continue pt 2

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Suppose that the market equilibrium price for a good is $1. A nonbinding price ceiling in this market will result in a price set at

Market for used cars: Demand: Qd = 154,000 - 86 P Supply: Qs = -100 + 14 P What would be the equilibrium price for used cars?

$1,541

Use the following information to answer the questions that follow. Market for used cars: Demand: Qd = 154,000 - 86 P Supply: Qs = -100 + 14 P What would be the equilibrium price for used cars?

$1,541

What is the equilibrium price in the market for public transportation? Demanded 86,000 Supplied 86,000

$1.25

Muddy's Bakery and Lilly's Sweetshop both sell cupcakes. The market price of one chocolate cupcake is $2.50. Muddy's is willing to sell a cupcake for as little as $1.65; Lilly's is willing to sell a cupcake for as little as $1.75. What is the total producer surplus for the two firms?

$1.60

Consider the market for socks. The current price of a pair of plain white socks is $5.00. Two consumers, Jeff and Samir, are willing to pay $7.25 and $8.00, respectively, for a pair of plain white socks. Two sock manufacturers are willing to sell plain white socks for as little as $4.00 and $4.15 per pair. How much is total producer surplus in this market?

$1.85

Jamal is willing to pay $85 for a new jacket that sells for $70. Eddie is willing to pay $65 for that same jacket. What is the total consumer surplus for Jamal and Eddie?

$15

In the figure above, if the government imposes a price floor on wheat at $5 and agrees to purchase any surpluses, how much will the government be forced to spend?

$15 million

Suppose that the equilibrium price of a mountain bike is $250. The government decides that people have a right to affordable mountain biking. To protect this new right, government passes a law setting a maximum price of $150 for a bike. As a result of the legislation, and in the absence of a black market, the price of a mountain bike will be

$150

Many consumers will be unable to buy the good at a price ceiling of $0.50 because of a shortage. However, they may still be able to purchase the good at the price of

Sellers who are unable to sell their good at a price floor of $6, may still be able to sell their good at a price of

What will be the amount of government expenditure required if a price floor for corn is set at $4.50 and the government agrees to purchase the amount of disequilibrium?

$202,500

Bob is willing to pay $65 for a new pair of shoes. Bill is willing to pay $50 for the same shoes. The shoes have a price of $45. What is the total consumer surplus for Bob and Bill?

$25

What would be the equilibrium price in the market for corn? Demanded 169,000 Supplied 169,000

$3.50

Say Sarah was choosing between three alternatives: working on her job that pays her $20; writing a term paper wheich she values at $10; or going out with a friend, which she values at $30. The opportunity cost of writing the term paper is:

$30.

Market for a new hardcover book: Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P What would be the equilibrium price for hardcover books?

$35

Use the following information to answer the questions that follow. Market for a new hardcover book: Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P What would be the equilibrium price for hardcover books?

$35

Say John was choosing between 3 alternatives: going to the beach, which he values at $40; washing his car, which he values at $20; or going out with a friend, which he values at $60. The opportunity costs of going out with a friend is:

$40

Suppose Sarah was considering between buying a burger or a pizza. She would be willing to pay $10 for the pizza, which costs around $5. The opportunity costs of buying a burger would be:

Say Sarah was choosing between three alternatives: working on her job that pays her $20; writing a term paper which she values at $40; or going out with a friend, which she values at $50. The opportunity costs of writing the term paper is:

$50.

A friend comes up to you and offers to give you a free ticket to the local professional team's baseball game that night. You decide to attend the game. The game takes 5 hours and costs you $15 for transportation. If you had not attended the game, you would have worked at your part-time job for $8 an hour. What is the cost to you of attending the game?

$55

In the table above, at what price level does the labor market reach equilibrium? Wage Rate $6 Labor demanded 153,300,020 Labor supplied 153,300,020

$6.00

A college student is faced with a difficult decision of how to spend one hour tonight. She could babysit her professor's child at an hourly wage of $7, she could work at the college library at a wage of $6, or she could finish her economics homework assignment. If she chooses to complete her homework assignment, she has incurred an opportunity cost equal to:

$7.

