Micro econ test 2

Assume that your roommate is very messy. Suppose she gets a $25 benefit from being messy but imposes a $50 cost on you. The Coase theorem would suggest that an efficient solution would be for you to a.pay your roommate at least $25 but no more than $50 to clean up after herself. b. pay your roommate at least $51 to clean up after herself. c. charge your roommate at least $25 to have you clean up after her. d. charge your roommate at least $50 but no more than $100 to keep you from complaining about the mess.

a

At the equilibrium price, consumer surplus is a.$100. b. $200. c. $50. d. $450.

a

With trade, Guatemala will a.export 22 units of coffee b. export 10 units of coffee. c. import 30 units of coffee. d. import 12 units of coffee.

a

At the equilibrium price, producer surplus is a. $300. b. $150. c. $450. d. $125.

b

If tickets sell for $40 each, then what is the total consumer surplus in the market? a. $90. b. $30. c. $70. d. $110.

b

If you have two (essentially) identical tickets that you sell to the group in an auction, what will be the selling price for each ticket? a. $21 b. $26 c. $51 d. $61

b

In the absence of trade, the equilibrium price of coffee in Guatemala is a. $30. b. $90. c. $110. d. $140.

b

In the absence of trade, total surplus in Guatemala is represented by the area a. A + B + C. b. A + B + C + D + F. c. A + B + C + D + F + G. d. A + B + C + D + F + G + H.

b

In which of the following cases would sellers have to develop a rationing mechanism? a. a price ceiling set at $8 b. a price ceiling set at $6 c. a price floor set at $8 d. a price floor set at $6

b

Which of the following price ceilings would be binding in this market? a. $8 b. $6 c. $12 d. $10

b

With trade, Nicaragua a. imports 150 calculators. b. imports 250 calculators. c. exports 100 calculators. d. exports 250 calculators.

b

Consumer surplus in Nicaragua without trade is a. $375. b. $2,000. c. $2,250 d. $8,700.

c

If you have a ticket that you sell to the group in an auction, what will be the selling price? a. slightly more than $20. b. slightly more than $25. c.slightly more than $50. d. slightly more than $60.

c

On holiday weekends thousands of people picnic in state parks. Some picnic areas become so overcrowded the benefit or value of picnicking diminishes to zero. An overcrowded picnic area is an example of a. a private good. b. a club good. c. a Tragedy of the Commons. d. public good.

c

Suppose the government imposes a $1 tax in each of the four markets represented by demand curves D1, D2, D3, and D4. The deadweight will be the largest in the market represented by a. D1. b. D2. c. D3. d.D4.

d

Suppose the government imposes a tax of P' - P'''. The area measured by L+M+Y represents a. consumer surplus after the tax. b. consumer surplus before the tax. c. producer surplus after the tax. d. producer surplus before the tax.

d

Suppose the government imposes a tax of P' - P'''. Total surplus before the tax is measured by the area a. I+Y. b. J+K+L+M. c. L+M+Y. d. I+J+K+L+M+Y.

d

If Evan, Selena, and Angie sell the good, and the resulting producer surplus is $300, then the price must have been a.$200. b. $300. c. $450. d. $600.

a

The price that buyers pay after the tax is imposed is a. $8. b. $10. c. $16. d. $24.

d

If the government imposes a price ceiling of $8 on this market, then there will be a. no shortage. b. a shortage of 10 units. c. a shortage of 20 units. d. a shortage of 40 units.

a

If the government imposes a price floor of $6 on this market, then there will be a. no surplus. b. a surplus of 20 units. c. a surplus of 30 units. d. a surplus of 40 units.

a

If trade in peaches is allowed, U.S. producers of peaches a.will be better off. b. will be worse off. c. will be unaffected. d. will experience a decrease in their collective producer surplus.

a

Panel (a) and Panel (b) each illustrate a $4 tax placed on a market. In comparison to Panel (a), Panel (b) illustrates which of the following statements? a. When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic. b. When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic. c. When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic. d. When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic.

a

Suppose the government imposes a tax of P' - P'''. The area measured by I+Y represents the a. deadweight loss due to the tax. b. loss in consumer surplus due to the tax. c. loss in producer surplus due to the tax. d. total surplus before the tax.

a

Suppose the government imposes a tax of P' - P'''. The area measured by J represents a. consumer surplus after the tax. b. consumer surplus before the tax. c. producer surplus after the tax. d. producer surplus before the tax.

a

Suppose the government imposes a tax of P' - P'''. The area measured by K+L represents a. tax revenue. b. consumer surplus before the tax. c. producer surplus after the tax. d. total surplus before the tax.

a

The Ogallala aquifer is a large underground pool of fresh water under several western states in the United States. Any farmer with land above the aquifer can at present pump water out of it. We might expect that a.over time, the aquifer is likely to be overused. b. each farmer has a sufficient incentive to conserve the water. c. state governments have an incentive to insure that their farmers do not overuse the water. d. resources would be used more efficiently if the government paid for the pumps farmers use to get the water.

a

The change in total surplus in Nicaragua because of trade is a.$625, and this is an increase in total surplus. b. $750, and this is an increase in total surplus. c. $625, and this is a decrease in total surplus. d. $750, and this is a decrease in total surplus.

a

The per-unit burden of the tax on sellers is a. $6. b. $8. c. $10. d. $14.

a

A common theme among examples of market failure is a. the good being provided harms society in some systematic way. b. some item of value does not have an owner with the legal authority to control it. c. cost-benefit analysis will show that private markets should provide the goods and services. d. government intervention decreases the social benefits.

