Micro Test 2

Consumer surplus is a. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. b. the amount a buyer is willing to pay for a good minus the cost of producing the good. c. the amount by which the quantity supplied of a good exceeds the quantity demanded of the good. d. a buyer's willingness to pay for a good plus the price of the good.

a. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

23. Refer to (test 2) Figure 9-6. With trade and without a tariff, a. the domestic price is equal to the world pce. b. carnations are sold at $8 in this market. c. there is a shortage of 400 carnations in this market. d. this country imports 200 carnations.

a. the domestic price is equal to the world price.

25. Refer to (test 2) Figure 9-6. The amount of deadweight loss caused by the tariff equals a. $100. b. $200. c. $400. d. $500.

b. $200.

8. Refer to (test 2) Figure 8-6. When the tax is imposed in this market, sellers effectively pay what amount of the $10 tax? a. $0 b. $4 c. $6 d. $10

b. $4

26. Refer to (test 2) Figure 9-6. The amount of revenue collected by the government from the tariff is a. $200. b. $400. c. $500. d. $600.

b. $400.

A tax on an imported good is called a a. quota. b. tariff. c. supply tax. d. trade tax.

b. tariff.

35. Refer to (test 2) Figure 8-19. The curve that is shown on the figure is called the a. deadweight-loss curve. b. tax-incidence curve. c. Laffer curve. d. Lorenz curve.

c. Laffer curve.

12. Refer to (test 2) Figure 8-6. What happens to total surplus in this market when the tax is imposed? a. Total surplus increases by $1,500. b. Total surplus increases by $3,000. c. Total surplus decreases by $1,500. d. Total surplus decreases by $,3000.

c. Total surplus decreases by $1,500.

The term tax incidence refers to a. whether buyers or sellers of a good are required to send tax payments to the government. b. whether the demand curve or the supply curve shifts when the tax is imposed. c. the distribution of the tax burden between buyers and sellers. d. widespread view that taxes (and death) are the only certainties in life.

c. the distribution of the tax burden between buyers and sellers.

We can say that the allocation of resources is efficient if a. producer surplus is maximized. b. consumer surplus is maximized. c. total surplus is maximized. d. sellers' costs are minimized.

c. total surplus is maximized.

For a small country called Boxland, the equation of the domestic demand curve for cardboard is Q(d)= 200-2P, where Q(d) represents the domestic quantity of cardboard demanded, in tons, and P represents the price of a ton of cardboard. • For Boxland, the equation of the domestic supply curve for cardboard is Q(s)= -60+3P, where Q(s) represents the domestic quantity of cardboard supplied, in tons, and P again represents the price of a ton of cardboard. Q: How much Dead Weight Loss does the tariff create? a. None, Boxland is an exporter of cardboard. b. $150 c. $100 d. $250

d. $250

9. Refer to (test 2) Figure 8-6. When the government imposes the tax in this market, tax revenue is a. $600. b. $900. c. $1,500. d. $3,000

d. $3,000

A binding price ceiling (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price. a. (ii) only b. (iv) only c. (i) and (iii) only d. (ii) and (iv) only

d. (ii) and (iv) only

For a small country called Boxland, the equation of the domestic demand curve for cardboard is Q(d)= 200-2P, where Q(d) represents the domestic quantity of cardboard demanded, in tons, and P represents the price of a ton of cardboard. • For Boxland, the equation of the domestic supply curve for cardboard is Q(s)= -60+3P, where Q(s) represents the domestic quantity of cardboard supplied, in tons, and P again represents the price of a ton of cardboard. Q: Assume that Boxland producers successfully lobby for a $10 tariff on cardboard. In that event: a. Boxland will export 60 tons of cardboard b. Boxland will export 120 tons of cardboard c. Boxland will import 180 tons of cardboard d. Boxland will import 60 tons of cardboard

d. Boxland will import 60 tons of cardboard

A legal minimum on the price at which a good can be sold is called a price a. subsidy. b. floor. c. support. d. ceiling.

b. floor.

29. Refer to (test 2) Figure 9-2. If this country chooses to trade, the price of baskets in this country will be a. $10 and 40 baskets will be sold domestically. b. $10 and 105 baskets will be sold domestically. c. $7 and 70 baskets will be sold domestically. d. $7 and 40 baskets will be sold domestically.

a. $10 and 40 baskets will be sold domestically.

21. Refer to (test 2) Figure 9-6. Without trade, the equilibrium price of carnations is a. $8 and the equilibrium quantity is 300. b. $6 and the equilibrium quantity is 200. c. $6 and the equilibrium quantity is 400. d. $4 and the equilibrium quantity is 500.

a. $8 and the equilibrium quantity is 300.

