Econ homework 5

If a price floor is not binding, then

the equilibrium price is above the price floor

The imposition of a binding price ceiling on a market causes

quantity demanded to be greater than quantity supplied

Refer to Figure 7-9. At equilibrium, consumer surplus is represented by the area

A+B+C

Refer to Table 7-4. The market quantity of oranges demanded per day is exactly seven if the price of an orange, P, satisfies

$0.25 < P < $0.60

Dallas buys strawberries, and he would be willing to pay more than he now pays. Suppose that Dallas has a change in his tastes such that he values strawberries more than before. If the market price is the same as before, then

Dallas's consumer surplus would increase

Which of the following is true when the price of a good or service rises?

Some buyers exit the market.

Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will increase the price paid by buyers of picture frames by

between $0.50 and $1

Refer to Figure 6-3. A government-imposed price of $24 in this market is an example of a

binding price floor that creates a surplus

A legal minimum on the price at which a good can be sold is called a

price floor

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

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

Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, producer surplus will be

$18

Refer to Table 7-3. If you have two (essentially) identical tickets that you sell to the group in an auction, assuming that each person can only buy one ticket, which of the following is closest to the selling price for each ticket?

$26

At Nick's Bakery, the cost to make a cheese danish is $1.50 per danish. As a result of selling 10 danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his danishes for

$3.50 each

Refer to Figure 7-5. If the supply curve is S', the demand curve is D, and the equilibrium price is $150, what is the producer surplus?

$625

Refer to Figure 6-7. Which of the following statements is notcorrect?

. A government-imposed price of $10 would be a binding price ceiling if market demand is either Demand A or Demand B.

Refer to Figure 7-9. If the price were P3, consumer surplus would be represented by the are

. A.

Refer to Table 6-1. How many units of the good are purchased after the imposition of the price floor?

5

Kristi and Rebecca sell lemonade on the corner for $0.50 per cup. It costs them $0.10 to make each cup. On a certain day, their producer surplus is $20. How many cups did Kristi and Rebecca sell?

50

A tax on the buyers of cameras encourages

buyers to demand a smaller quantity at every price

Justin builds fences for a living. Justin's out-of-pocket expenses (for wood, paint, etc.) plus the value that he places on his own time amount to his

cost of building fences

Refer to Figure 6-8 . When the price ceiling is enforced in this market, and the supply curve for gasoline shifts from S 1 to S 2 , the resulting quantity of gasoline that is bought and sold is

less than Q3

When a tax is placed on the sellers of a product, buyers pay

more, and sellers receive less than they did before the tax

A demand curve reflects each of the following except the

quantity that each buyer will ultimately purchase

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is

zero

Which of the following is not a result of rent control?

Higher quality housing

Suppose buyers of fountain drinks are required to send $0.50 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 $0.20 per drink. Which of the following statements is correct?

This tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quantity.

Refer to Figure 6-5. Which of the following statements is not correct?

When the price is $6, there is a surplus of 8 units

Refer to Figure 6-8 . When the price ceiling is enforced in this market and the supply curve for gasoline shifts from S 1 to S 2 ,

a shortage will occur at the new market price of P2

Refer to Table 7-1. If the price of the product is $110, then who would be willing to purchase the product?

Calvin, Sam, and Andrew

You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field. Assume the ticket has no resale value. Willie Nelson is performing on the same night, and his concert is your next-best alternative activity. Tickets to see Willie Nelson cost $40. On any given day, you would be willing to pay up to $50 to see and hear Willie Nelson perform. Assume there are no other costs of seeing either event. Based on this information, at a minimum, how much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game?

$10

Refer to Figure 7-4 . Which area represents producer surplus when the price is P 1 ?

BCG

Refer to Figure 6-11. Suppose a tax of $2 per unit is imposed on this market. How much will buyers pay per unit after the tax is imposed?

Between $5 and $7

Refer to Figure 6-11. Suppose a tax of $2 per unit is imposed on this market. What will be the new equilibrium quantity in this market?

Between 60 units and 100 units

Refer to Figure 7-9. At equilibrium, producer surplus is represented by the area

D+H+F

The distinction between efficiency and equality can be described as follows:

Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society

A surplus results when a

binding price floor is imposed on a market

To say that a price ceiling is nonbinding is to say that the price ceiling

is set above the equilibrium price

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it

maximizes the combined welfare of buyers and sellers

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

may increase, decrease, or remain unchanged

Producer surplus directly measures

the well-being of sellers