econ 2
if the price is 1,000, a. evaline's producer surplus is $100 b. dianne is an eager supplier c. bobby is an eager supplier d. all of the above are correct
a
if the supply curve is S and the demand curve shifts from D to D' what is the change in producer surplus? a. producer surplus increases by 3125 b. producer surplus decreases by 3125 c. producer surplus increases by 5625 d. producer surplus decreases by 5625
a
other things equal, the deadweight loss of a tax a. increases as the size of tax increases, and the increase in the deadweight loss is more rapid than the increase in the size of the tax b. increases as the price elasticities of demand and/or supply increase, but the deadweight loss does not change as the size of the tax increases c. increases as the size of the tax increases, but the increase in the deadweight loss is less rapid than the increase in the size of the tax d. decreases as the size of tax increases
a
refer to figure 6-24.. in the after tax equilibrium, government collects a. 1,680 in tax revenue; of this amount, 1260 represents a burden on buyers and 420 represents a burden on sellers b. 1680 in tax revenue, 840 buyers, 840 sellers c. 1440 in tax revenue, 720 buyers, 720 sellers d. 1440 in tax revenue, 960 buyers, 480 sellers
a
the benefit that government receives from a tax is measured by a. tax revenue b. deadweight loss c. tax incidence d. consumer surplus
a
the marginal seller is the seller who a. would leave the market b. cannot compete with the other sellers in the market c. has the largest producer surplus d. can produce at the lowest cost
a
the price elasticity of demand measures the a. magnitude of the response in quantity demanded to change in price b. direction of the shift in the demand curve in response to market event c. responsiveness of quantity demanded to change in income d. size of the shortage created by the increase in demand
a
a result of welfare economics is that the equilibrium price of a product is considered to be the best price because it a. minimizes costs and maximizes output b. maximizes the combined welfare of buyers and sellers c. maximizes both the total revenue for firms and the quantity supplied of the product d. minimizes the level of welfare payments
b
a shortage results when a a. nonbonding price ceiling is removed from a market b. binding price ceiling is imposed on a market c. binding price ceiling is removed from a market d. nonbonding price ceiling is imposed on a market
b
an increase in the size of a tax is most likely to increase tax revenue in a market with a. elastic demand and inelastic supply b. inelastic demand and inelastic supply c. elastic demand and elastic supply d. inelastic demand and elastic supply
b
for quantities greater than M, the value to the marginal buyer is a. less than the cost to the marginal seller so increasing the quantity increases total surplus b. less than the cost to the marginal seller so decreasing the quantity increases total surplus c. greater than the cost to the marginal seller so increasing the quantity increases total surplus d. greater than the cost to the marginal seller so decreasing the quantity increases total surplus
b
if the economy is at point B on the curve, then an increase in the tax rate will a. decrease the deadweight loss of the tax and decrease tax revenue b. increase the deadweight loss of the tax and decrease tax revenue c. decrease the deadweight loss of the tax and increase tax revenue d. increase the deadweight loss of the tax and increase tax revenue
b
suppose the equilibrium price of a tube of toothpaste is $2 and the government imposes a price floor of $3 per tube. as a result of the price floor, the a. demand curve for toothpaste shifts to the left b. quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases c. quantity supplied of toothpaste stays the same d. supply curve for toothpaste shifts to the right
b
the "invisible hand" refers to a. the fact that social planners sometimes have to intervene, even in perfectly competitive markets, to make those markets more efficient b. the marketplace guiding the self-interests of market participants into promoting general economic well-being c. the automatic maximization of consumer surplus in free markets d. the equality that results from market forces allocating the goods produced in the market
b
a government imposed price of $12 in this market is an example of a a. non-binding price floor that creates a surplus b. non-binding price ceiling that creates a shortage c. binding price floor that creates a surplus d. binding price ceiling that creates a shortage
c
at a price of $2.00, total surplus is a. smaller than it would be at the equilibrium price b. the same as it would be at the equilibrium price c. larger than it would be at the equilibrium price d. there is insufficient information to make this determination
c
for prices above $8, demand is price a. inelastic and total revenue will rise as price b. inelastic and total revenue will fall as price rises c. elastic and total revenue will fall as price rises d. elastic and total revenue will rise as price rises
c
if the economy is at point b on the curve, then a small decrease in the tax rate will a. increase the deadweight loss of the tax and decrease tax revenue b. increase the deadweight loss of the tax and increase tax revenue c. decrease the deadweight loss of the tax and increase tax revenue d. decrease the deadweight loss of the tax and decrease tax revenue
c
if the minimum wage exceeds the equilibrium wage, then a. the minimum wage will not be binding b. the quantity demanded of labor will exceed the quantity supplied c. the quantity supplied of labor will exceed the quantity demanded d. there will be no unemployment
c
if the price elasticity of supply is 1.2 , and price is increased by 5% quantity supplied would a. decrease by 4.2% b. decrease by 6% c. increase by 6% d. increase by 4.2%
c
in general, elasticity is a measure of a. how firms' profits respond to changes in market prices b. the extent to which advances in technology are adopted by producers c. how much buyers and sellers respond to changes in market conditions d. the extent to which a market is competitive
c
suppose the demand for peanuts increases. what will happen to producer surplus in the market for peanuts? a. it remains unchanged b. it may increase, decrease, or remain unchanged c. it increases d. it decreases
c
the deadweight loss (triangle) is the area a. B+D b. A+C+F+J c. C+F d. B+C+D+F
c
the demand curve representing the demand for a luxury good with several close substitutes is a. A b. B c. C d. D
c
the price labeled as p2 on the vertical access represents the a. difference between the price received by sellers before the tax is imposed and the price received by sellers after the tax is imposed b. price of the good after the tax is imposed c. price of the good before the tax is imposed d. difference between the price paid by buyers after the tax is imposed and the price paid by buyers before the tax is imposed
