ECON 300 Ch. 3 Quiz
When demand and supply are linear, consumer surplus is equal to:
The area between the demand curve and the price, out to the quantity that is exchanged.
When demand and supply are linear, producer surplus is equal to:
The area between the supply curve and the price, out to the quantity that is exchanged.
If the government provides a certain amount of a good to consumers in addition to what the private market provides:
market price will fall, and market quantity will rise by less than the additional amount provided by the government.
As the size of a per-unit tax increases:
the deadweight loss resulting from the tax gets bigger.
If a tax and a quota raise prices by the same amount:
the tax and the quota result in the same amount of deadweight loss.
When demand and supply are linear, consumer surplus is calculated as the area of a triangle:
with a base equal to the quantity sold and a height equal to the difference between the market price and the demand choke price.
When demand and supply are linear, producer surplus can be calculated:
with a base equal to the quantity sold and a height equal to the difference between the market price and the supply choke price.
If the supply equation for a good is QS = 400P − 8,000 and the price is 100, then producer surplus is:
$1.28 million.
If the demand equation for a good is QD = 800 − 2P and price increases from $150 to $200, then consumer surplus decreases by:
$22,500.
https://d2l.arizona.edu/content/enforced/785531-319-2192-5W1ECON300101/csfiles/home_dir/Screen%20Shot%202016-05-25%20at%2010.51.59%20AM.png?_&d2lSessionVal=lGQvTQUtz3YocDypxMbKWEv3v In this graph, producer surplus is equal to:
12.
http://assessments.bfwpub.com/QM4PRODUCTION_res/topicresources/1657297977/image002.jpg In this graph, consumer surplus is equal to:
32.
When demand is inelastic and supply is elastic:
buyers bear most of the economic burden of a tax.
A binding price ceiling:
causes a shortage, has an uncertain effect on consumer surplus, and reduces producer surplus.
A binding price floor:
causes a surplus, reduces consumer surplus, and has an uncertain effect on producer surplus.
All else equal, a negative supply shock:
causes consumer surplus to decrease but has an uncertain effect on producer surplus.
If more substitutes for pens become available:
consumer surplus for pens decreases.
If the legal burden of a tax is passed from sellers to buyers:
deadweight loss is unchanged.
If the government subsidizes the production of a good:
deadweight loss results because too much of the good is exchanged.
The government wants to transfer welfare from buyers to sellers by collecting a $1 tax on a good from buyers and subsidizing sellers $1 for each unit of the good sold. This policy will:
decrease the equilibrium price
A per-unit tax on a good that sellers are legally responsible for paying:
decreases supply, increases the equilibrium price, and decreases consumer surplus.
When a price ceiling is binding, the resulting deadweight loss tends to be smaller than the resulting transfer from producers to consumers if:
demand and supply are more price inelastic.
A nonbinding price floor:
does not cause any deadweight loss.
All else equal, a demand increase:
has an uncertain effect on consumer surplus but causes producer surplus to increase.
A quota limiting the production of a good to a quantity less than the market equilibrium quantity:
lowers consumer surplus, may cause producer surplus to increase, and creates a deadweight loss.
When demand is elastic and supply is inelastic:
sellers bear most of the economic burden of the tax.