Price..Qty D....Qty S $0......12.........0 $1..... 10........ 2 $2.......8..........4 $3.......6..........6 $4.......4..........8 $5.......2..........10 $6.......0..........12 Suppose the government imposes a price floor of $1 on this market. What will be the size of the surplus in this market? a. 0 units b. 2 units c. 8 units d. 10 units

a. 0 units

43. Refer to (test 2) Figure 6-7. For a price ceiling to be binding in this market, it would have to be set at a. any price below $6. b. a price between $3 and $6. c. a price between $6 and $9. d. any price above $6.

a. any price below $6.

The size of the deadweight loss generated from a tax is affected by the a. elasticities of both supply and demand. b. elasticity of demand only. c. elasticity of supply only. d. total revenue collected by the government.

a. elasticities of both supply and demand.

42. Refer to (test 2) Figure 6-25. In which market will the majority of the tax burden fall on sellers? a. market (a) b. market (b) c. market (c) d. All of the above are correct.

a. market (a)

The following table represents the costs of five possible sellers. Seller.........................Cost Abby.......................$1,500 Bobby.....................$1,200 Carlos.....................$1,000 Dianne.....................$750 Evalina....................$500 If the market price is $1,000, the producer surplus in the market is a. $700. b. $750. c. $2,250. d. $3,700.

b. $750.

How is the burden of a tax divided? (i) When the tax is levied on the sellers, the sellers bear a higher proportion of the tax burden. (ii) When the tax is levied on the buyers, the buyers bear a higher proportion of the tax burden. (iii) Regardless of whether the tax is levied on the buyers or the sellers, the buyers and sellers bear an equal proportion of the tax burden. (iv) Regardless of whether the tax is levied on the buyers or the sellers, the buyers and sellers bear some proportion of the tax burden. a. (i) and (ii) only b. (iv) only c. (i), (ii), and (iii) only d. (i), (ii), and (iv) only

b. (iv) only

40. Refer to (test 2) Figure 7-8. Which area represents producer surplus when the price is P2? a. BCG b. ACH c. ABGD d. AHGB

b. ACH

For a small country called Boxland, the equation of the domestic demand curve for cardboard is Q(d)= 200-2P, where Q(d) represents the domestic quantity of cardboard demanded, in tons, and P represents the price of a ton of cardboard. • For Boxland, the equation of the domestic supply curve for cardboard is Q(s)= -60+3P, where Q(s) represents the domestic quantity of cardboard supplied, in tons, and P again represents the price of a ton of cardboard. Q:Assume the world price of cardboard is $30. a. Boxland will export 110 tons of cardboard b. Boxland will import 110 tons of cardboard c. Boxland will export 30 tons of cardboard d. Boxland will import 140 tons of cardboard

b. Boxland will import 110 tons of cardboard

11. Refer to (test 2) Figure 8-6. What happens to consumer surplus when the tax is imposed in this market? a. Consumer surplus falls by $3,600. b. Consumer surplus falls by $2,700. c. Consumer surplus falls by $1,800. d. Consumer surplus falls by $900.

b. Consumer surplus falls by $2,700.

Suppose England exports cars to Australia and imports cheese from Mexico. This situation suggests that a. England has a comparative advantage relative to Mexico in producing cheese, and Australia has a comparative advantage relative to England in producing cars. b. England has a comparative advantage relative to Australia in producing cars, and Mexico has a comparative advantage relative to England in producing cheese. c. England has an absolute advantage relative to Mexico in producing cheese, and Australia has an absolute advantage relative to England in producing cars. d. England has an absolute advantage relative to Australia in producing cars, and Mexico has an absolute advantage relative to England in producing cheese.

b. England has a comparative advantage relative to Australia in producing cars, and Mexico has a comparative advantage relative to England in producing cheese.

On a graph, consumer surplus is represented by the area a. between the demand and supply curves. b. below the demand curve and above price. c. below the price and above the supply curve. d. below the demand curve and to the right of equilibrium price.

b. below the demand curve and above price.

22. Refer to (test 2) Figure 9-6. Before the tariff is imposed, this country a. imports 200 carnations. b. imports 400 carnations. c. exports 200 carnations. d. exports 400 carnations.

b. imports 400 carnations.

The deadweight loss from a tax of $5 per unit will be smallest in a market with a. inelastic supply and elastic demand. b. inelastic supply and inelastic demand. c. elastic supply and elastic demand. d. elastic supply and inelastic demand.

b. inelastic supply and inelastic demand.

Rent control a. serves as an example of how a social problem can be alleviated or even solved by government policies. b. serves as an example of a price ceiling. c. is regarded by most economists as an efficient way of helping the poor. d. is the most efficient way to allocate scarce housing resources.

b. serves as an example of a price ceiling.

17. Refer to (test 2) Figure 8-12 Which of the following combinations will maximize the deadweight loss from a tax? a. supply 1 and demand 1 b. supply 2 and demand 2 c. supply 1 and demand 2 d. supply 2 and demand 1

b. supply 2 and demand 2

10. Refer to (test 2) Figure8-6. The tax results in a deadweight loss that amounts to a. $600. b. $900. c. $1,500. d. $1,800.

c. $1,500.

