Econ Test #2

If Gina sells a shirt for $40, and her producer surplus from the sale is $32, her cost must have been

$8

Sellers of a good bear the larger share of the tax burden when a tax is placed on a product for which the (i) supply is more elastic than the demand. (ii) demand in more elastic than the supply. (iii) tax is placed on the sellers of the product. (iv) tax is placed on the buyers of the product.

(ii) only

A tax on sellers will shift the

. supply curve upward by the amount of the tax

Studies of the effects of the minimum wage typically find that a 10 percent increase in the minimum wage depresses teenage employment by about

1 to 3 percent.

Alex is willing to pay $10, and Bella is willing to pay $8, for 1 pound of ribeye steak. When the price of ribeye steak increases from $9 to $11,

Alex experiences a decrease in consumer surplus, but Bella does not.

An example of a price floor is

The Minimum Wage

A price ceiling is

a legal maximum on the price at which a good can be sold.

A price floor will be binding only if it is set

above the equilibrium price.

Laissez-faire is a French expression which literally means

allow them to do

Long lines

are an inefficient rationing mechanism because they waste buyers' time, and discrimination according to seller bias is an inefficient rationing mechanism because the good does not necessarily go to the buyer who values it most highly.

Consumer surplus in a market can be represented by the

area below the demand curve and above the price.

If a tax is imposed on a market with inelastic demand and elastic supply, then

buyers will bear most of the burden of the tax.

A $3 tax levied on the buyers of shoes will cause the

demand curve for shoes to shift down by $3.

Tax incidence

depends on the elasticities of supply and demand

Which of the following is correct? A tax burden

falls more heavily on the side of the market that is less elastic.

A consumer's willingness to pay directly measures

how much a buyer values a good.

The tax incidence

is the manner in which the burden of a tax is shared among participants in a market.

As a result of a decrease in price

new buyers enter the market, increasing consumer surplus.

The minimum wage is an example of a

price floor.

Efficiency in a market is achieved when

the sum of producer surplus and consumer surplus is maximized.

If a price floor is not binding, then

there will be no effect on the market price or quantity sold.

A $2.00 tax levied on the sellers of birdhouses will shift the supply curve

upward by exactly $2.00.

The marginal seller is the seller who

would leave the market first if the price were any lower.