phone market

and the effective price received by sellers both decrease

It does not matter whether a tax is levied on the buyers or the sellers of a good because

buyers and sellers will share the burden of the tax

which of the following is not correct? a. the economy contains many labor markets for different types of workers b.the impact of the minimum wage depends on the skill and experience of the worker c. the minimum wage is binding for workers with high skills and much experience d. the minimum wage is not binding when the equilibrium wage is above the minimum wage

c

which is the least likely to be a competitive market?

cable television

When, in our analysis of the gains and losses from international trade, we assume that a country is small, we are in effect assuming that the country

cannot affect world prices by trading with other countries

a tax placed on a good

causes the equilibrium quantity of the good to decrease

trade among nations is ultimately based on

comparative advantage

when a country abandons a no-trade policy, adopts a free-trade policy, and becomes an importer of a particular good,

consumer surplus increases the total surplus in the market for that good

total surplus with a tax is equal to

consumer surplus+producer surplus+tax revenue

the price received by sellers in a market will decrease if the government

decreases a binding price ceiling in that market

A drought in California destroys many red grapes. As a result of the drought, the consumer surplus in the market for red grapes

decreases, and the consumer surplus in the market for red wine decreases

when a tax is placed on the buyers of the tennis racquets, the size of the tennis racquet market

decreases, but the price paid by buyers increases

which events must result in a lower price in the market for snickers?

demand for snickers decreases, and supply of snickers increases

Suppose that a tax is placed on books. If the buyers pay the majority of the tax, then we know that the

demand is more inelastic than the supply

a tax imposed on the sellers of a good will lower the

effective price received by the sellers and lower the equilibrium quantity

if the government wants to reduce the burning of fossil fuels, it should impose a tax on

either buyers or sellers of gasoline

Assume, for England, that the domestic price of wine without international trade is lower than the world price of wine. This suggests that, in the production of wine,

england has a comparative advantage over other countries and england will export wine

For any country, if the world price of copper is higher than the domestic price of copper without trade, that country should

export copper, since that country has a comparative advantage in copper

which would be the least likely result of a binding price ceiling imposed on the market for rental cars?

free gasoline given to people as an incentive to rent a car

the supply curve for whisky is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. when whisky is taxed, the area on the relevant supply-and-demand graph that represents

governments tax revenue is a triangle, the deadweight loss of the tax is a triangle, and the loss of consumer surplus caused by the tax is neither a rectangle nor a triangle. (all of the above are correct)

if the labor supply curve is nearly vertical, a tax on labor

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

suppose jamaica has an absolute advantage over other counties in producing sugar, but other countries have a comparative advantage over jamaica in producing sugar. if trade in sugar is allowed, jamaica will

import sugar

if a market is allowed to move freely to its equilibrium price and quantity, then an increase in supply will

increase consumer surplus

a rightward shift of a demand curve is also called an

increase in demand

if the demand for light bulbs increases, producer surplus in the market for light bulbs

increases

the infant-industry argument

is based on the belief that protecting industries when they are young will pay off later

"other things equal, when the price of a good rises, the quantity supplied of the good also rises, and then the price falls the quantity supplies falls as well." this relationship between price and quantity supplied

is referred to as the law of supply

When a surplus exists in a market, sellers

lower price, which increases quantity demanded and decreases quantity supplied, until the surplus is eliminated.

denmark is an importer of computer chips, taking the world price of $12/chip as given. suppose denmark imposes a $5 tariff on chips. which outcome is possible?

more danish-produced chips are sold in denmark

taxes on labor encourage what

mothers to stay at home rather than work in the labor force

Inefficiency exists in an economy when a good is

not being produced by the lowest-cost producers.

the higher a country's tax rates, the more likely that country will be

on the negatively sloped part of the laffer curve

Assume for Guatemala that the domestic price of coffee without international trade is higher than the world price of coffee. This suggests that

other countries have a comparative advantage over guatemala in the production of coffee, and guatemala will import coffee

The presence of a price control in a market for a good or service usually is an indication that

policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers

when markets fail, public policy can

potentially remedy the problem and increase economic efficiency

there is no shortage of scare resources in a market economy because

prices adjust to eliminate shortages

When a country that imports a particular good imposes a tariff on that good,

producer surplus increases and total surplus decreases in the market for that good

When a shortage exists in a market, sellers

raise price, which decreases quantity demanded and increases quantity supplied until the shortage is eliminated.

a tax imposed on the sellers of a good will

raise the price buyers pay and lower the effective price sellers recieve

for a good that is taxed, the area on the relevant supply-and-demand graph that represents a governemnts tax revenue is

rectangular

the quantity supplied of a good is the amount that

sellers are willing and able to sell

If a tax shifts the supply curve upward (or to the left), we can infer that the tax was levied on

sellers of the good

suppose there is an increase in the price of steel. we would expect the supply curve for steel beams to:

shift left

When a binding price ceiling is imposed on a market to benefit buyers,

some buyers benefit, and some are harmed

a major difference between tariffs and import quotas is that

tariffs raise revenue for the government, but import quotas create a surplus for those who get the licenses

in markets, prices move toward equilibrium because of

the actions of buyers and sellers

which is correct regarding a tax on a good and the resulting deadweight loss

the greater the price of elasticities of supply and demand, the greater the deadweight loss

when a country allows trade and becomes and importer of bottled water, which of the following is NOT a consequence?

the losses of domestic producers of bottled water exceed the gains of domestic consumers of bottled water

a movement along the demand curve might be caused by a change in

the price of the good or service that is being demanded

suppose a tax is imposed on baseball bats. which case will the tax cause the equilibrium quantity of baseball bats to shrink by the smallest amount?

the response of buyers and sellers to a change in the price of baseball bats is weak

what is correct about the effects of rent control

the short-run effect of rent control is a relatively small shortage of apartments, and the long-run effect of rent control is a larger shortage of apartments

if the supply of a product increases, then we would expect equilibrium price

to decrease and equilibrium quantity to incease

consumer surplus is equal to the

value to buyers- amount paid by buyers

total surplus is equal to

value to buyers- cost to sellers

total surplus in a market is equal to

value to buyers-costs of sellers

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because

with shortages and waiting lists, they have no incentive to maintain and improve their property