Exam 2
Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $250. His consumer surplus is
$150
The numbers reveal the opportunity costs of providing 10 piano lessons of equal quality Seller Cost Marcia $200 Jan $250 Cindy $350 Greg $400 Peter $700 Bobby $800 The equilibrium market price for 10 piano lessons is $400. What is the total producer surplus in the market?
$400
George produces cupcakes. His production cost is $10 per dozen. He sells the cupcakes for $16 per dozen. His producer surplus per dozen cupcakes is
$6
Suppose the government has imposed a price ceiling on sliced sandwich bread. Which of the following events could transform the price ceiling from one that is binding to one that is not binding?
A decrease in the price of peanut butter and jelly
Taxes cause deadweight losses because they A. lead to losses in surplus for consumers and for producers that, when taken together, exceed tax revenue collected by the government B. distort incentives to both buyers and sellers C. prevent buyers and sellers from realizing some of the gains from trade D. All of the above are correct
All of the above are correct
Which of the following is NOT a characteristic of a public good?
Because it is a free good, there is no opportunity cost
Miguel, Maria, and Marcos all would like a place to sit while waiting at their children's bus stop. The neighborhood association is considering installing several park benches at the bus stop. Miguel values the benches at $20, Maria at $30, and Marcos at $40. The park benches and labor for installation cost $100. If Miguel, Maria, and Marcos are the only residents who value the benches, what should the neighborhood association do?
Do not install the park benches because the costs outweigh the benefits
Why is the commercial value of ivory a threat to the elephant, while the commercial value of beef is the cow's guardian?
Elephants are a common resource
Suppose the government has imposed a price floor on the market for soybeans. Which of the following events could transform the price floor from one that is not binding into one that is binding?
Farmers use improved, draught-resistant seeds, which lowers the cost of growing soybeans
Ty lives in an apartment building and gets a benefit from playing his stereo. Olivia, who lives next door to Ty and often loses sleep due to the loud music coming from Ty's stereo, bears a cost from the noise. Olivia is threatening to call the police to force Ty to turn down his stereo. Under which of the following conditions would Ty be able to offer Olivia some amount of money to keep her from calling the police and to allow him to continue to play his stereo loudly?
The benefit of the music to Ty must exceed the cost of the noise to Olivia
Suppose that a negative externality is created by the production of good X. Which of the following statements is correct? A. The social cost of producing good X includes the private cost plus the cost to bystanders of the externality B. The increased social cost can be graphed as a decrease in demand C. The market equilibrium quantity will be the socially optimal quantity as long as the government does not interfere D. Both a and b are correct
The social cost of producing good X includes the private cost plus the cost to bystanders of the externality
When the production of a good results in a positive externality, the social value curve is
above the demand curve, indicating that the total value to society is greater than the private benefit
A city street is
common resource when it is congested, but it is a public good when it is not congested
All else equal, what happens to consumer surplus if the price of a good increases?
consumer surplus decrease
A tax on buyers will shift the A. demand curve upward by the amount of the tax B. demand curve downward by the amount of the tax C. supply curve upward by the amount of the tax D. supply curve downward by the amount of the tax
demand curve downward by the amount of the tax
If the government removes a binding price ceiling from a market, then the price paid by buyers will
increase, and the quantity sold in the market will increase
The tax incidence A. is the manner in which the burden of a tax is shared among participants in a market B. can be shifted to the buyer by imposing the tax on the buyers of a product in a market C. can be shifted to the seller by imposing the tax on the sellers of a product in a market D. All of the above are correct
is the manner in which the burden of a tax is shared among participants in a market
The national defense of the United States is NOT rival because
my employment of the national defense does not diminish your enjoyment of the national defense of the United States
Research into new technologies provides a
positive externality, and too few resources are devoted to research as a result
The benefit to sellers of participating in a market is measure by the
producer surplus
Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the
supply of the product is more elastic than the demand for the product
After a country goes from disallowing trade in coffee with other countries to allowing trade in coffee with other countries, A. the domestic price of coffee will equal the world price of coffee B. the domestic price of coffee will be lower than the world price of coffee C. The world price of coffee does not matter; the domestic price of coffee prevails D. the domestic price of coffee will be greater than the world price of coffee
the domestic price of coffee will equal the world price of coffee
If a market is characterized by a positive externality that is not the result of a technology spillover,
the socially optimal level of output is greater than the equilibrium level of output, and the socially optimal price is greater than the equilibrium price
Suppose Brazil has a comparative advantage over other countries in producing almonds, but other countries have an absolute advantage over Brazil in producing almonds. If trade in almonds is allowed, Brazil
will export almonds