$7.10

Based on the infographic, what is the minimum amount employees can be paid by law in the state of Wyoming?

$7.25/hour

Refer to the accompanying figure. At what price would there be the LEAST pressure to form a black market?

Say John was choosing between three alternatives: going to the beach, which he values at $50; washing his car, which he values at $100; or going out with a friend, which he values at $80. The costs of washing his car is:

$80

Using the table below, calculate total consumer surplus for Beanie, Mitch, and Frank if the price of the textbook is $110. Beanie: $200 Mitch: $150 Frank: $100

-$130 -Consumer surplus is calculated as the difference between a consumer's willingness to pay and the price that he or she actually pays. For Beanie and Mitch, consumer surplus is calculated as follows Beanie: $200 - $110 = $90 Mitch: $150 - $110 = $40 For Frank, his willingness to pay ($100) is lower than the price ($110), so he does not buy the textbook; therefore, he does not receive any consumer surplus. The total consumer surplus is Beanie's plus Mitch's, which equals $130.

Andrew paid $30 to buy a potato cannon, a cylinder that shoots potatoes hundreds of feet. He was willing to pay $45. When Andrew's friend Nick learns that Andrew bought a potato cannon, he asks Andrew if he will sell it for $60, and Andrew agrees, since he would have sold it for $45. Nick is thrilled, since he would have paid Andrew up to $80 for the cannon. Andrew is also delighted. What is Andrew's original consumer surplus?

-$15 -The consumer surplus from the original purchase is equal to Andrew's willingness to pay minus the price that he actually paid, namely $45-$30 = $15.

-$15 -The producer surplus from the resale is equal to $60-$45 = $15, since Andrew valued the cannon at $45 but received a price of $60 for it.

-$20 -The consumer surplus from the resale is equal to $80-$60 = $20, since Nick's willingness to pay was $80, but he actually paid $60.

-$35 -The consumer surplus from the resale is equal to $80-$60 = $20, since Nick's willingness to pay was $80 but he actually paid $60. The producer surplus from the resale is equal to $60-$45 = $15, since Andrew was willing to sell the cannon at $45 but received a price of $60 for it. Therefore, the total surplus generated by the resale is $20+$15 = $35.

Austin and Erin are willing to pay $10 and $9, respectively, for a ticket to a screening of a new movie. What is the total consumer surplus for both Austin and Erin if the market price of a ticket is $6?

-$7 -The total consumer surplus is the amount of consumer surplus for every individual added together. In this market we have two consumers with willingness to pay of $10 and $9. Subtract the market price from each individual's willingness to pay in order to find the consumer surplus for that individual.

The table below shows the willingness of three people to sell their tutoring services. Calculate the producer surplus for Frank if the price of the tutoring is $18 per hour. Frank willingness to sell: $10/hr

-$8/hr -If Frank is willing to tutor for a minimum of $10/hr and he receives $18/hr, he receives $8/hr more than the minimum price at which he is willing to sell tutoring services. Therefore, he receives a producer surplus of $8/hr.

Look at the provided figure. What area(s) represent consumer surplus after the tax (select all that apply)?

-A -the top of the triangle

Look at the provided figure. What area(s) represent the tax revenue after the tax (select all that apply)?

-B,C -middle rectangles

Look at the provided figure. What area(s) represent producer surplus before the tax (select all that apply)?

-C,D,F -the bottom half of P*

Look at the provided figure. What area(s) represent producer surplus after the tax (select all that apply)?

-D -the bottom triangle

Look at the provided figure. What area(s) represent consumer surplus before the tax (select all that apply)?

-E,B,A -the top half of P*

Look at the provided figure. What area(s) represent the deadweight loss after the tax (select all that apply)?

-E,F -just the tip

Is the following statement true or false? Provide the correct reason: A tax that raises no revenue for the government cannot have any deadweight loss.

