Eco Test 2

Nick can purchase each milkshake for $2. For the first milkshake purchased Nick is willing to pay $4, for the second milkshake $3, for the third milkshake $2 and for the fourth milkshake $1. What is the value of Nick's consumer surplus for the milkshakes he buys?

$3

Stefano has just completed an original oil painting. After considering the costs for brushes, paint, canvas, and the value of Stefano's labor time, the marginal cost of the painting is $1,000. Lucky Stefano. One art lover paid him $1,500. How much producer surplus did Stefano obtain?

$500

Jane is willing to pay $4 for the first cup of coffee a day, $2.50 for the second cup, and $1 for the third cup, after which she won't buy any coffee. The price of a cup of coffee is $2.40. How many cups of coffee per day will Jane buy?

2

Marginal benefit is the benefit received from ________.

Consuming one more unit of a good or a service

A price ceiling can result in which of the following?

Inefficiency Black Markets Increased search activities

The demand and the supply for a good are each neither perfectly elastic nor perfectly inelastic. Which of the following is not correct?

Taxes levied on sellers and taxes levied on buyers are not equivalent

The government sets a price floor for corn which is above the equilibrium price of corn. As a result, ________.

a deadweight loss will be created

The imposition of tariffs on Korean steel has led to ________ in imports of Korean steel to the United States and ________ the price of steel in the United States.

a decrease; raised

Suppose the government wants to encourage people to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. As a result,

a shortage of treadmills will develop.

Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling becomes effective,

a smaller quantity of the good is bought and sold.

A price ceiling is a price

above which a seller cannot legally sell

When a sales tax is imposed on sellers, the supply curve shifts so that the vertical distance between the old and the new supply curve equals the

amount of the sales tax.

A price floor is a price

below which a seller cannot legally sell AND that creates a surplus of the good if it is set above the equilibrium price Both A and C

The demand and the supply for a good are each neither perfectly elastic nor perfectly inelastic. If a sales tax on sellers of the good is imposed, the tax is paid by

both buyers and sellers.

A tax on the buyers of personal computer external hard drives encourages

buyers to demand a smaller quantity at every price.

A country will export a good if it

can sell the good to a foreigner at a higher price than the no-trade domestic price.

The elasticity of demand for chocolate chip cookies is 0.6 and the elasticity of supply for these cookies is 1.9. If a tax is imposed on purchases of chocolate chip cookies, then the

consumers would pay more of the tax

The demand and the supply for cereal are each neither perfectly elastic nor perfectly inelastic. A tax on the buyers of cereal will increase the price of cereal paid by buyers,

decrease the effective price of cereal received by sellers, and decrease the equilibrium quantity of cereal.

The demand and the supply for a sofa are each neither perfectly elastic nor perfectly inelastic. A tax on the buyers of sofas

decreases the size of the sofa market.

A $3 tax levied on the buyers of shoes will cause the

demand curve for shoes to shift down by $3.

If the United States imposes a tariff on a good, then

domestic consumption of the good decreases.

A minimum wage set above the equilibrium wage rate is a price

floor that results in a surplus of labor

If you buy a DVD player produced in Japan, a

good was exported by Japan and imported by the United States.

A country opens up to trade and becomes an importer of a sugar. In the sugar market, consumer surplus will ________, producer surplus will ________, and total surplus will ________.

increase; decrease; increase

The value of a good is equal to the

maximum price you are willing to pay for it

The amount of a tax paid by the buyers will be smaller the

more elastic the demand and the more inelastic the supply

Producer surplus is the ________ summed over the quantity sold.

price received for a good minus its marginal cost

If a tax is imposed in a market in which demand is perfectly inelastic,

the buyers pay the entire tax.

Marginal cost is best defined as

the extra cost of producing one more unit of output

On Green Island, the demand for pencils is perfectly elastic and the supply of pencils is perfectly inelastic. If a sales tax on pencils is introduced,

the sellers pay the entire tax.

A sales tax is imposed on the sellers of gasoline. This tax shifts

the supply of gasoline curve leftward.

If a price ceiling is not binding, then

there will be no effect on the market price or quantity sold.

Most t-shirts bought by Americans are made in Asia. U.S. consumers of t-shirts buy these t-shirts because

they pay a lower price for t-shirts made in Asia than they would for similar shirts made in the United States.

Consumer surplus is the

value of a good minus the price paid for it summed over the quantity bought