Econ 224 exam 2
If the demand for a product increases, then we would expect equilibrium price
C. and equilibrium quantity both to increase.
[FIGURE 6-27] Suppose a tax of $3 per unit is imposed on this market. What will be the new equilibrium quantity in this market?
C. between 8 units and 10 units
[FIGURE 6-4] A government-imposed price of $6 in this market could be an example of a
C. binding price ceiling and a non-binding price floor
If the government removes a binding price floor from a market, then the price paid by buyers will
C. decrease, and the quantity sold in the market will increase.
Consider the market for laptop computers. Consumer income rises (assume laptop computers are a normal good), what happens to the equilibrium price and quantity?
D. price rises and quantity rises
Consumer surplus
The amount a buyer is willing to pay for a good minus the amount the buyer actually pays for the good.
Producer surplus
The amount a seller is paid for a good minus the seller's cost of producing it. The area between the price and above the supply curve measures the producer surplus.
[TABLE 7-1] If the price of the product is $122, then the total consumer surplus is_____________
B. $41
[TABLE 7-10] If the market price is $1,200, total producer surplus in the market is
B. $800
[TABLE 13-2] What is the marginal product of the second worker?
B. 200 units
[FIGURE 7-3] Area C represents the
B. Consumer surplus to new consumers who enter the market when the price falls from P2 to P1.
consider the market for laptop computers. Which one is not correct when the price of semiconductors falls? (Semiconductors are an input of producing laptop computers)
B. Demand curve shift to the left
[TABLE 7-1] If the market price is $105,
B. Sam's consumer surplus is $30 and total consumer surplus is $90.
Which of the following events must cause equilibrium quantity to fall?
B. demand and supply both decrease
If a price ceiling is not binding, then
B. the equilibrium price is below the price of a price ceiling.
If the supply of a prodcut increases, then we would expect equilibrium price
B. to decrease and equilibrium quantity increase.
[FIGURE 7-22] At the equilibrium price, total surplus is
C. $3,500
[TABLE 7-1] If the price of the product is $110, then who would be willing to purchase the product?
C. Calvin, Sam, and Andrew
[TABLE 7-10] If the price is $1,000,
C. Evaline's producer surplus is $100
[FIGURE 6-3] In panel b, there will be
C. a surplus
SCENARIO 13-4: Suppose that Abdul opens a coffee shop. He receives a loan from a bank for $100,000. He withdraws $50,000 from his personal savings account. The interest rate on the loan is 8%, and the interest rate on his savings account is 2%.
1. A. Abdul's explicit cost of capital is= $8,000 2. D. Abdul's implicit cost of capital is= $1,000
SCENARIO 13-11: Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each.
1. D. An accountant would calculate the total profit for one birdhouse to be= $15 2. B. An economist would calculate the total profit for one birdhouse to be= $11
Price ceiling is___________
A legal maximum of the price at which a good can be sold.
Price floor is____________
A legal minimum of the price at which a good can be sold. Meant to maintain prices near equilibrium levels.
Alex is willing to pay $10, and Bella is willing to pay $8, for 1 pound of ribeye steak. When the price of ribeye steak increases from $9 to $11,
A. Alex experiences a decrease in consumer surplus, but Bella does not.
When a binding price floor is imposed on a market,
A. the price is above the equilibrium price.
In a competitive market free of government regulation,
C. price adjusts until quantity demanded equals quantity supplied.
[table 4-9] which combination would produce a decrease in equilibrium price and an indeterminate change in equilibrium quantity?
C.decrease in demand and an increase in supply
[TABLE 7-10] Suppose each of the five sellers can supply at most one good unit of the good. The market quantity supplied is exactly 2 if the price is
D. $1,050
[FIGURE 6-27] Suppose a tax of $6 per unit is imposed on this market. How much will buyers pay per unit after the tax is imposed?
D. $22
[FIGURE 6-29] The buyers will bear a higher share of the tax burden than sellers if the demand is_____________
D. D2, and the supply is S2
[FIGURE 7-15] Area A represents
D. The increase in producer surplus to those producers already in the market when the price increases from P1 to P2.
A binding price ceiling
D. causes a shortage and is set at a price below the equilibrium price.
Equilibrium quantity must decrease when demand____________
D. decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease.
[FIGURE 6-2] The price ceiling causes quantity
D. demand to exceed quantity supplied by 85 units
Averaged fixed cost
Fixed cost divided by the quantity of output.
The area below the demand curve and above the price measures the consumer surplus in a market.
N/A
Marginal Cost
The increase in total cost that arises from an extra unit of production.
Willingness to pay
The maximum amount that a buyer will pay for a good
Economics of scale
The property whereby long-run average total cost falls as the quantity of output increases.
Cost
The value of everything a seller must give up to produce a good.
Average total cost
Total cost divided by the quantity of output
Average variable cost
Variable cost divided by the quantity of output.
binding price ceiling
when equilibrium price is above the price ceiling. Will lead to shortages.
Non-binding price ceiling
when equilibrium price is below the price ceiling.
Non-binding price floor
when the equilibrium price is below price floor.
Binding price floor
when the price floor is greater than equilibrium price.