b

Assume that your roommate is very messy. According to campus policy, you have a right to live in an uncluttered apartment. Suppose she gets an $80 benefit from being messy but imposes a $60 cost on you. The Coase theorem would suggest that an efficient solution would be for your roommate to a. stop her messy habits or else move out. b. pay you at least $60 but less than $80 to live with the clutter. c. continue to be messy and force you to move out. d. demand payment of at least $60 but no more than $80 to clean up after herself.

b

Cost-benefit analysis is important to determine the role of government in our economy because a. the government should provide all goods for which the benefits exceed the costs. b. cost-benefit analysis identifies the possible gains to society from government provision of a particular good. c. markets for private goods cannot effectively assign costs and benefits. d. cost-benefit analysis is the best tool to identify market failures.

b

If Evan, Selena, Angie, and Kris sell the good, and the resulting producer surplus is $700, then the price must have been a. $200. b. $300. c. $500. d. $700.

b

If the sellers bid against each other for the right to sell the good to a consumer, then the good will sell for a. $50 or slightly more. b. $100 or slightly less. c. $150 or slightly less. d. $200 or slightly more.

b

If the sellers bid against each other for the right to sell the good to a consumer, then the producer surplus will be a. $0 or slightly more. b.$50 or slightly less. c. $150 or slightly less. d. $200 or slightly more.

b

If trade in peaches is allowed, the United States a. will become an importer of peaches. b. will become an exporter of peaches. c. may become either an importer or an exporter of peaches, but this cannot be determined. d. will experience increases in both consumer surplus and producer surplus.

b

Suppose the government imposes a tax of P' - P'''. Total surplus after the tax is measured by the area a. I+Y. b.J+K+L+M. c. I+Y+B. d. I+J+K+L+M+Y.

b

The U.S. patent system a. makes general knowledge excludable. b. makes specific, technical knowledge excludable. c. creates a disincentive to invent. d. Both a and b are correct.

b

The effective price that sellers receive after the tax is imposed is a. $6. b. $10. c. $16. d. $24.

b

The per-unit burden of the tax on buyers is a. $6. b. $8. c. $14. d. $24.

b

The provision of a public good generates a a. positive externality, as does the use of a common resource. b.positive externality and the use of a common resource generates a negative externality c. negative externality, as does the use of a common resource. d. negative externality and the use of a common resource generates a positive externality.

b

This graph represents the tobacco industry. The industry creates a. positive externalities. b. negative externalities. c. no externalities. d. no equilibrium in the market.

b

This graph represents the tobacco industry. The socially optimal price and quantity are a. $1.90 and 38 units, respectively. b. $1.80 and 35 units, respectively. c. $1.60 and 42 units, respectively. d. $1.35 and 58 units, respectively.

b

What is the equilibrium quantity of output in the market? a. 2 units b. 3 units c. 4 units d. 5 units

b

What is the socially-optimal quantity of output in this market? a. 1 unit b. 2 units c. 3 units d. 4 units

b

When trade in coffee is allowed, producer surplus in Guatemala a. increases by the area B + D. b. increases by the area B + D + G. c. decreases by the area C + F. d. decreases by the area G.

b

Which of the following is an appropriate label for Line 2? a. social cost b. social value c. private cost d. private value

b

A city street is a. always a public good, whether or not it is congested. b. a public good when it is congested, but it is a common resource when it is not congested. c.a common resource when it is congested, but it is a public good when it is not congested. d. always a common resource, whether or not it is congested.

c

If the government imposes a price ceiling of $55 in this market, then total surplus will be a. $187.50. b. $125.00. c.$250.00. d. $266.67.

c

Panel (a) and Panel (b) each illustrate a $2 tax placed on a market. In comparison to Panel (b), Panel (a) illustrates which of the following statements? a. When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic. b. When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic. c.When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic. d. When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic.

c

Producers have little incentive to produce a public good because a. the social benefit is less than the private benefit. b. the social benefit is less than the social cost. c. there is a free-rider problem. d. there is a Tragedy of the Commons

c

Suppose the government imposes a tax of P' - P'''. The area measured by M represents a. consumer surplus after the tax. b. consumer surplus before the tax. c. producer surplus after the tax. d. producer surplus before the tax.

c

The amount of the tax per unit is a. $6. b. $8. c. $14. d. $18.

c

The parable called the Tragedy of the Commons applies to a. goods such as fire protection and cable TV. b. tornado sirens and basic research. c. clean air and clean water. d. antipoverty programs and national defense.

c

This graph represents the tobacco industry. Without any government intervention, the equilibrium price and quantity are a. $1.90 and 38 units, respectively. b. $1.80 and 35 units, respectively. c.$1.60 and 42 units, respectively. d. $1.35 and 58 units, respectively.

c

When trade in coffee is allowed, consumer surplus in Guatemala a. increases by the area B + D. b. increases by the area C + F. c.decreases by the area B + D d. decreases by the area D + G.

c

Which of the following is an appropriate label for Line 1? a. social cost minus social value b. social value minus private cost c.demand d. private cost

c

The sign on a church in your neighborhood reads "All are welcome at Sunday Service." Because the church has limited seating and is usually full, the Sunday Service is a. a private good. b. a public good. c. a club good. d. a common resource.

d

Which of the following is an appropriate label for Line 1? a. social cost b. social value c. private cost d. private value

d

Which of the following statements is not correct? a. A price ceiling set at $6 would be binding, but a price ceiling set at $12 would not be binding. b. A price floor set at $14 would be binding, but a price floor set at $8 would not be binding. c. A price ceiling set at $9 would result in a surplus. d. A price floor set at $6 would result in a shortage.

d