c
the price of the good would continue to serve as the rationing mechanism if a. a price floor if $5 is imposed b. a price ceiling of $3 is imposed c. a price ceiling of $5 is imposed d. all of the above are correct
c
the surgeon general announces that eating chocolate increases tooth decay. as a result, the equilibrium price of chocolate a. decreases and producer surplus increases b. increases and producer surplus decreases c. decreases and producer surplus decreases d. increases and producer surplus increases
c
when a tax on a good is enacted, a. sellers bear the full burden of the tax if the tax is levied on them; buyers bear the full burden of the tax if the tax is levied on them b. buyers always bear the full burden of the tax c. buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or sellers d. sellers always bear the full burden of the tax
c
when the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is a. 1.50 and an increase in price will result in a decrease in total revenue b. 1.50 and an increase in price will result in an increase in total revenue c. 0.67 and an increase in price will result in an increase in total revenue d. 0.67 and an increase in price will result in a decrease in total revenue
c
which of the following statements summarizes the incidence of the tax? a. for each unit of the good that is sold, buyers bear one fourth of the tax burden and sellers bear three fourths of the tax burden b. for each unit of the good that is sold buyers bear one third of the tax burden and sellers bear two thirds of the tax burden c. for each unit of the good that is sold, buyers bear one half of the tax burden and sellers bear one half of the tax burden d. for each unit of the good that is sold, buyers bear three fourths of the tax burden and sellers bear one fourth
c
A Demand is very elastic B Demand is very inelastic C Supply is very elastic D Supply is very inelastic Suppose the government is considering levying a tax in one or more of the markets described in the table. which of the markets will allow the government to minimize the deadweight losses from the tax? a. market C only b. market A and C only c. market A only d. markets B and D only
d
a minimum wage that is set below a market's equilibrium we will a. result in an excess demand for labor, that is, unemployment b. result in an excess demand for labor, that is, a shortage of workers c. result in an excess supply of labor, that is, unemployment d. have no impact on employment
d
all else equal, what happens to consumer surplus if the price of a good decreases? a. consumer surplus is unchanged b. consumer surplus increases c. consumer surplus decreases d. consumer surplus may increase, decrease, or remain unchanged
d
at the equilibrium price, consumer surplus is a. 500 b. 3500 c. 2000 d. 1000
d
consumer surplus is a. a concept that helps us make normative statements about the desirability of market outcomes b. represented on a graph by the are below the demand curve and above the price c. a good measure of economic welfare if buyer's preferences are the primary concern d. all of the above are correct
d
if a tax is levied on the sellers of a product then there will be a(n) a. upward shift on the demand curve b. downward shift of the demand curve c. increase in quantity demanded d. decrease in quantity demanded
d
if the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus? a. 1250 b. 5000 c. 625 d. 2500
d
in a market, the marginal buyer is the buyer a. who is willing to buy exactly one unit of the good b. whose willingness to pay is lower than that of all other buyers and potential buyers c. whose willingness to pay is higher than that of all other buyers and potential buyers d. who would be the first to leave the market if the price were any higher
d
suppose lauren, leslie and lydia all purchase bulletin boards for their rooms at $15 each. lauren's willingness to pay was $35, leslies $25 and lydia's $30, total consumer surplus for these three would be a. 90 b. 30 c. 15 d. 45
d
when her income increased from 10,000 to 20,000, heathers consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy burgers increased from 2 pounds to 4 pounds. we can conclude that for heather, macaroni a. and soy burgers are both normal goods with income elasticities equal to 1 b. is an inferior good and soy burgers are normal goods; both have an income elasticity of 1 c. and soy burgers are both inferior goods with income elasticities equal to -1 d. is an inferior good with an income elasticity of -1 and soy burgers are normal goods with an income elasticity of 1
d
true/false: a binding price ceiling causes quantity demanded to be less than quantity supplied
false
true/false: a tax of $1 on sellers always increases the equilibrium price by $1
false
true/false: a tax on sellers increases supply
false
true/false: all buyers benefit from a binding price ceiling
false
true/false: consumer surplus is the amount a buyer has to pay for a good minus the amount the buyer is willing to pay for it
false
true/false: drug interdiction which reduces the supply of drugs, may decrease drug-related crime because the demand for drugs is inelastic
false
true/false: if the government places a $2 in the market, the buyer bears $2 of the tax burden
false
suppose that when the price rises by 10% for a particular good, the quantity demanded of that good falls by 20%. the price elasticity of demand for this good is equal to 2.0
true
true/false: a price floor set at $60 would create a surplus of 60 units
true
true/false: at the equilibrium price, the quantity that buyers want to buy it exactly equals the quantity that sellers want to sell
true
true/false: because taxes distort incentives, they cause markets to allocate resources inefficiently
true
true/false: even though federal law mandates that workers and firms each pay half of the total FICA tax, the tax burden may not fall equally on workers and firms
true
true/false: if a market is in equilibrium, then it is impossible for a social planner to raise economic welfare by increasing or decreasing the quantity of the good
true
true/false: if a supply curve is horizontal then supply is said to be perfectly elastic, and the price elasticity of supply approaches infinity
true
true/false: if the government places a $2 tax in the market, the sellers bears $1 of the tax burden
true
true/false: the economy contains many labor markets for different types of workers
true
true/false: the income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income
true
true/false: when markets fail, public policy can potentially remedy the problem and increase economic efficiency
true
true/false: whether a tax is levied on sellers or buyers, buyers and sellers usually share the burden of taxes
true
true/false: workers rather than firms bear most of the burden of the payroll tax
true
