Econ midterm II

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Wendy is willing to pay $50 for a concert ticket and Bruce would like to receive $25. If the market price is $40 for this transaction, then the total surplus would be $15.

false

When a tax is levied on buyers, consumer surplus decreases and producer surplus remains unchanged

false

When market activity generates a negative externality, the level of output in the market equilibrium is lower than the socially optimal level.

false

a buyer is willing to buy a product at a price greater than or or equal to his willingness to pay

false

a tax on insulin is likely to cause a very large deadweight loss to society

false

consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it

false

consumer surplus measures the total benefit to society of participating in a market

false

corrective taxes cause deadweight losses, reducing economic efficiency

false

economists agree that trade ought to be restricted if free trade means that domestic jobs might be lost because of foreign competition

false

economists believe that carbon taxes create deadweight loss

false

economists believe that the optimal level of pollution is zero

false

economists feel that national security concerns never provide a legitimate rationale for trade restrictions

false

government subsidized scholarships are an example of a government policy aimed at correcting negative externalities associated with education.

false

if rosa is willing to pay $450 for hockey tickets and has consumer surplus of $175, the price of the tickets is $625

false

if the government imposes a $3 tax in a market, the equililbrium price will rise by $3

false

if the government imposes a binding price floor in a market, then the consumer surplus in that market will increase

false

if the size of a tax doubles, the deadweight loss doubles

false

if the size of a tax triples, the deadweight loss increases by a factor of six

false

if the world price of a good is greater than the domestic price in a country that can engage in international trade, then that country becomes an importer of that good

false

joel has a 1996 mustang which he sells to Susie, an avid car collector. Susie is pleased since she paid $8000 for the car but would have been willing to pay $11000 for the car. Susie's consumer surplus is $2000

false

let p represent price; let Qs represent quantity supplied; and assume the equation of the supply curve is P =10 +1/4Qs. If 80 units of the good are produced and sold,then producer surplus amounts to $1,200.

false

negative externalities lead markets to produce a smaller quantity of a good than is socially desirable, while positive externalities lead markets to produce a larger quantity of a good than is socially desirable

false

organizers of an outdoor concert in a park surrounded by residential neighborhoods are likely to consider the noise and traffic cost to residential neighborhoods when they assess the financial viability of the concert venture

false

suppose that Austrailia imposes a tariff on imported beef. If the increase in producer surplus is $100 million, the increase in tariff revenue is $200 million, and the reduction in consumer surplus is $500 million, the deadweight loss of the tariff is $300 million

false

the greater the elasticity of demand, holding elasticity of supply constant, the smaller the deadweight loss of a tax

false

the lower the price, the lower the consumer surplus, all else equal

false

the more inelastic are demand and supply, the greater is the deadweight loss of a tax

false

the tax on gasoline causes deadweight losses, as is the case with all taxes

false

to determine the optimal level of output in a market with negative externalitiies, a benevolent social planner would look for the level of output at which private cost equals private value

false

total surplus in a market can be measured as the area below the supply curve plus the area above the demand curve, up to the point of equilibrium

false

trade decisions are based on the principle of absolute advantage

false

trade raises the economic well-being of a nation in the sense that the gains of the winners exceed the losses of the losers. This statement is correct for a nation that exports manufactured goods, but it is not correct for a nation that imports manufactured goods

false

when a country allows international trade and becomes an importer of a good, domestic producers of the good are better off, and domestic consumers of the good are worse off

false

when a good is taxed, the tax revenue collected by the government equals the decrease in the welfare of buyers and sellers caused by the tax

false

when a tax is imposed on buyers, consumer surplus decreases but producer surplus increases

false

when a tax is imposed on sellers, producer surplus decreases but consumer surplus increases

false

when markets open up to international trade, we know that consumer surplus will rise

false

without free trade, the domestic price of a good must be equal to the world price of a good.

false

producer surplus is the cost of production minus the amount a seller is paid

false (what a seller would accept minus what products are worth)

