econ test 2!

new buyers enter the market, increasing consumer surplus.

As a result of a decrease in price,

not change, and the price received by sellers will not change.

If the government removes a $1 tax on sellers of gasoline and imposes the same $1 tax on buyers of gasoline, then the price paid by buyers will

not change, and the price received by sellers will not change

If the government removes a $2 tax on buyers of cigars and imposes the same $2 tax on sellers of cigars, then the price paid by buyers will

decrease, and the price received by sellers will increase.

If the government removes a tax on a good, then the price paid by buyers will

has a large deadweight loss.

If the labor supply curve is very elastic, a tax on labor

$2 for buyers and $6 for sellers.

Refer to Figure 6-26. The per-unit burden of the tax is

20 units

Refer to Figure 6-28. Suppose a tax of $6 per unit is imposed on this market. What will be the new equilibrium quantity in this market?

panel (a)

Refer to Figure 6-30. In which market will the majority of the tax burden fall on sellers?

panel (c)

Refer to Figure 6-30. In which market will the tax burden be most equally divided between buyers and sellers?

$400

Refer to Figure 7-14. At the equilibrium price, producer surplus is

A+B

Refer to Figure 7-15. When the price rises from P1 to P2, what area represents the increase in producer surplus?

$250

Refer to Figure 7-19. At the equilibrium price, total surplus is

total surplus

Refer to Figure 7-21. When the price is P1, area B+C represents

$1,800

Refer to Figure 7-26. At the equilibrium price, total surplus is

BCGD

Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers?

ABC

Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to new buyers entering the market?

$2,500

Refer to Figure 7-7. What is the consumer surplus if the price is $100?

$25

Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The amount of deadweight loss resulting from this tax is

positive externality, and too few resources are devoted to research as a result.

Research into new technologies provides a

increase, and producer surplus in the industry will increase.

Suppose consumer income increases. If grass seed is a normal good, the equilibrium price of grass seed will

cause marginal buyers and marginal sellers to leave the market, causing the quantity sold to fall. prevent buyers and sellers from realizing some of the gains from trade. reduce the sum of producer and consumer surpluses by more than the amount of tax revenue.

Taxes cause deadweight losses because taxes

price floor

The minimum wage is an example of a

value to buyers - costs of sellers

Total surplus in a market is equal to

buyers of tea and sellers of tea both are made worse off.

When a tax is levied on buyers of tea,

increase

When there is a technological advance in the pork industry, consumer surplus in that market will

people can be prevented from using it.

A good is excludable if

below the equilibrium price, causing a shortage

A price ceiling is binding when it is set

effective price received by sellers and lower the equilibrium quantity.

A tax imposed on the buyers of a good will lower the

$8

Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book?

Value to buyers - Amount paid by buyers

Consumer surplus is equal to the

decline in total surplus that results from a tax.

Deadweight loss is the

A price floor set at $6.50 would result in a surplus.

Figure 6-13This figure shows the market demand and market supply curves for good X. Refer to Figure 6-13. Which of the following statements is correct?

the market-based solution raises revenue for the government. the market-based solution can result in a greater reduction in pollution. the market-based solution is less costly to society.

Most economists prefer corrective taxes to regulation as a way to correct the problem of pollution because

makes it necessary for sellers to ration the good

Refer to Figure 6-2. The price ceiling

$3

Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The per-unit burden of the tax on sellers is

$10, and total surplus with the tax is $7.50.

Refer to Figure 8-2. Total surplus without the tax is

Calvin and Sam

Refer to Table 7-1. If the price of the product is $130, then who would be willing to purchase the product?

any possible increase in producer surplus would be smaller than the loss of consumer surplus.

Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6,

both existing sellers who now receive higher prices on the pizzas they were already selling and new sellers who enter the market because of the higher prices.

Suppose that the market price for pizzas increases. The increase in producer surplus comes from the benefit of the higher prices to

$8

The vertical distance between points A and B represents the tax in the market. Refer to Figure 6-18. The per-unit burden of the tax on buyers is

falls more heavily on the side of the market that is less elastic.

