Altindag Micro Econ Test 2

If Martin sells a shirt for $40, and his producer surplus is $8, his cost must have been?

$32

Inefficiency exists in an economy when a good is?

Not being consumed by buyers who value it most highly

Moving production from a high-cost producer to a low-cost producer will do what?

Raise total surplus

A supply curve can be used to measure producer surplus because it reflects

Seller's cost

Dallas buys strawberries, and he would be willing to pay more than he now pays. Suppose that Dallas has a change in his tastes such that he values strawberries more than before. If the market price is the same as before, then his consumer surplus would?

increase

If the government removes a tax on a good, then the quantity of the good sold will?

increase

When a tax is placed on the sellers of a product, buyers pay

more, and sellers receive less than they did before

Chad's Willingness to Pay, Chad's Consumer Surplus First Day: $5.00, $1.25 Second Day: $4.00, $0.75 What is the price of Chad's latte on the first day

$3.75

Seller: Cost Marcia: $200 Jan: $250 Cindy: $350 Greg: $400 Peter: $700 Bobby: $800 You wish to purchase 10 piano lessons for yourself and for your brother, so you take bids from each of the sellers. You will take lessons at the same time, so one teacher cannot provide lessons to both of you. You must pay the same price for both sets of lessons, and you will not accept a bid below a seller's cost because you are concerned that the seller will not provide all 10 lessons. What bid will you accept?

$349

Price: Quan Dem, Quan Supp $20: 2400, 0 $30: 2000, 200 $40: 1600, 400 $50: 1200, 600 $60: 800, 800 $70: 400, 1000 $80: 0, 1200 Which of the following price ceilings would be binding in this market? $80, $70, $60, $50

$50

Price: Quan Dem, Quan Supp $20: 2400, 0 $30: 2000, 200 $40: 1600, 400 $50: 1200, 600 $60: 800, 800 $70: 400, 1000 $80: 0, 1200 Suppose the gov imposes a price ceiling of $70 on this market. What will be the size of the shortage in this market?

0 units

Opponents of the minimum wage point out that the minimum wage does what

1. Encourages teens to drop out of school 2. Prevents some workers from getting needed on-the-job training 3. Contributes to the problem of unemployment

What does a demand curve reflect

1. Willingness to pay of all buyers in the market 2. value each buyer in the market places on the good 3. highest price buyers are willing to pay for each quantity

Price: Quan Dem, Quan Supp $20: 2400, 0 $30: 2000, 200 $40: 1600, 400 $50: 1200, 600 $60: 800, 800 $70: 400, 1000 $80: 0, 1200 Suppose the gov imposes a price ceiling of $70 on this market. What will be the size of the surplus in this market?

600 Units

What is a price ceiling

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

1st Orange, 2nd Orange, 3rd Orange Allison: $2.00, $1.50, $0.75 Bob: $1.50, $1.00, $0.60 Charisse: $0.75, $0.25, $0 Who experiences the largest gain in consumer surplus when the price of an orange decreases from $1.05 to $0.75?

Allison

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

Consumer and Producer surplus

Justin builds fences for a living. Justin's out-of-pocket expenses plus the value he places on his own time amount to his what?

Cost of building fences

According to economists, government restrictions on ticket scalping do all of the following except a. inconvenience the public. b. reduce the audience for cultural and sports events. c. waste police officers' time. d. keep the cost of tickets to all consumers low

D

Suppose buyers of vodka are required to send $5.00 to the government for every bottle of vodka they buy. Further, suppose this tax causes the effective price received by sellers of vodka to fall by $3.00 per bottle. Which of the following statements is correct? a. This tax causes the demand curve for vodka to shift downward by $5.00 at each quantity of vodka. b. The price paid by buyers is $2.00 per bottle more than it was before the tax. c. Sixty percent of the burden of the tax falls on sellers. d. All of the above are correct.

D

Total surplus... a. can be used to measure a market's efficiency. b. is the sum of consumer and producer surplus. c. is the value to buyers minus the cost to sellers. d. All of the above are correct

D

The price paid by buyers in a market will decrease if the government

Decreases a tax on the good sold in that market

1st Orange, 2nd Orange, 3rd Orange Allison: $2.00, $1.50, $0.75 Bob: $1.50, $1.00, $0.60 Charisse: $0.75, $0.25, $0 If the market price of an orange increases from $0.80 to $1.05, then consumer surplus does what?

Decreases by $0.90

30. One economist has argued that rent control is "the best way to destroy a city, other than bombing." Why would an economist say this?

He fears rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city

If the cost of producing sofas decreases, then consumer surplus in the sofa market will

Increase

Suppose the demand for peaches decreases. What will happen to producer surplus int he market for peaches?

It decreases

Suppose the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will decrease the effective price received by sellers of picture frames by?

Less than $0.50

Willingness to pay...

Measures the value that a buyer places on a good

If the government allowed free market for transplant orgnans such as kidneys to exist, what would happen?

Shortage of organs would be eliminated, and there would be no surplus of organs

When a binding price floor is imposed on a market to benefit sellers

Some sellers benefit, some sellers are harmed

We can say that the allocation of resources is efficient if?