-False. A tax can become so large that production of the good decreases to zero.

If you were willing to pay $3.05 for a gallon of milk purchased at the grocery store but were required to pay only $2.05, you have gained a refund of $1.00 from the clerk a consumer surplus amounting to $1.00 a producer surplus amounting to $1.00 None of these answers are true.

-a consumer surplus amounting to $1.00 -Consumer surplus is defined as the difference between your willingness to pay for a good and the price that you actually pay for it. In this case, that's $3.05 minus $2.05, or $1.00.

The difference between the willingness to pay for a good and the price that is paid to get it is producer surplus willingness to sell consumer surplus welfare economics

-consumer surplus -A consumer's willingness to pay is the maximum price a consumer will pay for a good. Consumer surplus is the difference between the willingness to pay for a good and the price that is paid to get it

If the government wants to minimize the deadweight loss of taxation, which of the following items are good candidates for an excise tax (select all that apply)? emergency plumber services Coca-Cola insulin food at restaurants

-emergency plumber services -insulin

The difference between the willingness to sell a good and the price that the seller receives for it is consumer surplus welfare economics willingness to pay producer surplus

-producer surplus -A seller's willingness to sell is the minimum price the seller will accept to sell a good or service. Producer surplus is the difference between the willingness to sell a good and the price that the seller receives.

Which of the following are characteristics of an efficient market? Select all that apply. Producer surplus and consumer surplus are equal Both producer and consumer surplus are greater than zero Total surplus (aka social welfare) is maximized. Quantity supplied equals quantity demanded. Deadweight loss equals zero. Willingness to pay exceeds willingness to sell at the margin. Willingness to sell exceeds willingness to pay at the margin. There is a tax. There is a price ceiling. There is a price floor.

-quantity supplied equals quantity demanded -deadweight loss equals zero -total surplus (aka social welfare) is maximized -Markets are efficient (meaning that social welfare is maximized) at the equilibrium point. At the equilibrium point, quantity supplied will equal quantity demanded and deadweight loss will equal zero. Anything that moves the market away from the equilibrium point will reduce social welfare. Taxes, price ceilings, and price floors are artificial mechanisms that keep the market from reaching equilibrium and thereby generate deadweight loss. When the market is efficient, willingness to pay equals willingness to sell at the margin.

shift from D1 to D2.(SHIFT OUT-RIGHT)

. Refer to the accompanying diagram. An increase in the number of buyers would cause the demand curve to:

Use the following information to answer the questions that follow. Market for flat-screen TVs: Demand: Qd = 2,600 - 5 P Supply: Qs = -1,000 + 10 P What would be the quantity demanded if a price floor is set at $300? Hint: you need to confirm whether or not the price control is binding.

1,100

Market for flat-screen TVs: Demand: Qd = 2,600 - 5 P Supply: Qs = -1,000 + 10 P What would be the equilibrium quantity for flat-screen TVs?

1,400

Use the following information to answer the questions that follow. Market for flat-screen TVs: Demand: Qd = 2,600 - 5 P Supply: Qs = -1,000 + 10 P What would be the quantity demanded if a price floor is set at $100? Hint: you need to confirm whether or not the price control is binding.

1,400

Market for used cars: Demand: Qd = 154,000 - 86 P Supply: Qs = -100 + 14 P What would be the quantity supplied if a price floor is set at $100?

21,474

Use the following information to answer the questions that follow. Market for used cars: Demand: Qd = 154,000 - 86 P Supply: Qs = -100 + 14 P What would be the quantity supplied if a price floor is set at $100? Hint: you need to confirm whether or not the price control is binding.

21,474

Market for used cars: Demand: Qd = 154,000 - 86 P Supply: Qs = -100 + 14 P What would be the quantity supplied if a price floor is set at $2,000?

27,900

Use the following information to answer the questions that follow. Market for used cars: Demand: Qd = 154,000 - 86 P Supply: Qs = -100 + 14 P What would be the quantity supplied if a price floor is set at $2,000? Hint: you need to confirm whether or not the price control is binding.

