Exam 2

In year 1, the government imposes a $2 per unit tax on sellers of widgets. The next year, the government removes the tax on sellers and replaces it with a $2 per unit tax on buyers of widgets. The market otherwise does not change between years. Which of the following is correct?

Consumers' tax burden will be the same in years 1 and 2

Suppose sellers of mopeds are required to send $100 to the government for ever moped they sell. Further, suppose this tax causes the price paid by buyers of mopeds to rise by $60 per moped. Which of the following statements is correct?

The effective price received by the sellers is $40 less than it was before the tax

Suppose the demand is inelastic within a certain price range. For that price range

an increase in price would increase total revenue because the decrease in quantity demanded is proportionally less than the increase in price

a price ceiling will be binding only if it is set

below the equilibrium price

a shortage results when a

binding price ceiling is imposed on a market

the price elasticity of demand measures

buyers' responsiveness tot the change in the price of a good

all else equal, what happens to consumer surplus if the price of a good decreases

consumer surplus increases

When a country allows trade and becomes an exporter of a good

domestic producers gain and domestic consumers lose

demand is perfectly elastic if the price elasticity of demand is

equal to infinity

If the government levies a $5 tax per ticket on buyers of NFL game tickets, then the effective price (sticker price plus tax) paid by buyers of NFL game tickets would:

increase by less than $5

goods with close substitutes tend to have

more elastic demands

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the

quantity-demanded of toothpaste decreases and the quantity-supplied of toothpaste increases

If a country allows trade and, for a certain good, the domestic price without trade is higher than the world price,

the country will be an importer of the good

Suppose supply is perfectly elastic, and the demand of the good in question decreases. As a result

the equilibrium quantity decreases, and the equilibrium price is unchanged

demand is said to be inelastic if

the quantity demanded changes only slightly when the price of the good changes

by comparing the world price of pecan's to the U.S.'s domestic price of pecans, we can determine

whether the U.S. will import, export or have the comparative advantage in producing pecans

in the market, the marginal buyer is the buyer

who would be the first to leave the market if the price were any higher

The maximum price that a buyer will pay for a good is called

willingness to pay