Total surplus is maximized

Consumer Surplus is equal to

Value to buyers - Amount paid by buyers

Total surplus in a market is equal to?

Value to buyers - cost of sellers

What is a price floor is

a legal minimum on the price at which a good can be sold

What observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling becomes effective

a smaller quantity of the good is bought and sold

Economists tend to see ticket scalping as what?

a way of increasing the efficiency of ticket distribution

At present, the maximum legal price for a human kidney is $0. The price of $0 maximizes consumer or producer surplus?

neither

the minimum wage, if binding, raises the income of who?

only those workers whose jobs would pay less than the minimum wage if it didn't exist

A tax imposed on the buyers of a good will

raise the price buyers pay and lower the effective price sellers receive

Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $20 per ticket, then the demand curve will...?

shift upward by $30, and the price paid by buyers will decrease by less than $30

An outcome that can result from either a price ceiling or a price floor is?

undesirable rationing mechanisms

1st Orange, 2nd Orange, 3rd Orange Allison: $2.00, $1.50, $0.75 Bob: $1.50, $1.00, $0.60 Charisse: $0.75, $0.25, $0 The market quantity of oranges demanded per day is exactly 7 if the price of orange, P, satisfies...?

$0.25 < P < $0.60

Chad's Willingness to Pay, Chad's Consumer Surplus First Day: $5.00, $1.25 Second Day: $4.00, $0.75 What is the price that Chad paid for a latte on the second day?

$0.50 less than the first day

Seller Cost Abby: $1,600 Bobby: $1,300 Dianne: $1,100 Evaline: $900 Carlos: $800 Suppose each of the 5 sellers can supply at most 1 unit of the good. The market quantity supplied is exactly 4 if the price is?

$1,400

Caroline sharpens knives in her spare time for extra income. Buyers of her service are willing to pay $2.95 per knife for as many knives as Caroline is willing to sharpen. On a particular day, she is willing to sharpen the first knife for $2.00, the second knife for $2.25, the third knife for $2.75, and the fourth knife for $3.50. Assume Caroline is rational in deciding how many knives to sharpen. Her producer surplus is

$1.85

Buyer Willingness To Pay Calvin: $150.00 Sam: $135.00 Andrew: $120.00 Lori: $100.00 If the price of the product is $135, what is the total consumer surplus

$15

Seller: Cost Evan: $50 Selena: $100 Angie: $150 Kris: $200 If Evan, Selena, and Angie sell the good, and the resulting producer surplus is $300, then the price must have been?

$200

At Nick's Bakery, the cost to make a cheese danish is $1.50/danish. As a result of selling 10 danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his danishes for?

$3.50 each

Seller Cost Abby: $1,600 Bobby: $1,300 Dianne: $1,100 Evaline: $900 Carlos: $800 If the market price is $1000, the producer surplus in the market is?

$300

Buyer Willingness to Pay Carlos: $15 Quilana: $25 Wilbur: $35 Ming-la: $45 If there is only 1 unit of the good and if the buyers bid against each other for the right to purchase it, then the good will sell for?

$35 or slightly more

Price: Quantity Demanded, Quantity Supplied $12.00: 0, 36 $10.00: 3, 30 $ 8.00: 6, 24 $ 6.00: 9, 18 $ 4.00: 12, 12 $ 2.00: 15, 6 $ 0.00: 18, 0 Both the demand curve and the supply curve are straight lines. At equilibrium, total surplus is what?

$72

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

1st Orange, 2nd Orange, 3rd Orange Allison: $2.00, $1.50, $0.75 Bob: $1.50, $1.00, $0.60 Charisse: $0.75, $0.25, $0 If the market price of an orange is $0.90, then the market quantity of oranges demanded per day is

4

Chad is willing to pay $5.00 to get his first cup of morning latté; he is willing to pay $4.50 for a second cup. He buys his first cup from a vendor selling latté for $3.75 per cup. He returns to that vendor later in the morning to find that the vendor has increased her price to $3.90 per cup. Chad buys a second cup. Which of the following statements is correct? a. Chad's willingness to pay for his second cup of latté was smaller than his willingness to pay for his first cup of latté. b. Chad's consumer surplus on his second cup of latté was larger than his consumer surplus on his first cup of latté. c. Chad is irrational in that he is willing to pay a different price for his second cup of latté than what he is willing to pay for his first cup of latté. d. Chad places a higher value on his second cup of latté than on his first cup of latté.

A

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

Buyer Willingness to Pay Carlos: $15 Quilana: $25 Wilbur: $35 Ming-la: $45 Who experiences the largest loss of consumer surplus when the price of the good increases from $20 to $22

All 3 buyers experience the same loss

4. Suppose the government has imposed a price ceiling on laptop computers. Which of the following events could transform the price ceiling from one that is not binding into one that is binding? a. Improvements in production technology reduce the costs of producing laptop computers. b. The number of firms selling laptop computers decreases. c. Consumers' income decreases, and laptop computers are a normal good. d. The number of consumers buying laptop computers decreases.