27,900

Market for a new hardcover book: Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P What would be the equilibrium quantity for hardcover books?

Use the following information to answer the questions that follow. Market for a new hardcover book: Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P What would be the equilibrium quantity for hardcover books?

Market for used cars: Demand: Qd = 154,000 - 86 P Supply: Qs = -100 + 14 P What would be the quantity demanded if a price ceiling is set at $1,000?

68,000

What is the quantity demanded when the price floor is $0.75 in the market for public transportation?

86,000

Market for a new hardcover book: Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P What would be the quantity supplied if a price floor is set at $50?

What is the incentive to create a black market when a binding price ceiling exists?

A black market emerges because buyers who want to have a low opportunity cost are seeking out the product.

What is the incentive to create a black market when a binding price floor exists?

A black market emerges because sellers need a way to dispose of surplus product

What is the incentive to create a black market when a binding price floor exists?

A black market emerges because sellers need a way to dispose of surplus product.

is represented by a movement along the supply curve.

A change in quantity supplied:

shift of the demand curve to the left. d. movement along the demand curve to the left.

A decrease in demand is represented by a:

is a TABLE representing the relationship between the price of a good or service and the quantity demanded.

A demand schedule:

A simplified representation that is used to study a real situation is called:

A model

What is the long-run consequence of a price ceiling law?

A shortage will continue to exist and will grow larger over time

7. If the production possibility frontier is a straight line, which of the following is true?

A) Opportunity costs are constant.

15. "Steel tariffs will prevent job losses in the steel industry" is a positive statement.

A) True

the QUANTITY demanded falls when the price rises, and the quantity demanded rises when the price falls.(INVERSELY PROPORTIONAL)

According to the law of demand, all other things being equal,

14. If the United States is more productive than Mexico in all lines of production, then the United States cannot benefit from trade with Mexico.

B) False

17. If they spend all night writing computer programs, Laurence can write 10 programs while Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 while Carrie Anne can make 4. Given this information and supposing Laurence and Carrie Anne have constant opportunity costs, we know that:

B) Laurence has an absolute advantage in both programs and sunglasses.

10. Dr. Colgate is a dentist who employs an assistant, Ms. Crest. If Dr. Colgate worked all day at the front desk, she could answer 40 phone calls. If she worked all day with patients, she could clean the teeth of 40 patients. If Ms. Crest worked all day at the front desk, she could answer 60 phone calls. If she worked all day with patients, she could clean the teeth of 20 patients. Which of the following is true?

B) Ms. Crest has a comparative advantage in answering phones.

The opportunity cost of production:

B) is what you give up to produce the good.

19. Efficient production exists when the economy is:

B) operating on its production possibility frontier.

What would you expect the consequences to size and quality would be for a product sold under a binding price ceiling?

Both the quality and the size of the product will decrease

What would you expect the consequences to size and quality would be for a product sold under a binding price ceiling?

Both the quality and the size of the product will decrease.

11. Assume that Colombia gives up three motorcycles for each ton of coffee it produces, while Bolivia gives up seven motorcycles for each ton of coffee it produces.

C) Colombia has a comparative advantage in coffee production and should specialize in coffee production.

13. Which of the following is an example of a positive statement?

C) The federal government pays for 46% of U.S. health care costs.

8. Assume an economy is operating on its production possibility frontier, which shows the production of military and civilian goods. If the output of military goods is increased, the output of civilian goods:

C) must decrease.

18. Technological improvements will:

C) shift the production possibility frontier outward.

12. The two flows represented in the circular-flow diagram are:

C) the flow of money and the flow of goods and services.

What happens to the amount of consumer surplus and producer surplus when the supply of scarves suddenly declines (shifts left)?

Consumer surplus declines and producer surplus declines

How do consumers who are subject to a binding price ceiling respond as the time frame shifts from the short run to the long run?

Consumers are increasingly willing to substitute away from the good, and their elasticity of demand becomes more elastic.

