Econ Exam 2 Hw Questions
The amount of the per-unit tax in this market is *BLANK* The amount of tax revenue generated from this market is *BLANK* (reference graph on Q6 via HW 3)
$1.50 and $750
According to the figure, the value of this product's next highest-valued use is: (reference graph on Q27 via HW 3)
$2.00
What do prices signal to producers?
1.) Important info of economy 2.) Represent collective wisdom of participants 3.) Signal valuable info of where resources are more needed and less needed 4.) Economic actors have strong incentives to respond to price signals to make profits
If a price ceiling of $6 is imposed on this market and the good is rationed via queues, there will be a shortage of *BLANK* units and the value of wasted time will be $*BLANK* and the value of lost consumer surplus will be $*BLANK* the value of lost consumer surplus will be $*BLANK* and the deadweight loss will be $*BLANK*
20, 80, 50, 50, 20
If quantity demanded is 70 units and quantity supplied is 55 units under a price control, then what type of price control is it?
A binding price ceiling
The segment of the demand curve that represents satisfied wants is Segment *BLANK* The segment of the demand curve that represents unsatisfied wants is Segment *BLANK*
AB and BC
Central planning as a method of distributing resources has been abandoned throughout most of the world for which of the following reasons? I. There is little incentive to innovate. II. The potential for corruption is high. III. It is too difficult to determine the most productive use for all resources.
All 3
Suppose that the price of gasoline increases. Consumers have an incentive to do which of the following? I. Drive less frequently. II. Purchase more fuel-efficient cars. III. Live closer to work.
All 3
The HP Stock Exchange lets members of HP's sales team buy and sell shares that pay out when sales fall within a certain range. A typical security would pay out $1, if and only if futures sales fall within the specific range of that share. Accordingly, the trading prices given in the table suggest that the probability of selling: (reference chart on Q32 via HW3)
Between 15,000 and 25,000 units is 60%.
When a price control changes the equilibrium market price and quantity traded, we say that the price control is *BLANK* When a price control has no effect on the equilibrium market price and quantity traded, we say that the price control is *BLANK*
Binding and nonbinding
If the elasticity of supply is 1.4 and the elasticity of demand is 0.7 (in absolute value), who bears most of the burden of taxation?
Consumers
If the elasticity of supply is 1.7 and the elasticity of demand is 0.9 (in absolute value), who receives most of the benefit of a subsidy?
Consumers
Suppose that a per-unit tax is levied on some good. This good's elasticity of supply is greater than the good's elasticity of demand (in absolute value). Who bears more of the burden of the tax?
Consumers
In the eighteenth century, the British Crown instituted a Stamp Tax, a commodity tax, on, among other things, newspapers. During this period in history, newspapers were one of the few ways people could learn about world events, and entering the newspaper industry was relatively easy. With this in mind, who likely paid more of the tax: consumer or producers?
Consumers were more likely to pay more of the tax because the demand for newspapers was more inelastic than the supply.
It is Valentine's Day in the United States, and you give your significant other one dozen roses that were freshly picked 72 hours ago from the fields of Kenya. What made this gift possible?
Economic markets
A subsidy has been implemented in this market. Identify the equilibrium price and quantity traded before the subsidy was implemented (reference graph on Q15 on HW 3)
Equilibrium Price before subsidy: $7 Equilibrium Quantity Traded before subsidy: 460
A tax has been implemented in this market. What is the equilibrium price and quantity traded before the tax was implemented? (reference graph on Q6 via HW 3)
Equilibrium price was: $5.25 Equilibrium quantity was: 680
Ground beef is a key input for both hamburgers and sausages. Suppose that the price of sausage increases. We would expect that the usage of ground beef would be shifted away from making
Hamburgers and into making sausages
Which of the following facts about taxes and subsidies is FALSE? I. Taxes and subsidies create deadweight losses. II. Taxes and subsidies create government revenue. III. Who bears the burden of a tax or a subsidy is determined by the relative elasticities of supply and demand. IV. Taxes and subsidies increase the welfare of consumers and producers.
II and IV
Suppose that Ishmael purchases a gold futures contract from Ali. The futures contract states that in two months, Ishmael will have the right to purchase 600 ounces of gold at $50 per ounce from Ali. Describe the beliefs that Ishmael and Ali have about the future price of gold.