We can conclude that international trade is beneficial because regardless of whether the country imports or exports a good, the overall increase in well-being outweighs the losses associated with trade

true

When a driver enters a crowded highway he increases the travel times of all other drivers on the highway. This is an example of a negative externality

true

a congestion toll imposed on a highway driver to force the driver to take into account the increase in travel time she imposes on all other drivers is an example of internalizing the externality

true

a corrective tax places a price on the right to pollute

true

buyers and sellers neglect the external effects of their actions when deciding how much to demand or supply

true

consumer surplus can be measured as the area between the demand curve and the equilibrium price

true

deadweight loss measures the decrease in total surplus that results from a tariff or quota

true

economists use the government's tax revenue to measure the public benefit from a tax

true

efficiency is related to the size of the economic pie, whereas equality is related to how the pie gets sliced and distributed

true

even if possible, it would be inefficient to prohibit all polluting activity

true

for any given quantity, the price on a demand curve represents the marginal buyer's willingness to pay

true

free markets allocate (a) the supply of goods to the buyers who value them most highly and (b) the demand for goods to the sellers who can produce them at least cost

true

free trade causes job losses in industries in which a country does not have a comparitive advantage, but it also casues job gains in industries in which the country has a comparitive advantage

true

government can be used to solve externality problems that are too costly for private parties to solve

true

if a tariff is placed on watches, the price of both domestic and imported watches will rise by the amount of the tariff

true

if the government removes a binding price ceiling in a market, then the producer surplus in that market will increase

true

if the social value of producing robots is greater than the private value of producing robots, the private market produces too few robots

true

in a competitive market, sales go to those producers who are willing to supply the product at the lowest price

true

in a market characterized by externalities, the market equilibrium fails to maximize the total benefit to society as a whole

true

in order to calculate consumer surplus in a market, we need to know willingness to pay and price

true

markets sometimes fail to allocate resources efficiciently

true

normally, noth buyers and sellers of a good become worse off when the good is taxed

true

If Belgium exports chocolate to the rest of the world, then Belgian chocolate producers benefit from higher producer surplus, Belgian chocolate consumers are worse off because of lower consumer surplus, and total surplus in Belgium increases because of the exports of chocolate.

true

suppose there is an increase in supply that reduces market price. Consumer surplus increases because (1) consumer surplus received by existing buyers increases and (2) new buyers enter the market

true

tariffs cause deadweight loss because they move the price of an imported product closer to the equilibrium without trade, thus reducing the gains from trade

true

taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade

true

the cost of production plus producer surplus is the price a seller is paid

true

the government can internalize externalities by taxing goods that have negative externalities and subsidizing goods that have positive externalities

true

the idea that tax cuts would increase the quantity of labor supplied, thus increasing tax revenue, became known as supply-side economics

true

the more elastic are supply and demand in a market, the greater are the distortions caused by a tax on that market, and the more likely it is that a tax cut in that market will raise tax revenue

true

the nation of Aviana soon will abadon its no trade policy and adopt a free trade policy. If the world price of goose meat is $3 per pound and the domestic price of goose meat without trade is $2 per pound, then Aviana should export goose meat.

true

the nation of Spritzland used to prohibit international trade, but now trade is allowed, and Spritzland is exporting wristwatches. Relative to the previous no-trade situation, total surplus in the market for wristwatches in Spritzland has increased

true

the patent system gives firms greater incentive to engage in research and other activities that advance technology

true

the social cost of pollution includes the private costs of the producers plus the costs to those bystanders adversely affected by the pollution

true

total surplus - value to buyers =costs to sellers

true

when a country that imports shoes imposes a tariff on shoes, buyers of shoes in that country become worse off and sellers of shoes in that country become better off

true

when demand increases so that market price increases, producer surplus increases because (1) producer surplus received by existing sellers increases, and (2) new sellers enter the market

true

when firms internalize a negative externality, the market supply curve shifts to the left.

true

when markets open up to international trade, we know that total surplus will rise

true

when the government imposes taxes on buyers and sellers of a good, society loses some of the benefits of market efficiency

true


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