econ exam 2
Bob purchases a book, and his consumer surplus is $3. If Bob is willing to pay $8 for the book, then the price of the book must be
$5
Which of the following could be the price elasticity of demand for a good for which an increase in price would increase revenue?
.65
If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a
0.6 percent increase in the quantity demanded.
If a 15% change in price results in a 20% change in quantity supplied, then the price elasticity of supply is about
1.33, supply is elastic
If the government imposes a binding price floor in a market, then the consumer surplus in that market will increase.
False
If the current allocation of resources in the market for wallpaper is efficient, then it must be the case that
The market for wallpaper is in equilibrium
When the price falls from P2 to P1, which of the following would not be true?
The total cost of what is now sold by sellers is actually higher than it was before the decrease in the price
Suppose sellers of liquor are required to send $5.00 to the government for every bottle of liquor they sell. Further, suppose this tax causes the price paid by buyers of liquor to rise by $3.00 per bottle. Which of the following statements is correct?
This tax causes the supply curve for liquor to shift upward by $5.00 at each quantity of liquor.
A binding minimum wage creates a surplus of labor.
True
A tax on sellers reduces the size of a market.
True
Suppose you sell a kayak for $600, but you were willing to sell it for $450. The buyer was willing to pay $650. The total surplus is $200.
True
When a free market for a good reaches equilibrium, anyone who is willing and able to sell at the market price can sell the good.
True
If a binding price floor is imposed on the market for eBooks, then
a surplus of eBooks will develop.
A price floor will be binding only if it is set
above the equilibrium price
Producer surplus is the area
below the price and above the supply curve
Total surplus is represented by the area
between the demand and supply curves up to the point of equilibrium
Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,
both Janine and Henry experience an increase in consumer surplus.
Dawn's bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit of the lower prices to
both existing customers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices.
Suppose there is an early freeze in California that reduces the size of the lemon crop. What happens to consumer surplus in the market for lemons?
consumer surplus decreases
If a tax is levied on the sellers of a product, then there will be a(n)
decrease in quantity demanded
When demand is elastic, an increase in price will cause
decrease in total revenue
When demand is inelastic, a decrease in price will cause
decrease in total revenue
A tax on the sellers of coffee mugs
decreases the size of the coffee mug market
Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts?
it increases
If the demand for leather increases, consumer surplus in the leather market
may increase, or remain the same
consumer surplus
measures the benefit buyers receive from participating in a market
Total surplus in a market will increase when the government
neither a nor b is correct
At the present, the maximum legal price for a human kidney is $0. The price of 0 maximizes
neither consumer nor producer surplus
If a tax is imposed on a market with inelastic supply and elastic demand, then
sellers will bear most of the burden of the tax
If the government allowed a free market for transplant organs such as kidneys to exist, the
shortage of organs would be eliminated, and there would be no surplus of organs
For a particular good, a 3 percent increase in price causes a 10 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?
there are too many close substitutes for this