chap 7 micro econ

In response to a shortage caused by the imposition of a binding price ceiling on a market, A. sellers could ration the good or service according to their own personal biases. B. price will no longer be the mechanism that rations scarce resources. C. long lines of buyers may develop. D. All of the above are correct.

D. All of the above are correct

A tax on a market with elastic demand and elastic supply will shrink the market more than a tax on a market with inelastic demand and inelastic supply will shrink the market.(T/F)

true

A binding price floor will reduce a firm's total revenue A. when demand is inelastic. B. when demand is elastic. C. never. D. always.

B. when demand is elastic

All buyers benefit from a binding price ceiling.

false

The price paid by buyers in a market will increase if the government (i) increases a binding price floor in that market. (ii) increases a binding price ceiling in that market. (iii) decreases a tax on the good sold in that market. A. (ii) only B. (i), (ii), and (iii) C. (iii) only D. (i) and (ii) only

(i) and (ii) only

The price paid by buyers in a market will decrease if the government A. increases a tax on the good sold in that market. B. decreases a binding price floor in that market. C. imposes a binding price floor in that market. D. increases a binding price ceiling in that market.

B. decreases a binding price floor in that market

Because the supply and demand of housing are inelastic in the short run, the initial shortage caused by rent control is large.(T/F)

false

A tax on sellers shifts the supply curve to the left. a. TRUE b. FALSE

true

A tax on sellers shifts the supply curve to the left.(T/F)

true

The quantity sold in a market will decrease if the government A. increases a tax on the good sold in that market. B. decreases a binding price floor in that market. C. increases a binding price ceiling in that market. D. All of the above are correct

A. increases a tax on the good sold in that market.

The quantity sold in a market will decrease if the government A. increases a tax on the good sold in that market. B. decreases a binding price floor in that market. C. increases a binding price ceiling in that market. D. All of the above are correct.

A. increases a tax on the good sold in that market.

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is A. zero. B. negative, and the consumer would not purchase the product. C. positive, and the consumer would purchase the product. D. There is not enough information given to answer this question.

A. zero

A binding price ceiling (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. A. (ii) only B. (ii) and (iv) only C. (iv) only D. (i) and (iii) only

B. (ii) and (iv) only

Minimum-wage laws dictate A. the exact wage that firms must pay workers. B. a minimum wage that firms may pay workers. C. a maximum wage that firms may pay workers. D. both a minimum wage and a maximum wage that firms may pay workers.

B. a minimum wage that firms may pay workers.

Suppose the government imposes a 50-cent tax on the sellers of packets of chewing gum. The tax would A. shift the supply curve upward by less than 50 cents. B. discourage market activity. C. raise the equilibrium price by 50 cents. D. create a 50-cent tax burden each for buyers and sellers.

B. discourage market activity.

Most labor economists believe that the supply of labor is much more elastic than the demand.(T/F)

false

A tax on the buyers of sofas A. decreases the size of the sofa market. B. may increase, decrease, or have no effect on the size of the sofa market. C. has no effect on the size of the sofa market. D. increases the size of the sofa market.

A. decreases the size of the sofa market.

Buyers and sellers neglect the external effects of their actions when deciding how much to demand or supply. a. TRUE b. FALSE

a. TRUE

If Darby values a soccer ball at $50, and she pays $40 for it, her consumer surplus is $90. a. TRUE b. FALSE

false

Under rent control, bribery is a mechanism to A. allocate housing to the poorest individuals in the market. B. bring the total price of an apartment (including the bribe) closer to the equilibrium price. C. allocate housing to the most deserving tenants. D. force the total price of an apartment (including the bribe) to be less than the market price.

B. bring the total price of an apartment (including the bribe) closer to the equilibrium price.

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. A. (i) and (iii) only B. (i) only C. (iii) only D. (ii) and (iv) only

A. (i) and (iii) only

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 places a higher value on his second cup of latté than on his first cup of latté. C. Chad's consumer surplus on his second cup of latté was larger than his consumer surplus on his first cup of latté. D. 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.

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

A price floor is binding when it is set A. above the equilibrium price, causing a surplus. B. below the equilibrium price, causing a shortage. C. below the equilibrium price, causing a surplus. D. above the equilibrium price, causing a shortage.

A. above the equilibrium price, causing a surplus.

A price floor is binding when it is set A. above the equilibrium price, causing a surplus. B. below the equilibrium price, causing a shortage. C. below the equilibrium price, causing a surplus. D. above the equilibrium price, causing a shortage.

A. above the equilibrium price, causing a surplus.

A shortage results when a A. binding price ceiling is imposed on a market. B. binding price ceiling is removed from a market. C. nonbinding price ceiling is removed from a market. D. nonbinding price ceiling is imposed on a market.

A. binding price ceiling is imposed on a market.

Total surplus measures the A. buyers' willingness to pay less the sellers' costs. B. fairness of the distribution of resources in society. C. loss to buyers from paying higher prices plus the benefit to sellers from receiving lower prices. D. value to the government of goods and services sold in society.

A. buyers' willingness to pay less the sellers' costs.

To say that a price ceiling is binding is to say that the price ceiling A. causes quantity demanded to exceed quantity supplied. B. results in a surplus. C. is set above the equilibrium price. D. All of the above are correct.

