Econ 2200 Exams review
The price elasticity of demand measures how much
quantity demanded responds to a change in price.
The price elasticity of supply measures how responsive
sellers are to a change in price.
A price ceiling is
a legal maximum on the price at which a good can be sold.
Rent-control laws dictate
a maximum rent that landlords may charge tenants.
Elasticity is
a measure of how much buyers and sellers respond to changes in market conditions
Minimum-wage laws dictate
a minimum wage that firms may pay workers.
Price controls are usually enacted
when policymakers believe that the market price of a good or service is unfair to buyers or sellers.
Externalities are
side effects passed on to a party other than the buyers and sellers in the market
Market failure is the inability of
some unregulated markets to allocate resources efficiently.
Welfare economics is the study of how?
the allocation of resources affects economic well-being
Welfare economics is the study of how
the allocation of resources affects economic well-being.
Consumer surplus is
the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
Producer surplus is
the amount a seller is paid minus the cost of production
Refer to Table 7-1. If price of the product is $135, then the total consumer surplus is
$15.
Refer to Table 7-10. If the market price is $1,000, the producer surplus in the market is
$300
In general, elasticity is a measure of
how much buyers and sellers respond to changes in market conditions
Refer to Table 7-1. If the price of the product is $122, then the total consumer surplus is
$41.
Refer to Table 7-10. If the market price is $1,200, the producer surplus in the market is
$800
Which of the following statements is correct?
Buyers always want to pay less and sellers always want to be paid more.
Which of the following 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.
Refer to Table 7-1. If the price of the product is $130, then who would be willing to purchase the product?
Calvin and Sam
Refer to Table 7-1. If the price of the product is $110, then who would be willing to purchase the product?
Calvin, Sam, and Andrew
If the government removes a tax on a good, then the quantity of the good sold will
increase
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 $1,000
Which of the following is not correct?
Economic policies rarely have effects that their architects did not intend or anticipate.
How does the concept of elasticity allow us to improve upon our understanding of supply and demand?
Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept
Which of the Ten Principles of Economics does welfare economics explain more fully?
Markets are usually a good way to organize economic activity
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
Refer to Table 7-1. If the market price is $105,
Sam's consumer surplus is $30 and total consumer surplus is $90.
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?
The number of firms selling laptop computers decreases
Consumer surplus is equal to the
Value to buyers - Amount paid by buyers
Consumer surplus
is measured using the demand curve for a product.
Market power refers to the
ability of market participants to influence price
Producer surplus equals the
amount received by sellers minus the cost to sellers
When studying how some event or policy affects a market, elasticity provides information on the
magnitude of the effect on the market.
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
A result of welfare economics is that the equilibrium price of a product is considered to be the best price because of it
maximizes the combined welfare of buyers and sellers
Consumer surplus,
measures the benefit buyers receive from participating in a market
When a tax is placed on the sellers of a product, buyers pay
more, and sellers receive less than they did before the tax
Price controls
can generate inequities of their own
A legal maximum on the price at which a good can be sold is called a price.
ceiling
Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?
consumer and producer surplus
If the government removes a tax on a good, then the price paid by buyers will
decrease, and the price received by sellers will increase
A tax on the sellers of coffee mugs
decreases the size of the coffee mug market
The presence of a price control in a market for a good or service usually is an indication that
policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.
A tax imposed on the sellers of a good will raise the
price paid by buyers and lower the equilibrium quantity
The price elasticity of supply measures how much
the quantity supplied responds to changes in the price of the good.
When studying how some event or policy affects a market, elasticity provides information on the.
direction and magnitude of the effect.
Which of the following is not an example of a public policy?
equilibrium laws
The decisions of buyers and sellers that affect people who are not participants in the market create
externalities