Econ test 2

A $2.00 tax levied on the sellers of mailboxes will shift the supply curve a. upward by exactly $2.00. b. upward by less than $2.00. c. downward by exactly $2.00. d. downward by less than $2.00.

a

As price elasticity of supply increases, the supply curve a. becomes flatter. b. becomes steeper. c. becomes downward sloping. d. shifts to the right.

a

Consumer surplus is a.the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. b.the amount a buyer is willing to pay for a good minus the cost of producing the good. c.the amount by which the quantity supplied of a good exceeds the quantity demanded of the good. d.a buyer's willingness to pay for a good plus the price of the good.

a

Figure 6-9 The effective price that sellers receive after the tax is imposed is a. $5. b. $6. c. $7. d. $8

a

Goods with many close substitutes tend to have a. more elastic demands. b. less elastic demands. c. price elasticities of demand that are unit elastic. d. income elasticities of demand that are negative.

a

If a price floor is not binding, then a. the equilibrium price is above the price floor. b. the equilibrium price is below the price floor. c. it has no legal enforcement mechanism. d. More than one of the above is correct

a

Refer to Figure 7-17. At equilibrium, total surplus is measured by the area a.ACG. b.AFG. c.KBG. d.CFG.

a

Refer to Figure 7-17. If 10 units of the good are produced and sold, then a.the good is overproduced relative to the efficient output level and total surplus can be increased by reducing its production. b.producer surplus is maximized. c.total surplus is minimized. d.the good is underproduced relative to the efficient output level and total surplus can be increased by increasing its production.

a

Refer to Figure 7-18. Buyers who value this good more than the equilibrium price are represented by which line segment? a.AC. b.CK. c.BC. d.CH.

a

Refer to Figure 7-18. If the government mandated a price increase from P1 to a higher price, then a. total surplus would decrease. b. consumer surplus would increase. c. total surplus would increase, since producer surplus would increase. d. total surplus would remain unchanged.

a

Refer to Figure 7-7. Which area represents producer surplus when the price is P1? a.BCG b.ACH c.ABGD d.DGH

a

Refer to Table 6-1. Suppose the government imposes a price ceiling of $5 on this market. What will be the size of the shortage in this market? a. 0 units b. 2 units c. 8 units d. 10 units

a

The benefit to buyers of participating in a market is measured by a.consumer surplus. b.producer surplus. c.total surplus. d.deadweight loss.

a

Eric produces jewelry boxes. If the demand for jewelry boxes is elastic and Eric wants to increase his total revenue, he should a. increase the price of his jewelry boxes. b. decrease the price of his jewelry boxes. c. not change the price of his jewelry boxes. d. None of the above answers is correct.

b

For a good that is a luxury, demand a. tends to be inelastic. b. tends to be elastic. c. has unit elasticity. d. cannot be represented by a demand curve in the unusual way.

b

If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the a. consumer has consumer surplus of $2 if he or she buys the good. b. consumer does not purchase the good. c. market is not a competitive market. d. price of the good will fall due to market forces.

b

Refer to Table 7-6. If the market price is $1,000, the producer surplus in the market is a.$700. b.$750. c.$2,250. d.$3,700.

b

The imposition of a binding price floor on a market causes quantity demanded to be a. greater than quantity supplied. b. less than quantity supplied. c. equal to quantity supplied. d. Both (a) and (b) are possible.

b

The maximum price that a buyer will pay for a good is called the a. cost. b. willingness to pay. c. equity. d. efficiency.

b

When a good is taxed, the burden of the tax a. falls more heavily on the side of the market that is more elastic. b. falls more heavily on the side of the market that is more inelastic. c. falls more heavily on the side of the market that is closer to unit elastic. d. is distributed independently of relative elasticities of supply and demand.

b

A $2.00 tax levied on the buyers of lawnmowers will shift the demand curve a. upward by exactly $2.00. b. upward by less than $2.00. c. downward by exactly $2.00. d. downward by less than $2.00.