A. causes quantity demanded to exceed quantity supplied.

Suppose that in a particular market, the demand curve is highly elastic, and the supply curve is highly inelastic. If a tax is imposed in this market, then the A. sellers will bear a greater burden of the tax than the buyers. B. buyers and sellers are likely to share the burden of the tax equally. C. buyers will bear a greater burden of the tax than the sellers. D. buyers and sellers will not share the burden equally, but it is impossible to determine who will bear the greater burden of the tax without more information.

A. sellers will bear a greater burden of the tax than the buyers.

The marginal seller is the seller who A. would leave the market first if the price were any lower. B. has the largest producer surplus. C. cannot compete with the other sellers in the market. D. can produce at the lowest cost.

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

Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle. Which of the following statements is correct? A. This tax causes the demand curve for perfume to shift downward by $1.00 at each quantity of perfume. B. The effective price received by sellers is $0.40 per bottle less 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.

B. The effective price received by sellers is $0.40 per bottle less than it was before the tax.

Suppose that the equilibrium price in the market for tomatoes is $3 per pound. If a law reduced the maximum legal price for tomatoes to $2 per pound, A. any possible increase in consumer surplus would be larger than the loss of producer surplus. B. any possible increase in consumer surplus would be smaller than the loss of producer surplus. C. the resulting increase in producer surplus would be smaller than any possible loss of consumer surplus. D. the resulting increase in producer surplus would be larger than any possible loss of consumer surplus.

B. any possible increase in consumer surplus would be smaller than the loss of producer surplus.

Suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages. The tax would shift A. demand, raising both the equilibrium price and quantity in the market for artificially-sweetened beverages. B. supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially-sweetened beverages. C. demand, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially-sweetened beverages. D. supply, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially-sweetened beverages.

B. supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially-sweetened beverages.

Suppose the government imposes a 20-cent tax on the sellers of artificially-sweetened beverages. The tax would shift A. demand, raising both the equilibrium price and quantity in the market for artificially-sweetened beverages. B. supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially-sweetened beverages. C. demand, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially-sweetened beverages. D. supply, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially-sweetened beverages.

B.supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially-sweetened beverages.

Which of the following equations is not valid? A. Consumer surplus = Value to buyers - Amount paid by buyers B. Producer surplus = Amount received by sellers - Cost to sellers C. Total surplus = Value to sellers - Cost to sellers D. Total surplus = Value to buyers - Amount paid by buyers + Amount received by sellers - Costs of sellers

C. Total surplus = Value to sellers - Cost to sellers

You receive a paycheck from your employer, and your pay stub indicates that $400 was deducted to pay the FICA (Social Security/Medicare) tax. Which of the following statements is correct? A. The $400 that you paid is the true burden of the tax that falls on you, the employee. B. This type of tax is an example of a payback tax. C. Your employer is required by law to pay $400 to match the $400 deducted from your check. D. All of the above are correct.

C. Your employer is required by law to pay $400 to match the $400 deducted from your check.

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. Workers will bear A. an equal share of the tax in comparison to firms. B. a greater share of the tax in comparison to firms. C. a smaller share of the tax in comparison to firms. D. All of the above are possible.

D. All of the above are possible.

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. Workers will bear A. an equal share of the tax in comparison to firms. B. a greater share of the tax in comparison to firms. C. a smaller share of the tax in comparison to firms. D. All of the above are possible.

D.all of the above

Suppose that in a particular market, the demand curve is highly elastic, and the supply curve is highly inelastic. If a tax is imposed in this market, then the A. sellers will bear a greater burden of the tax than the buyers. B. buyers and sellers are likely to share the burden of the tax equally. C. buyers will bear a greater burden of the tax than the sellers. D. buyers and sellers will not share the burden equally, but it is impossible to determine who will bear the greater burden of the tax without more information.

a. sellers will bear a greater burden of the tax than the buyers.

In response to a shortage caused by the imposition of a binding price ceiling on a market, A. sellers could ration the good or service according to their own personal biases. B. price will no longer be the mechanism that rations scarce resources. C. long lines of buyers may develop. D. All of the above are correct.

d.all above

Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is . If 80 units of the good are produced and sold, then producer surplus amounts to $1,200.(T/F)

false

Which of the Ten Principles of Economics does welfare economics explain more fully? A. Markets are usually a good way to organize economic activity. B. Trade can make everyone better off. C. The cost of something is what you give up to get it. D. A country's standard of living depends on its ability to produce goods and services.

A. Markets are usually a good way to organize economic activity.

If the government wants to reduce smoking, it should impose a tax on A. either buyers or sellers of cigarettes. B. sellers of cigarettes. C. whichever side of the market is less elastic. D. buyers of cigarettes

A. either buyers or sellers of cigarettes.

Suppose that Firms A and B each produce high-resolution computer monitors, but Firm A can do so at a lower cost. Cassie and David each want to purchase a high-resolution computer monitor, but David is willing to pay more than Cassie. Which of the following market outcomes is efficient? A. Firm A produces a monitor that Cassie buys. David does not purchase a monitor. B. Firm B produces a monitor that Cassie buys. David does not purchase a monitor. C. Firm B produces a monitor that David buys. D. Firm A produces a monitor that David buys

D. Firm A produces a monitor that David buys

Government subsidized scholarships are an example of a government policy aimed at correcting negative externalities associated with education. a. TRUE b. FALSE

false