If the local government tells gas stations that they are not allowed to change the price of gas for three weeks during hurricane season, what will be the consequence?

Consumers will be unable to buy all the gas they want at the temporary price ceiling price.

The local city council passes a law that establishes a maximum rent for apartments in your city. Which of the following is likely to happen?

Current renters will sublet to others at prices above the legal maximum.

16. Of the following statements, which reflect(s) a normative view? I. The United States should increase the minimum wage to $10 per hour. II. There is a federal minimum wage in the United States. III. The federal minimum wage in the United States is less than $10 per hour.

D) Statement I reflects a normative view.

20. The slope of a typical production possibility frontier is:

D) negative.

9. As long as people have different ________, everyone has a comparative advantage in something.

D) opportunity costs

Why does a shortage that occurs under a binding price ceiling decrease over time?

Demand and supply both become more elastic.

Say John was choosing between 3 alternatives: going to the beach, washing his car, or going out with a friend. The opportunity cost of going out with a friend is:

Going to the beach or washing his car

What will I do differently as a seller in the black market in the long run?

I will substitute away from producing the product

What will I do differently as a seller in the black market in the long run?

I will substitute away from producing the product.

What will I do differently as a buyer in the black market in the long run?

I will substitute away from the product because in the long run I can find substitutes.

the DEMAND for all of that good's substitutes will increase.(DIRECT)

If the price of a good increases, holding all else constant,

Which of the following is true, holding all other things constant, when comparing regions that impose a higher minimum wage to regions that impose a lower minimum wage?

In regions with the lowest minimum wage, the price control is non-binding; in the regions with the highest minimum wage, the price control is binding

Which of the following is true, holding all other things constant, when comparing regions that impose a higher minimum wage to regions that impose a lower minimum wage?

In regions with the lowest minimum wage, the price control is nonbinding; in the regions with the highest minimum wage, the price control is binding.

RESOURCES that firms use in the production of final goods and services.

Inputs are:

Which of the following is a correct statement about a minimum wage law?

It causes prices to rise as producers pay more for labor

Which of the following is a correct statement about a minimum wage law?

It causes prices to rise as producers pay more for labor.

Say you took an average of 20 minutes to answer and ECON problem, and 40 minutes to answer a MATH problem. If you had a limited time left to study, your best strategy would be to solve:

It depends

Say you took an average of 5 minutes to answer an ECON problem, and 2 minutes to answer a MATH problem. If you had a limited time left to study, your best strategy would be to solve:

It depends

Imagine you find yourself in a heat wave and your air conditioner has broken. Unable to find a new one at the store because of a price gouging law, you purchase an air conditioner on the black market. What role did the price gouging law have?

It increased the incentive of individuals to supply the good on the black market

It increased the incentive of individuals to supply the good on the black market.

Why does a surplus exist under a binding price floor?

It makes the price so high that the quantity supplied exceeds the quantity demanded in the legal market

Why does a surplus exist under a binding price floor?

It makes the price so high that the quantity supplied exceeds the quantity demanded in the legal market.

Why do shortages develop under a binding price ceiling?

It makes the price so low that the quantity demanded exceeds the quantity supplied in the legal market

Why do shortages develop under a binding price ceiling?

It makes the price so low that the quantity demanded exceeds the quantity supplied in the legal market.

Suppose that the federal government places a binding price floor on chocolate. To help support the price floor, the government purchases all chocolate that consumers do not buy. If the price floor remains in place for a number of years, what do you expect to happen to the quantity of chocolate demanded by consumers?

It will decrease.

It will increase.

The market is currently at market equilibrium. If a binding price ceiling of P1 is imposed, by how much would the quantity supplied change?

It would decrease by 18,000 units

The equilibrium Price is INDERterminate and equilibrium Quantity goes DOWN.

Many consumer items eventually go out of style, and because fewer people want these items, demand for them drops. When this happens, we usually see production of these items stop. What happens to the equilibrium price and equilibrium quantity in a market like this?