c

A shortage results when a. a nonbinding price ceiling is imposed on a market. b. a nonbinding price ceiling is removed from a market. c. a binding price ceiling is imposed on a market. d. a binding price ceiling is removed from a market.

c

Demand is said to have unit elasticity if elasticity is a. less than 1. b. greater than 1. c. equal to 1. d. equal to 0.

c

Economists typically measure efficiency using a.the price paid by buyers. b.the quantity supplied by sellers. c.total surplus. d.profits to firms.

c

If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is a. 0.75. b. 1.25. c. 1.33. d. 1.60.

c

If the government levies a $500 tax per car on sellers of cars, then the price paid by buyers of cars would a. increase by more than $500. b. increase by exactly $500. c. increase by less than $500. d. decrease by an indeterminate amount.

c

If the price elasticity of supply is 1.5, and a price increase led to a 3% increase in quantity supplied, then the price increase amounted to a. 0.2%. b. 0.5%. c. 2%. d. 4.5%.

c

Refer to Figure 7-1. When the price is P1, consumer surplus is a.A. b.A+B. c.A+B+C. d.A+B+D.

c

Refer to Figure 7-12. At the equilibrium price, consumer surplus is a. $150. b. $200. c. $300. d. $500.

c

Refer to Figure 7-18. Sellers whose costs are less than the equilibrium price are represented by which line segment? a.AC. b.CK. c.BC. d.CH.

c

Refer to Figure 8-4. The vertical distance between points A and B represents a tax in the market. The amount of tax revenue received by the government is equal to $210. $420. $980. $1,600.

c

Refer to Table 7-1. If the price of the product is $18, then the total consumer surplus is a.$38. b.$42. c.$46. d.$72.

c

Suppose there is currently a tax of $50 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then a. the demand curve will shift upward by $20, and the price paid by buyers will decrease by less than $20. b. the demand curve will shift upward by $20, and the price paid by buyers will decrease by $20. c. the supply curve will shift downward by $20, and the effective price received by sellers will increase by less than $20. d. the supply curve will shift downward by $20, and the effective price received by sellers will increase by $20.

c

The burden of the tax on buyers is a. $1 per unit. b. $1.50 per unit. c. $2 per unit. d. $3 per unit.

c

The decrease in total surplus that results from a market distortion, such as a tax, is called a a.wedge loss. b.revenue loss. c.deadweight loss. d.consumer surplus loss.

c

What happens to the total surplus in a market when the government imposes a tax? a.Total surplus increases by the amount of the tax. b.Total surplus increases but by less than the amount of the tax. c.Total surplus decreases. d.Total surplus is unaffected by the tax.

c

. When a tax is levied on a good, the buyers and sellers of the good share the burden, a. provided the tax is levied on the sellers. b. provided the tax is levied on the buyers. c. provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers. d. regardless of how the tax is levied.

d

If the price elasticity of demand for a good is 4.0, then a 10 percent increase in price results in a a. 0.4 percent decrease in the quantity demanded. b. 2.5 percent decrease in the quantity demanded. c. 4 percent decrease in the quantity demanded. d. 40 percent decrease in the quantity demanded.

d

In the long run, the quantity supplied of most goods a. will increase in almost all cases, regardless of what happens to price. b. cannot respond at all to a change in price. c. can respond to a change in price, but the change is almost always inconsequential. d. can respond substantially to a change in price.

d

Refer to Figure 7-12. If the government imposes a price ceiling of $120 in this market, then total surplus will be a. $0. b. $125. c. $375. d. $500.

d

Refer to Table 6-1. Which of the following price floors would be binding in this market? a. $1 b. $2 c. $3 d. $4

d

Refer to Table 7-6. If the price is $775, who would be willing to supply the product? a. Abby and Bobby b. Abby, Bobby, and Carlos c. Carlos, Dianne, and Evalina d. Dianne and Evalina

d

Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase revenue? a. 0 b. 0.2 c. 1 d. 2.1

d

figure 6-9 The amount of the tax per unit is a. $1. b. $1.50. c. $2. d. $3.

d