micro final

Evan purchases a wall calendar for $9, and his consumer surplus is $1. How much is Evan willing to pay for the wall calendar?

$10

Refer to Figure 9-4. Consumer surplus in Nicaragua without trade is

$2,250.

Refer to Figure 8-2. The amount of deadweight loss as a result of the tax is

$2.5

Refer to Figure 34-4. Assume that the current price of good X is $25 (which includes a $10 tariff on imports of good X). The government collects tariff revenue on good X in the amount of

$300

Refer to Figure 9-6. Without trade, the equilibrium price of roses is

$4 and the equilibrium quantity is 300.

Refer to Figure 8-2. Producer surplus without the tax is

$4, and producer surplus with the tax is $1.

Refer to Table 7-9. The equilibrium market price for 10 piano lessons is $400. What is the total producer surplus in the market?

$400

Refer to Figure 8-2. The amount of the tax on each unit of the good is

$5

Refer to Figure 8-2. The amount of tax revenue received by the government is

$5.

Refer to Figure 8-2. Consumer surplus without the tax is

$6, and consumer surplus with the tax is $1.5.

Refer to Figure 9-4. The change in total surplus in Nicaragua because of trade is

$625, and this is an increase in total surplus.

Refer to Figure 9-2. Without trade, consumer surplus is

$845

Refer to Figure 9-1. In the absence of trade, the equilibrium price of coffee in Guatemala is

$90

A binding price floor (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price.

(i) and (iii) only

Refer to Figure 34-4. The world price of good X is $15. Under a policy of free trade, the U.S. production of good X would be

0

Suppose that when the price of cigarettes decreases by 20 percent, the quantity demanded increases by 10 percent. The price elasticity of demand for cigarettes is __________, making cigarettes an ____________ product (in this example).

0.5; inelastic

If a 20% increase in price for a good results in a 15% decrease in quantity demanded, the price elasticity of demand is

0.75

Refer to Figure 9-1. In the absence of trade, total surplus in the Guatemalan coffee market amounts to

1,650.

Refer to Figure 9-1. With trade, total surplus in the Guatemalan coffee market amounts to

1,870

Refer to Figure 34-4. Assume that the current price of good X is $25 (which includes a $10 tariff on imports of good X). Americans purchase ______ units of good X from U.S. producers and import _______ units of good X from abroad.

10;30

Refer to Figure 4-2. This figure represents the orange juice market. The horizontal line represents a price ceiling imposed by the government. How many fewer units would be exchanged at the price ceiling compared to the number that would be exchanged at the equilibrium price?

200 units.

If the price elasticity of demand for a good is 1 (in absolute value), then a 3 percent decrease in price results in a

3 percent increase in the quantity demanded.

Refer to Figure 34-4. The world price of good X is $15. Under a policy of free trade, U.S. consumers will import ___________ units of X from abroad.

50

Refer to Figure 7-1. When the price is P2, consumer surplus is

A

Refer to Figure 7-9. If the price were P3, consumer surplus would be represented by the area

A

Refer to Figure 34-5. Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports). Consumers' surplus is equal to the area __________ while producers' surplus is equal to the area __________.

A + B; C + G

Refer to Figure 7-9. At equilibrium, total surplus is represented by the area

A+B+C+D+H+F.

Refer to Figure 7-9. At equilibrium, consumer surplus is represented by the area

A+B+C.

Which of the following best explains why making automobiles completely safe is not efficient?

After some level of safety is reached, making cars even safer will not be worth the additional cost.

Refer to Figure 34-5. Assume that the current price of sugar in the United States is $300 per ton (which includes a $100 per ton tariff on sugar imports). The removal of the $100 per ton tariff would increase consumers' surplus by an amount equal to area

C + D + E + F

Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?

Consumer and producer surplus

Refer to Figure 9-1. When trade is allowed,

Guatemalan producers of coffee become better off and Guatemalan consumers of coffee become worse off.

Refer to Figure 8-1. Suppose the government imposes a tax of P'-P'''. Total surplus before the tax is measured by the area

I + J + K + L + M + Y.

Refer to Figure 8-1. Suppose the government imposes a tax of P'-P'''. Total surplus after the tax is measured by the area

J+ K + L + M.

Which of the following is not a function of prices in a market system?

Prices ensure an equal distribution of goods and services among consumers.

When a country allows trade and becomes an exporter of a good, which of the following is not a consequence?

The losses of domestic consumers of the good exceed the gains of domestic producers of the good.

Suppose Yolanda needs a dog sitter so that she can travel to her sister's wedding. Yolanda values dog sitting for the weekend at $200. Rebecca is willing to dog sit for Yolanda so long as she receives at least $175. Yolanda and Rebecca agree on a price of $185. Suppose the government imposes a tax of $30 on dog sitting. What is the deadweight loss of the tax?

The lost benefit to Yolanda and Rebecca because after the tax, Rebecca will not dog sit for Yolanda

A city wants to raise revenues to build a new municipal swimming pool next year. The mayor suggests that the city raise the price of admission to the current municipal pools this year to raise revenues. The city manager suggests that the city lower the price of admission to raise revenues. Who is correct?

The mayor would be correct if demand were price inelastic; the city manager would be correct if demand were price elastic.

Which of the following is likely to have the most price elastic demand?

Tommy Hilfiger jeans

What happens to the total surplus in a market when the government imposes a tax?

Total surplus decreases.

If the price elasticity of demand for a good is 2, then a 10 percent decrease in the quantity demanded must be the result of

a 5 percent increase in the price.

Suppose the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. As a result,

a shortage of treadmills will develop.

