Econ 202 test 2 ch 7-10

Which of the following will cause a decrease in producer surplus? a. the imposition of a binding price ceiling in the market b. an increase in the number of buyers of the good c. income increases and buyers consider the good to be normal d. producer surplus

a. the imposition of a binding price in the market

Consumer surplus measures the benefit to buyers of participating in a market. TRUE or FALSE

true

Economists use the government's tax revenue to measure the public benefit from a tax true or false

true

If producing a soccer ball costs Jake $5, and he sells it for $40, his producer surplus is $35 true or false

true

Suppose there is an increase in supply that reduces market price. Consumer surplus increases because (1) consumer surplus received by existing buyers increases and (2) new buyers enter the market. true or false

true

Taxes create deadweight losses true or false

true

The cost of production plus producer surplus is the price a seller is paid true or false

true

When markets fail, public policy can potentially remedy the problem and increase economic efficiency. True or False

true

If the size of a tax doubles, the deadweight loss doubles true or false

false

Kelly is willing to pay $5.20 for a gallon of gasoline. The price of gasoline at her local gas station is $3.80. If she purchases ten gallons of gasoline, then Kelly's consumer surplus is

$14

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is

$175

Diana is a personal trainer whose client Charles pays $80 per hour-long session. Charles values this service at $100 per hour, while the opportunity cost of Diana's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. Before the tax, what is the total surplus?

$25

*Suppose a tax of $5 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units. The tax decreases consumer surplus by $450 and decreases producer surplus by $300. The deadweight loss from the tax is

$250

Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28 . If Karla hires Roland to mow her lawn, Karla's consumer surplus is

$3

Bill created a new software program he is willing to sell for $200. He sells his first copy and enjoys a producer surplus of $150. What is the price paid for the software?

$350

Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is

$500

Producer surplus is the amount a seller is paid minus the cost of production. True or False

True

Which of the following events would increase producer surplus? a. Sellers' costs stay the same and the price of the good increases b. Sellers' costs increase and the price of the good stays the same. c. Sellers' costs increase and the price of the good decreases d. All of the above are correct

a. Sellers' cost stay the same and the price of the good increases

Relative to a situation in which gasoline is not taxed, 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

When a tax is levied on the sellers of a good, the a. supply curve shifts upward by the amount of the tax. b. quantity demanded decreases for all conceivable prices of the good c. quantity supplied increases for all conceivable prices of the good d. None of the above is correct

a. supply curve shifts upward by the amount of the tax

Suppose Brent, Callie, and Danielle each purchase a particular type of electric pencil sharpener at a price of $20. Brent's willingness to pay was $22, Callie's willingness to pay was $25, and Danielle's willingness to pay was $30. Which of the following statements is correct? a. Had the price of the pencil sharpener been $24 rather than $20, only Danielle would have been a buyer b. Brent's consumer surplus is the smallest of the three individual consumer surpluses c. For the three individuals together, consumer surplus amounts to $60. d. The fact that all three individuals paid $20 for the same type of pencil sharpener indicates that each one placed the same value on that pencil sharpener

b. Brent's consumer surplus is the smallest of the three individual consumer surlpluses

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 price received by sellers rises. d. falls, and the price received by sellers falls

b. rises, and the price received by sellers falls

When a tax is levied on buyers, the a. supply curves shifts upward by the amount of the tax b. tax creates a wedge between the price buyers effectively pay and the price sellers receive. c. tax has no effect on the well-being of sellers d. All of the above are correct

b. tax creates a wedge between the price buyers effectively pay and the price sellers receive.

Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called a. deadweight loss b. willingness to pay c. consumer surplus d. producer surplus

b. willingness to pay

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it a. maximizes costs of the seller. b. maximizes tax revenue for the government c. maximizes the combined welfare of buyers and sellers d. minimizes the expenditure of buyers

c. maximize the combined welfare of buyers and sellers

Inefficiency exists in a market when a good is a. not produced because buyers do not value it very highly b. not distributed fairly among buyers c. not being produced by the lowest-cost producers. d. being consumed by buyers who value it most highly.

c. not being produced by the lowest cost producers

Total surplus in a market is equal to a. value to buyers - amount paid by buyers. b. amount received by sellers - costs of sellers. c. value to buyers - costs of sellers d. amount received by sellers - amount paid by buyers

c. value to buyers-costs of sellers

Five hundred units of good x are currently bought and sold. The marginal buyer is willing to pay $40 for the 500th unit, and the cost to the marginal seller is $35 for the 500th unit. We know that a. the equilibrium price of good x is somewhere between $35 and $40 b. the equilibrium quantity of good x exceeds 500 units c. 500 units is not an efficient quantity of good x d. All of the above are correct

d. all of the above are correct

When a tax is imposed on a good, the a. supply curve for the good always shifts b. demand curve for the good always shifts c. amount of the good that buyers are willing to buy at each price always remains unchanged. d. equilibrium quantity of the good always decreases

d. equilibrium quantity of the good always decreases

When the demand for a good increases and the supply of the good remains unchanged, consumer surplus a. decreases. b. is unchanged. c. increases d. may increase, decrease, or remain unchanged

d. may increase, decrease or remain unchanged

A simultaneous increase in both the demand for MP3 players and the supply of MP3 players would imply that a. both the value of MP3 players to consumers and the cost of producing MP3 players has increased b. both the value of MP3 players to consumers and the cost of producing MP3 players has decreased. c. the value of MP3 players to consumers has decreased, and the cost of producing MP3 players has increased. d. the value of MP3 players to consumers has increased, and the cost of producing MP3 players has decreased.

d. the value of MP3 players to consumers has increased, and the cost of producing MP3 players has decreased

A tax raises the price received by sellers and lowers the price paid by buyers true or false

false

All else equal, a decrease in demand will cause an increase in producer surplus true or false

false

The area below the demand curve and above the supply curve measures the producer surplus in a market. true or false

false

The lower the price, the lower the consumer surplus, all else equal true or flase

false

When a tax is imposed on sellers, producer surplus decreases but consumer surplus increases. true or false

false