Which of the following is correct? A tax burden

Elephants are a common resource, whereas cows are privately owned.

Why has the value of ivory threatened the extinction of the elephant, whereas the value of beef has enhanced the survival of the cow?

private parties can bargain with sufficiently low transaction costs.

According to the Coase theorem, private markets will solve externality problems and allocate resources efficiently as long as

a strong incentive to kill as many elephants as he can find

Because elephants roam freely in many countries in Africa, each individual African elephant poacher has

$550

Bill created a new software program he is willing to sell for $300. He sells his first copy and enjoys a producer surplus of $250. What is the price paid for the software?

total surplus

Economists typically measure efficiency using

a common resource problem

Four roommates share an off-campus house and equally share the cost of rent. Everyone says that she values a clean house, yet the house is usually dirty. To an economist, a clean house in this case represents

less than $220

Gretchen is a writer who works from her home. Gretchen lives next door to Randall, the trumpet player for a local band. Randall needs lots of practice to earn his share of the band's profit, which will amount to $350. Gretchen gets distracted by Randall's trumpet playing but she needs to get her writing done to earn $570 for her current article. If Randall owns the right to play his music and Gretchen needs to hire a lawyer to help her reach an agreement with Randall, then what price is Gretchen willing to pay the lawyer?

T x Q

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as

shift up

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

property rights are not well established for clean air.

Markets do not ensure that the air we breathe is clean because

below the price and above the supply curve

Producer surplus is the area

$2,000

Refer to Figure 10-13. If the government imposed a corrective tax that successfully moved the market from the market equilibrium to the social optimum, then tax revenue for the government would amount to

An amount equal to the external cost.

Refer to Figure 10-17. How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome?

the same amount of tax revenue for the government.

Refer to Figure 6-21. Suppose buyers, rather than sellers, were required to pay this tax (in the same amount per unit as shown in the graph). Relative to the tax on sellers, the tax on buyers would result in

$12.00.

Refer to Figure 6-21. The price that buyers pay after the tax is imposed is

$3

Refer to Figure 6-25. The amount of the tax per unit is

$4.50

Refer to Table 7-2. If the market price is $5.50, the consumer surplus in the market will be

The equilibrium quantity is less than the socially optimal quantity.

Suppose that flu shots create a positive externality equal to $8 per shot. Further suppose that the government offers a $6-per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?

common goods

The Mansfield Public Library has a large number of books that anyone with a library card may borrow. Anyone can obtain a card for free. Because the number of copies of each book is limited, not everyone can have the same book at the same time. What type of good would the library books be classified as in this case?

The aquifer is a common resource which will be overused if no one owns it.

The Ogallala aquifer is a large underground pool of fresh water under several western states in the United States. Any farmer with land above the aquifer can at present pump water out of it. Which of the following statements about the aquifer is correct?

chicken wings than in the market for razor blades because the quantity of chicken wings would fall by more than the quantity of razor blades.

The demand for chicken wings is more elastic than the demand for razor blades. Suppose the government levies an equivalent tax on chicken wings and razor blades. The deadweight loss would be larger in the market for

buyers of salt and the sellers of caviar.

The demand for salt is inelastic, and the supply of salt is elastic. The demand for caviar is elastic, and the supply of caviar is inelastic. Suppose that a tax of $1 per pound is levied on the sellers of salt, and a tax of $1 per pound is levied on the buyers of caviar. We would expect that most of the burden of these taxes will fall on

demand for labor and supply of labor are equally elastic.

The mayor of Workerville proposes a local payroll tax to fund a new water park for the city. The mayor proposes to collect half the tax from workers and half the tax from firms. The mayor will be able to successfully divide the burden of the tax equally if the

$6

The vertical distance between points A and B represents the tax in the market. Refer to Figure 6-18. The per-unit burden of the tax on sellers is