B

Many economists believe that restrictions against ticket scalping result in each of the following except a. a smaller audience for cultural and sporting events. b. shorter lines at cultural and sporting events. c. less tax revenue for the state. d. an increase in ticket prices

B

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

Which of the following is true when the price of a good or service rises? a. Buyers who were already buying the good or service are better off. b. Some buyers exit the market. c. The total consumer surplus in the market increases. d. The total value of purchases before and after the price change is the same.

B

Which of the following will cause an increase in consumer surplus? a. an increase in the production cost of the good b. a technological improvement in the production of the good c. a decrease in the number of sellers of the good d. the imposition of a binding price floor in the market

B

If the government allowed a free market for transplant organs such as kidneys to exist, critics argue that such a market would do what?

Benefit rich people but not poor people

Suppose that the demand for digital cameras is elastic, and the supply of digital cameras is inelastic. A tax of $20 per camera levied on digital cameras will decrease the effective price received by sellers of digital cameras by

Between $10-$20

Under rent control, bribery is a mechanism to

Bring the total price of an apartment (including the bribe) closer to the equilibrium price

What is the most likely explanation for the imposition of a price ceiling on the market for milk?

Buyers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling

Which of the following will cause an increase in producer surplus? a. the imposition of a binding price ceiling in the market b. buyers expect the price of the good to be lower next month c. the price of a substitute increases d. income increases and buyers consider the good to be inferior

C

Buyer Willingness To Pay Calvin: $150.00 Sam: $135.00 Andrew: $120.00 Lori: $100.00 If the price of the product is $110, then who would one willing to purchase the product

Calvin, Sam, and Andrew

Seller Cost Abby: $1,600 Bobby: $1,300 Dianne: $1,100 Evaline: $900 Carlos: $800 If the price is $1150, who would be willing to supply the product?

Carlos, Dianne, and Evaline

If the government removes a binding price floor from a market, then the price received by sellers will

Decrease, and the quantity sold in the market will increase

The Sergeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate...? and producer surplus...?

Decreases, and producer surplus decreases

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

Decreases, and the C.S. in the market for red wine decreases

The mayor of Workerville proposes a local payroll tax to fund a new water park for the city. The mayor proposes to collect half the tax from workers and half the tax from firms. The mayor will be able to successfully divide the burden of the tax equally if the

Demand for labor and supply for labor is equally elastic

Seller: Cost Marcia: $200 Jan: $250 Cindy: $350 Greg: $400 Peter: $700 Bobby: $800 You wish to purchase 10 piano lessons, so you take bids from each of the sellers. The bids are required to be rounded to the nearest dollar. You will not accept a bid below a seller's cost because you are concerned that the seller will not provide all 10 lessons. Your parents have given you $450 to spend on piano lessons. You believe that the sellers with higher opportunity costs offer higher quality lessons. You want the highest quality lessons that you can afford, but you can spend any remaining money on dinner with friends. From whom will you take lessons, and how much money will you spend?

Greg; $401

If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would

Increase by less than $1000

Tomato sauce and spaghetti noodles are complementary goods. A decrease in the price of tomatoes will do what to consumer surplus in the noodle/ sauce market?

Increase consumer surplus in both tomato and noodle markets

Corn chips and potato chips are substitutes. Good weather sharply increases the corn harvest increase/ decrease C.S./ P.S. in the market for corn chips/ potato chips?

Increase consumer surplus on corn chips, decrease producer surplus

Suppose televisions are a normal good and buyers of televisions experience a decrease in income. As a result, consumer surplus in the television market

May increase, may decrease, may remain unchanged

Buyer Willingness to Pay Carlos: $15 Quilana: $25 Wilbur: $35 Ming-la: $45 If the market price for the good is $20, who will purchase the good?

Quilana, Wilbur, and Ming-la

How is the burden of tax divided?

Regardless of whether the tax is levied on the buyers or the sellers, the buyers and sellers bear and equal proportion of the tax.

Price: Quantity Demanded, Quantity Supplied $12.00: 0, 36 $10.00: 3, 30 $ 8.00: 6, 24 $ 6.00: 9, 18 $ 4.00: 12, 12 $ 2.00: 15, 6 $ 0.00: 18, 0 At a price of $2, total surplus is larger, smaller, the same as it would be at equilibrium, or not enough information?

Smaller

A simultaneous increase in both demands for MP3 players and the supply in MP3 players would imply that?

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

When does a binding price floor reduce a firms total revenue

When the demand is elastic

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because

With shortages and waiting lists, they have no incentive to maintain and improve their property

Suppose that in a particular market, the supply curve is highly elastic and the demand curve is highly inelastic. If a tax is imposed in this market, then the buyers will...?

bear a greater burden of the tax than the sellers

A shortage results when

binding price ceiling is imposed on a market

A tax on the buyers of cameras encourages

buyers to demand a smaller quantity at every price

If the government removes a binding price ceiling from a market, then the price received by sellers will

increase, and the quantity sold in the market will increase

In the housing market supply and demand are?

more elastic in the long run than in the short run, so rent control leads to larger shortage of apartments in the long run than the short run

If the price a consumer pays for a product is equal to a consumers willingness to pay, then the consumer surplus relevant to that purchase is...?

zero