Two neighbors, Molly and Sandy, are separated by a white picket fence. Each neighbor has a garden that grows tomatoes and peppers. How could Molly and Sandy gain from trade?

Molly could trade peppers to Sandy in exchange for tomatoes if Molly was the more efficient grower of peppers.

Suppose you live in a community with no price controls. What do you expect to happen if your town borders a community where there is a binding price floor on most products?

More consumers would purchase the product in the community without a price floor.

Which of the following demonstrates how people respond to incentives to make themselves better off?

More students major in economics when they hear that salaries for economists are rising.

Let's say that you have a friend who was caught illegally buying a good on the black market. When the judge asks you to describe your friend's motivation as a buyer, which of the following would most likely be your reply?

My friend bought the good on the black market because a binding price floor made the good too expensive to purchase on the legal market and it was cheaper on the black market

My friend bought the good on the black market because a binding price floor made the good too expensive to purchase on the legal market and it was cheaper on the black market.

Let's say that you have a friend who was caught illegally selling a good on the black market. When the judge asks you to describe your friend's motivation as a seller, which of the following would most likely be your reply?

My friend sold the good on the black market because a binding price floor resulted in a surplus of the product in the legal market and he needed to get rid of the surplus.

Do all buyers benefit from a binding price ceiling?

No. A binding price ceiling benefits only some buyers because not all are able to obtain the good in the legal market.

Do all sellers benefit from a binding price floor?

No. A binding price floor benefits only some sellers because not all are able to sell as much as they would like in the legal market

Do all sellers benefit from a binding price floor?

No. A binding price floor benefits only some sellers because not all are able to sell as much as they would like in the legal market.

A key theme fundamental to all of economics is:

People have unlimited wants facing limited means to satisfy them.

How do producers who are subject to a binding price ceiling respond as the time frame shifts from the short run to the long run?

Producers are increasingly willing to substitute away from producing the good, and their elasticity of supply becomes more elastic

How do producers who are subject to a binding price ceiling respond as the time frame shifts from the short run to the long run?

Producers are increasingly willing to substitute away from producing the good, and their elasticity of supply becomes more elastic.

Firms entered the market.

Refer to the accompanying figure. What event would cause the supply curve to shift out?

Which of the following would be true in a city with rent-controlled apartments?

Rents for those fortunate enough to find an apartment are lower than rents in nearby cities that lack rent controls

Which of the following would be true in a city with rent-controlled apartments?

Rents for those fortunate enough to find an apartment are lower than rents in nearby cities that lack rent controls.

Mortimer loves sushi. He loves sushi so much that he asks his congressional representative to work for passage of a binding price ceiling law. Who would be affected by this law and how?

Some consumers would benefit from such a law because prices for sushi would be lower for those able to buy it in the legal market.

Assume that all fast-food restaurants employ many minimum wage workers. Suppose 20,000 people in Pennsylvania work in fast-food restaurants for the federal minimum wage of $7.25/hour. If the state of Pennsylvania increases its minimum wage to $9.00/hour, who will be better off? Who will be worse off?

Some minimum wage workers will be better off, some minimum wage workers will be worse off, and all fast-food restaurant owners will be worse off

increases as the consumer's income decreases.(INVERSE)

Something is an inferior good if the demand for the good:

Equilibrium price will be indeterminate and equilibrium quantity will go UP. (INFERIOR IS INVERSED Q&INC)

Spam is considered an inferior good. What would happen to the equilibrium price and quantity of Spam if income decreased and more firms started producing Spam?

Cs=

TB-TC

Ps=

TB-TC

increase.

Taxes cause the equilibrium price of a good to:

If a good is subject to a binding price ceiling and you purchase it on the black market, what do you expect to happen to the availability of the good over time?

The availability of the good will fall over time as both the supply and demand curves become more elastic. (The shortage of the good will rise.)

You are the president of the United States. In an attempt to make gasoline prices cheaper, you have imposed a binding price ceiling on gas. What would you expect your critics to say?