Refer to Figure 6-4. A government-imposed price floor of $12 in this market results in

a surplus of 4 units.

If an allocation of resources is efficient, then

all potential gains from trade among buyers are sellers are being realized.

When demand is elastic, a decrease in price will cause

an increase in total revenue.

A price ceiling will be binding only if it is set

below the equilibrium price.

A shortage results when a

binding price ceiling is imposed on a market.

Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,

both Janine and Henry experience an increase in consumer surplus.

When a good is taxed,

both buyers and sellers of the good are made worse off.

If demand is price inelastic, then

buyers do not respond much to a change in price.

Demand is said to be price elastic if

buyers respond substantially to changes in the price of the good.

Refer to Figure 6-2. The price ceiling

causes a shortage of 85 units.

A legal maximum on the price at which a good can be sold is called a price

ceiling

The national defense argument for trade protectionism holds that

certain industries are necessary to the national defense of the country and therefore warrant trade protections.

If a consumer places a value of $14 on a particular good and if the price of the good is $12, then the

consumer enjoys consumer surplus if he or she buys the good.

Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by Jrepresents

consumer surplus after the tax.

Refer to Figure 8-1. Suppose the government imposes a tax of P'' - P. The area measured by J + K + I represents

consumer surplus before the tax.

Suppose Iceland goes from being an isolated country to being an importer of coats. As a result,

consumer surplus increases for consumers of coats in Iceland.

The price elasticity of demand for a good measures the willingness of

consumers to buy less of the good as price rises.

Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by I + Y represents the

deadweight loss due to the tax.

Refer to Figure 8-2. The imposition of the tax causes the price received by sellers to

decrease by $2.

Refer to Figure 8-2. The imposition of the tax causes the quantity sold to

decrease by 1 unit.

Refer to Figure 9-1. When trade in coffee is allowed, consumer surplus in Guatemala

decreases by the area B + D.

A drought in Spain destroys many red grapes causing the prices of both red grapes and red wine to rise. As a result, the consumer surplus in the market for red grapes

decreases, and the consumer surplus in the market for red wine decreases.

When a country allows trade and becomes an importer of a good,

domestic producers become worse off, and domestic consumers become better off.

Refer to Figure 9-2. With free trade, this country will

export 100 calculators.

There are several criticisms of the minimum wage. Which of the following is not one of those criticisms? The minimum wage

fails to raise the wage of any employed person.

Which of the following would be the least likely result of a binding price ceiling imposed on the market for rental cars?

free gasoline given to people as an incentive to a rent a car

In general, elasticity is a measure of

how much buyers and sellers respond to changes in market conditions.

Refer to Figure 9-4. With trade, Nicaragua

imports 250 calculators.

Refer to Figure 8-2. The imposition of the tax causes the price paid by buyers to

increase by $3.

When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will

increase tax revenue and decrease the deadweight loss.

Refer to Figure 7-1. When the price falls from P2 to P1, consumer surplus

increases by an amount equal to B+C.

Refer to Figure 9-1. When trade in coffee is allowed, producer surplus in Guatemala

increases by the area B + D + G.

An increase in price causes an increase in total revenue when demand is

inelastic

The deadweight loss from a tax per unit of good will be smallest in a market with

inelastic supply and inelastic demand.

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it

maximizes the combined welfare of buyers and sellers.

Minimum wage laws

may encourage some teenagers to drop out and take jobs.

If the minimum wage law sets a price floor above the equilibrium wage in the market for unskilled labor, then the

minimum wage will create a surplus of unskilled labor.

Goods with many close substitutes tend to have

more elastic demands.

Refer to Figure 6-6. If the government imposes a price ceiling of $8 on this market, then there will be

no shortage.

Economists compute the price elasticity of demand as the

percentage change in quantity demanded divided by the percentage change in price.

Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by Mrepresents

producer surplus after the tax.

Refer to Figure 8-1. Suppose the government imposes a tax of P'-P'''. The area measured by L + M+ Y represents

producer surplus before the tax.

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

quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases.

When consumers face rising gasoline prices, they typically

reduce their quantity demanded more in the long run than in the short run.

When the price of a good rises, the price is transmitting information indicating that the good has become relatively

scarcer

Elasticity of demand is closely related to the slope of the demand curve. The less responsive buyers are to a change in price, the

steeper the demand curve will be.

A tax levied on the sellers of a good shifts the

supply curve upward (or to the left).

Refer to Figure 8-1. Suppose the government imposes a tax of P'-P'''. The area measured by K + Lrepresents

tax revenue.

For a good that is a necessity, demand

tends to be inelastic.

Producer surplus is

the amount a seller is paid minus the cost of production.

Refer to Figure 9-3. With no international trade,

the equilibrium price is $12 and the equilibrium quantity is 300.

When a country allows trade and becomes an importer of a good,

the gains of the winners exceed the losses of the losers.

During the winter of 1973-74, a general system of wage and price controls (including a price ceiling on gasoline) was in force in the United States. At the beginning of 1974, some oil-producing countries imposed an oil embargo (a legal prohibition on commerce) on the West. In the spring of 1974, price controls were abolished.

the shortage of gasoline would go away.

Which of the following is not a determinant of the price elasticity of demand for a good?

the steepness or flatness of the supply curve for the good

Consumers receive more consumers' surplus when __________ than when _________________.

there is free trade; tariffs or quotas exist

If the minimum wage is set above the equilibrium wage, then

there will be fewer labor hours purchased by employers than at the equilibrium wage.

We can say that the allocation of resources is efficient if

total surplus is maximized.

​Rent controls can cause

​all of these are possible results of rent controls.