Ishmael believes the price of gold will be greater than $50. Ali believes that the price of gold will be less than $50.
Roxanne purchases an oil futures contract from Ivan. The futures contract states that, in 90 days, Roxanne will have the right to purchase 50 barrels of oil from Ivan at $50 per barrel. Suppose that the 90 days have passed and the spot price of oil is now $65. If the parties agree to a cash settlement, which of the following transactions will occur?
Ivan will pay Roxanne $750 in exchange for settling the contract.
A tax on consumers will shift the demand curve to the *BLANK* A tax on producers will shift the supply curve to the *BLANK*
Left and Left
Refer to the figure which represents a market for apartments with a rent-controlled price of $600. In this market, the long-run supply curve is __________ elastic that the short-run supply curve, causing the ___________ over time. (refer to graph on Q8 via HW 4)
More; shortage to increase to 11,000 apartments
The demand curve must be *BLANK* for producers to bear the ENTIRE burden of the tax
Perfectly elastic
A law that prevents a price from rising above a certain amount is called a price *BLANK* A law that prevents a price from falling below a certain amount is called a price *BLANK*
Price ceiling and Price floor
Suppose a per-unit tax is implemented in this market. Who would bear the majority of the tax burden? (reference graph on Q9 via HW 3)
Producers
A subsidy given to consumers will shift the demand curve to the *BLANK* A subsidy given to producers will shift the supply curve to the *BLANK*
Right and Right
Millions of producers working throughout the world cooperate to ensure that millions of consumers have the goods and services they desire. These producers do not know each other and are not coordinated by a central agency. Their actions are directed simply by:
Self interest
A soybean farmer plants his crop today but won't harvest it until next year, when the soybean price could be quite different from today's spot price. To avoid this price risk, the farmer can:
Sell in the future market
At a price ceiling of $1, there is a *BLANK* of *BLANK* units
Shortage and 4
Suppose that a hurricane hits both North Carolina and South Carolina. North Carolina has severe price-gouging laws in place, while South Carolina has none. Both states have a shortage of ice. Which state will likely recover from its ice shortage more quickly?
South Carolina will recover more quickly because prices can adjust to make businesses willing to invest in ice production.
Calculate the changes in welfare following the imposition of an $8 subsidy: change in consumer surplus, change in producer surplus, deadweight loss, and change in government revenue. In your answers, a decrease in value should be indicated by a negative sign.
The change in consumer surplus is $2600 and that is the same amount for producer surplus. The DWL is -$1080 and the change in government revenue is -$6240.
Calculate the following changes in welfare after the imposition of a $2 tax: change in consumer surplus, change in producer surplus, deadweight loss, and change in government revenue. In your answers, a decrease in value should be indicated by a negative sign. (reference graph on Q12 via HW3)
The consumer surplus used to be $1800 but now it is only $450 so change (difference) in consumer surplus is -$1350. This will be the same number for Producer surplus -$1350. The DWL IS 900. The government revenue is $1800.
Mobile homes are housing units installed on a permanent foundation owned by a landlord. Although a resident owns the home, she rents the foundation from the landlord. In theory, owners of mobile homes can transfer their home to a different foundation if the rent becomes too steep, but uninstalling, transporting, and reinstalling the mobile home is usually prohibitively expensive. This "lock-in" affect encourages state legislatures to create rent controls for mobile home foundations. Which statement is a plausible, unintended consequence of these laws?
There are few new mobile home foundations constructed.
Vaccines that inoculate people against SARS-CoV-2 (the virus that causes COVID-19) have been developed. Some state and local policymakers, with the intention of getting the population vaccinated as quickly as possible, have proposed setting a binding price ceiling on these vaccines. Why might this be a poor policy for achieving this objective?
This wouldn't be a good idea for getting the population vaccinated as quickly as possible because this will create a shortage overall of the vacinne which will make it a slower process.
Consider the market for medical services. Healthy people need less frequent and less expensive medical services than do unhealthy people. If the federal government were to subsidize medical services, which group would get more of the benefit of this subsidy?
Unhealthy people
If the government taxes walnuts at 50 cents a package, who pays the tax, assuming supply and demand are neither perfectly elastic nor inelastic?
Walnut retailers and consumers
Refer to the question above. In the market for hamburgers, we would expect the supply curve to shift to the ________ and the price of hamburgers to______
left (upward) and increase
