Quiz 4 (Chapters 7 & 8)

Olaf would be willing to pay $35 to attend a dog show, but he buys a ticket for $20. Olaf's consumer surplus is

$15

If Roberta sells a shirt for $30, and her producer surplus from the sale is $23 her cost must have been

$7

Buyer . Willingness to pay Mike . $50.00 Sandy . $30.00 Jonathan . $20.00 Haley . $10.00 1) If the price of the product is $15 then who would be willing to purchase the product 2) If the price of the product is $25, then the total consumer surplus is

1) Mike, Sandy, + Johnathan 2) $30

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

Total surplus decreases

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as

TxQ

According to Arthur Laffer, the graph that represents the amount of tax revenue (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like

an upside-down U

When a tax is levied on a good

both buyers and sellers are made worse off

The benefit to buyers of participating in a market is measured by

consumer surplus

A drought in California destroys many red grapes. As a result of the drought, the consumer surplus in the market for the red grapes

decreases

The study of how the allocation of resources affects economic well-being is called

welfare economics