Econ 110- Test 2: Walsh
Total surplus...
-Can be used to measure a market's efficiency -Is the sum of consumer and producer surplus -Is the value to buyers minus the cost to sellers
A binding price floor
-Causes a surplus -Is set a price above the equilibrium price
If Martin sells a shirt for $40, and hid producer surplus from the sale is $8, his cost must have been...
40-8=32
Bob purchased a book, ad his consumer surplus is $3. If Bob is willing to pay $8 for the book, then the price of the book must be...
8-3=5
Producer surplus equals
Amount received by sellers-Costs of sellers
On a graph, consumer surplus is represented by the area
Below the demand curve above price
Total surplus is represented by the area
Between the demand and supply curves up to the point of equilibrium
When a tax is placed on the sellers of energy drinks, the...
Burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal
The decrease in total surplus that results from a market distortion, such as a tax
Deadweight loss
A tariff on a product makes...
Domestic sellers better off and domestic buyers worse off
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
When a good is taxed, the burden of the tax
Falls most heavily on the side of the market that is more inelastic
A consumer's willingness to pay directly measures
How much a buyer values a good
If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would...
Increase by less than $1,000
Suppose the government increase the size of a tax by 20 percent. The deadweight loss from that tax
Increase by more than 20 percent
A legal maximum on the price at which a good can be sold
Price ceiling
Taxes
Regardless of whom the tax is levied on, the tax burden will ALWAYS be shared
A supply curve can be used measure producer surplus because it reflects...
Sellers' cost
A tax on an imported good
Tariff
The term incidence refers to
The distribution of the tax burden between buyers and sellers
Tax incidence
The manner in which the burden of a tax is shared among participants in a market
Allocation of resources is efficient when...
Total surplus is maximized
Total surplus is equal to...
Value to buyers-cost to seller
The price of a good that prevails in a world market
World Price
A legal minimum on the price at which a good can be sold
price floor
