Worksheet problems for ch. 5, 6, 7
Refer to Figure 6-10. The amount of the tax per unit is
$14
If the price is $17, then consumer surplus in the market is
$15, and Alexa, Erica, and Chen purchase the good.
The price that buyers pay after the tax is imposed is
$24
At the equilibrium price, consumer surplus is
$2400
Following the imposition of a price floor $2 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is
$3
The equilibrium market price for 10 piano lessons is $400. What is the total producer surplus in the market?
$400
If a 30 percent change in price results in a 39 percent change in quantity supplied, then the price elasticity of supply is about
0.77 and supply is elastic
When the price rises from P1 to P2, which area represents the increase in producer surplus due to new producers entering the market
DGH
When the price is P2, producer surplus is:
A+B+C.
What does the area below the price and above the supply curve represent?
Total producer surplus
The price elasticity of demand measures
buyers' responsiveness to a change in the price of a good.
The presence of a price control in a market for a good or service usually is an indication that
policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.
Which of the following statements is not correct?
When the price is $6, there is a surplus of 8 units.
A price ceiling is
a legal maximum on the price at which a good can be sold.
A price floor is
a legal minimum on the price at which a good can be sold.
Refer to Figure 6-3. A government-imposed price of $6 in this market is an example of a
binding price floor that creates a surplus.
When the price is P1, consumer surplus is
A+B+C
Which of the following could be the price elasticity of demand for a good for which an increase in price would decrease total revenue?
1.5
If a 5 percent increase in price for a good results in a 10 percent decrease in quantity demanded, the price elasticity of demand is
2.00
If the price elasticity of supply is 1.2, and a price increase led to a 4.5 percent increase in quantity supplied, then the price increase is about
3.75
Refer to Figure 5-6. Along which of these segments of the supply curve is supply most elastic?
AB
If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the
Consumer does not purchase the good
If the price of the product is $110, then who would be willing to purchase the product?
John, Sam, and Andrew
Which of the following events would increase producer surplus?
Sellers' costs stay the same and the price of the good increases.
What does the sum of the consumer surplus of all buyers in the market represent?
The total benefit that buyers derive from the market
Suppose buyers of fountain drinks are required to send $1.10 to the government for every fountain drink they buy. Further, suppose this tax causes the effective price received by sellers of fountain drinks to fall by $0.55 per fountain drink. Which of the following statements is correct?
This tax causes the demand curve for fountain drinks to shift downward by $1.10 at each quantity.
When a tax is placed on the sellers of drones, the size of the drone market
and the effective price received by sellers both decrease.
Demand is said to be price elastic if:
buyers respond substantially to changes in the price of the good
In this market, a minimum wage of $6 is
binding and creates unemployment.
Suppose that the price falls from P2 to P1. Area C represents the
consumer surplus to new consumers who enter the market when the price falls.
The supply of pickles is inelastic, and the supply of rice is elastic. Both goods are considered to be normal goods by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10 percent.
decrease in both the pickle and rice markets
If the government imposes a binding price ceiling on a market, then the price paid by buyers will
decrease, and the quantity sold in the market will decrease.
If the government removes a binding price floor from a market, then the price paid by buyers will
decrease, and the quantity sold in the market will increase.
When the price falls from P2 to P1, producer surplus
decreases by an amount equal to A+B.
Refer to Figure 6-2. The price ceiling causes quantity
demanded to exceed quantity supplied by 150 units.
Refer to Figure 6-1. A binding price ceiling is shown in
in graph B only
Refer to Figure 5-5. If the price decreased from $36 to $12, total revenue would
increase by $4,800, and demand is elastic between points X and Z.
The price ceiling
makes it necessary for sellers to ration the good using a mechanism other than price.
Goods with many close substitutes tend to have
more elastic demands
To say that a price ceiling is binding is to say that the price ceiling
set below equilibrium price
Suppose there is currently a tax of $80 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $80 per ticket to $64 per ticket, then the
supply curve will shift downward by $16, and the effective price received by sellers will increase by less than $16.
Suppose the government imposes a 20-cent tax on the sellers of artificially sweetened beverages. The tax would shift:
supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially sweetened beverages.
If the price of almonds rises, many people will switch from consuming almonds to consuming pecans. But if the price of salt rises, people will have difficulty purchasing something to use in its place. These examples illustrate the importance of:
the availability of close substitutes in determining the price elasticity of demand
The term tax incidence refers to
the distribution of the tax burden between buyers and sellers
Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the
the flatter the demand curve will be
Area A represents
the increase in producer surplus to those producers already in the market when the price increases from P1 to P2.
Demand is said to be inelastic if
the quantity demanded changes only slightly when the price of the good changes.
The price elasticity of supply measures how much
the quantity supplied responds to changes in the price of the good
Producer surplus directly measures
the well-being of sellers.