ECON 202 EXAM 2 (CH 7-11) not 9

supply curve for chocolate bars to shift up by $0.10.

A $0.10 tax levied on the sellers of chocolate bars will cause the

True

A binding minimum wage creates a surplus of labor?

binding price ceiling is imposed on a market

A shortage results when a

False

All else equal, a decrease in demand will cause an increase in producer surplus T/F

$175

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is

the equilibrium price of good x is somewhere between $35 and $40 the equilibrium quantity of good x exceeds 500 units 500 units is not an efficient quantity of good x

Five hundred units of good x are currently bought and sold. The marginal buyer is willing to pay $40 for the 500th unit, and the cost to the marginal seller is $35 for the 500th unit. We know that

True

If producing a soccer ball costs Jake $5, and he sells it for $40, his producer surplus is $35 T/F

False

If the equilibrium price of an airline ticket is $500 and the government imposes a price floor of $400 on airline tickets, then fewer airline tickets will be sold than at the market equilibrium T/F

decrease by less than $0.25.

If the government levies a $0.25 tax per MP3 music file downloaded on buyers of MP3 music files, then the price received by sellers of MP3 music files would

False

If the size of a tax doubles, the deadweight loss doubles T/F

False

Regardless of whether a tax is levied on sellers or buyers, taxes encourage market activity.

decrease and the quantity of gasoline supplied to decrease

Relative to a situation in which gasoline is not taxed, the imposition of a tax on gasoline causes the quantity of gasoline demanded to

$3

Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28 . If Karla hires Roland to mow her lawn, Karla's consumer surplus is

epends on the elasticities of supply and demand.

Tax incidence

False

The lower the price, the lower the consumer surplus, all else equal T/F

value to buyers - costs of sellers

Total surplus in a market is equal to

equilibrium quantity of the good always decreases

When a tax is imposed on a good, the

False

When a tax is imposed on sellers, producer surplus decreases but consumer surplus increase T/F

tax creates a wedge between the price buyers effectively pay and the price sellers receive.

When a tax is levied on buyers, the

and the effective price received by sellers both decrease

When a tax is placed on the sellers of cell phones, the size of the cell phone market

the imposition of a binding price ceiling in the market

Which of the following will cause a decrease in producer surplus?

the value of MP3 players to consumers has increased, and the cost of producing MP3 players has decreased.

A simultaneous increase in both the demand for MP3 players and the supply of MP3 players would imply that

lower rent and lower quality housing

A tax on buyers usually causes buyers to pay more for the good and sellers to receive less for the good than they did before the tax was levied.

False

A tax raises the price received by sellers and lowers the price paid by buyers T/F

South American cocoa bean producers refuse to ship to chocolate producers in the US.

​Consider the US market for chocolate, a market in which the government has imposed a price ceiling. Which of the following events could convert the price ceiling from a nonbinding to a binding price ceiling?

$350

Bill created a new software program he is willing to sell for $200. He sells his first copy and enjoys a producer surplus of $150. What is the price paid for the software?

$500

Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is

True

Consumer surplus measures the benefit to buyers of participating in a market T/F

$25

Diana is a personal trainer whose client Charles pays $80 per hour-long session. Charles values this service at $100 per hour, while the opportunity cost of Diana's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. Before the tax, what is the total surplus?

U.S. government regulations pertaining to the price of gasoline.

Economists blame the long lines at gasoline stations in the U.S. in the 1970s on

True

Economists use the government's tax revenue to measure the public benefit from a tax T/F

True

If a good or service is sold in a competitive market free of government regulation, then the price of the good or service adjusts to balance supply and demand.

not shift

If a tax is levied on the buyers of a product, then the supply curve will

buyers and sellers will share the burden of the tax

If a tax is levied on the buyers of flour, then?

buyers and sellers will share the burden of the tax.

If a tax is levied on the sellers of flour, then

any price above $7

In a competitive market, the equilibrium price is 7. For a price floor to be binding in this market, it would have to be set at

not being produced by the lowest-cost producers. being consumed by buyers who value it most highly.

Inefficiency exists in a market when a good is

$14

Kelly is willing to pay $5.20 for a gallon of gasoline. The price of gasoline at her local gas station is $3.80. If she purchases ten gallons of gasoline, then Kelly's consumer surplus is

He fears that rent control will eliminate the incentive to maintain buildings, leading to a deterioration of the city.

One economist has argued that rent control is "the best way to destroy a city, other than bombing." Why would an economist say this?

when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

Price controls are usually enacted?

True

Price floors are typically imposed to benefit sellers

True

Producer surplus is the amount a seller is paid minus the cost of production T/F

False

Since a tax imposed on buyers of a product only affects demand, such a tax has no impact on sellers in that market. T/F

Brent's consumer surplus is the smallest of the three individual consumer surpluses

Suppose Brent, Callie, and Danielle each purchase a particular type of electric pencil sharpener at a price of $20. Brent's willingness to pay was $22, Callie's willingness to pay was $25, and Danielle's willingness to pay was $30. Which of the following statements is correct?

willingness to pay

Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called

$250

Suppose a tax of $5 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units. The tax decreases consumer surplus by $450 and decreases producer surplus by $300. The deadweight loss from the tax is

True

Taxes create deadweight losses T/F

False

The area below the demand curve and above the supply curve measures the producer surplus in a market. T/F

True

The cost of production plus producer surplus is the price a seller is paid T/F

maximizes the combined welfare of buyers and sellers

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it

The market equilibrium price for televisions maximizes the total welfare of television buyers and sellers.

Welfare economics explains which of the following in the market for televisions?

supply curve shifts upward by the amount of the tax.

When a tax is levied on the sellers of a good, the

rises, and the price received by sellers falls

When a tax is placed on a product, the price paid by buyer

True

When markets fail, public policy can potentially remedy the problem and increase economic efficiency T/F

obscure the signals that normally guide the allocation of society's resources.

When policymakers set prices by legal decree, they

may increase, decrease, or remain unchanged

When the demand for a good increases and the supply of the good remains unchanged, consumer surplus

Sellers' costs stay the same and the price of the good increases

Which of the following events would increase producer surplus?

True

Who bears the majority of a tax burden depends on the relative elasticity of supply and demand.