Buyer...Willingness To Pay Lori.........$50.00 Audrey....$30.00 Zach........$20.00 Calvin .....$10.00 Refer to Table. If the price of the product is $18, then the total consumer surplus is a. $38. b. $42. c. $46. d. $72.

c. $46.

For a small country called Boxland, the equation of the domestic demand curve for cardboard is Q(d)= 200-2P, where Q(d) represents the domestic quantity of cardboard demanded, in tons, and P represents the price of a ton of cardboard. • For Boxland, the equation of the domestic supply curve for cardboard is Q(s)= -60+3P, where Q(s) represents the domestic quantity of cardboard supplied, in tons, and P again represents the price of a ton of cardboard. Q: If Boxland prohibits international trade in cardboard, then the equilibrium price of a ton of cardboard is... a. $36 and the equilibrium quantity of cardboard is 74 tons. b. $44 and the equilibrium quantity of cardboard is 88 tons. c. $52 and the equilibrium quantity of cardboard is 96 tons. d. $60 and the equilibrium quantity of cardboard is 100 tons.

c. $52 and the equilibrium quantity of cardboard is 96 tons.

20. Refer to (test 2) Figure 7-3. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers? a. ABD b. ACG c. BCFD d. DFG

c. BCFD

41. Refer to (test 2) Figure 7-8. Which area represents the increase in producer surplus when the price rises from P1 to P2 due to new producers entering the market? a. BCG b. ACH c. DGH d. AHGB

c. DGH

Trade among nations is ultimately based on a. absolute advantage. b. strategic advantage. c. comparative advantage. d. technical advantage.

c. comparative advantage.

The decrease in total surplus that results from a market distortion, such as a tax, is called a a. wedge loss. b. revenue loss. c. deadweight loss. d. consumer surplus loss.

c. deadweight loss.

34. Refer to (test 2) Figure 8-19 If the economy is at point B on the curve, then a small decrease in the tax rate will a. increase the deadweight loss of the tax and increase tax revenue. b. increase the deadweight loss of the tax and decrease tax revenue. c. decrease the deadweight loss of the tax and increase tax revenue. d. decrease the deadweight loss of the tax and decrease tax revenue.

c. decrease the deadweight loss of the tax and increase tax revenue.

24. Refer to (test 2) Figure 9-6. The imposition of a tariff on carnations a. increases the number of carnations imported by 100. b. increases the number of carnations imported by 200. c. decreases the number of carnations imported by 200. d. decreases the number of carnations imported by 400.

c. decreases the number of carnations imported by 200.

If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would a. increase by more than $1,000. b. increase by exactly $1,000. c. increase by less than $1,000. d. decrease by an indeterminate amount.

c. increase by less than $1,000.

48. Refer to (test 2) Figure 6-3. a. both panel (a) and panel (b). b. panel (a) only. c. panel (b) only. d. neither panel (a) nor panel (b).

c. panel (b) only.

Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the a. tax is placed on the sellers of the product. b. tax is placed on the buyers of the product. c. supply of the product is more elastic than the demand for the product. d. demand for the product is more elastic than the supply of the product.

c. supply of the product is more elastic than the demand for the product.

For a small country called Boxland, the equation of the domestic demand curve for cardboard is Q(d)= 200-2P, where Q(d) represents the domestic quantity of cardboard demanded, in tons, and P represents the price of a ton of cardboard. • For Boxland, the equation of the domestic supply curve for cardboard is Q(s)= -60+3P, where Q(s) represents the domestic quantity of cardboard supplied, in tons, and P again represents the price of a ton of cardboard. Q: How much tax revenue does the tariff generate for Boxland? a. None, the tariff has no impact since Boxland is an exporter of a. cardboard b. $10 c. $1100 d. $600

d. $600

Total surplus a. can be used to measure a market's efficiency. b. is the sum of consumer and producer surplus. c. is the to value to buyers minus the cost to sellers. d. All of the above are correct.

d. All of the above are correct.

When a tax is placed on the buyers of lemonade, the a. sellers bear the entire burden of the tax. b. buyers bear the entire burden of the tax. c. burden of the tax will be always be equally divided between the buyers and the sellers. d. burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal.

d. burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal.

30. Refer to (test 2) Figure 9-2. With free trade, this country will a. import 40 baskets. b. import 70 baskets. c. export 35 baskets. d. export 65 baskets.

d. export 65 baskets.

When a tax is levied on a good, the buyers and sellers of the good share the burden, a. provided the tax is levied on the sellers. b. provided the tax is levied on the buyers. c. provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers. d. regardless of how the tax is levied.

d. regardless of how the tax is levied.

The price of a good that prevails in a world market is called the a. absolute price. b. relative price. c. comparative price. d. world price.

d. world price.