The binding price ceiling will increase the likelihood that customers obtain needed gasoline on the black market.

You are a senator from Kansas who wants to help farmers. You have worked to encourage the passage of a law that would impose a binding price floor on wheat. What would you expect your critics to say?

The binding price floor will cause a surplus of wheat that farmers will be unable to sell

Suppose you live in a community with no price controls. What do you expect to happen if your town borders a community where there is a binding price floor on most products?

The black market in the community with a binding price floor would be larger

In some countries, a binding price ceiling is placed on prescription medicines. What would you expect the prescription medicine market to be like in these countries?

The legal maximum price would mean that not all consumers will have access to prescription medicines

In some countries, a binding price ceiling is placed on prescription medicines. What would you expect the prescription medicine market to be like in these countries?

The legal maximum price would mean that not all consumers will have access to prescription medicines.

Based on the infographic, what are the minimum wages in Nebraska and Colorado in relation to the federal minimum wage?

The minimum wage in Colorado is higher than the federal minimum wage, while Nebraska's minimum wage is equal to the federal minimum wage.

Why is raising the minimum wage generally ineffective?

The minimum wage is usually set below the prevailing equilibrium wage and is frequently nonbinding.

How would an economist explain a teenager's continued unemployment where there exists a minimum wage?

The minimum wage law made it such that the quantity of labor willing to work at that wage was greater than the quantity of labor demanded at that wage

How would an economist explain a teenager's continued unemployment where there exists a minimum wage?

The minimum wage law made it such that the quantity of labor willing to work at that wage was greater than the quantity of labor demanded at that wage.

What will happen in a market where a nonbinding price ceiling is removed?

The price and quantity will not change in the legal market.

Suppose you live in a community with no price controls. What do you expect to happen if your town borders a community where there is a non-binding price floor on most products?

The price and the quantity sold in the community without a non-binding price floor will be the same as the price and quantity in the community with a non-binding price floor

Suppose you live in a community with no price controls. What do you expect will happen if your town borders a community where there is a nonbinding price ceiling on most products?

The price and the quantity sold in the community without a nonbinding price ceiling will be the same as the price and quantity in the community with a nonbinding price ceiling.

One strategy I might use to be elected mayor of a university town is to place a binding price ceiling on rent for student apartments. What will happen if I get elected and am able to pass such a law?

The price ceiling will cause students to sleep in their cars or to move in with their friends because they won't be able to find a place to live.

What will happen in a market where a non-binding price floor is removed?

The price or quantity of the product sold on the legal market will not change

What will happen in a market where a binding price ceiling is removed?

The products sold will improve in quality and become more plentiful

A binding price ceiling will have the following consequences:

The quantity demanded will always exceed the quantity supplied.

Lena and Jess are roommates. Lena hates to clean the bathroom. Jess will agree to clean the bathroom only if Lena vacuums the living room. This statement best represents this economic concept:

There are gains from trade.

Nate and Dylan are brothers. They have to mow the lawn and clean their rooms before they can go to the high school football game. Nate mows the lawn and Dylan picks up the rooms, and they make it to the football game on time. This statement best represents this economic concept:

There are gains from trade.

One parent picks up the child from day care while the other parent goes to the grocery store and begins to make dinner. This is an example of which principle at work?

There are gains from trade.

A nonbinding price floor has the following consequences:

There are no consequences to a nonbinding price floor.

If the price floor for corn is set at $5.00, what amount and type of disequilibrium will be present in the market for corn? Demanded 120,000 Supplied 223,000

There will be a surplus of 103,000

In the figure above, if the government imposes a price floor on wheat at $5, what would be the amount of disequilibrium?

There will be a surplus of 3 million

What will happen in a market where a binding price floor is removed?

There will be downward pressure on the prices

What will happen in a market where a binding price floor is removed?

There will be downward pressure on the prices.

If the price ceiling for corn is $2.50, what amount and type of disequilibrium would be present in the market for corn? Demanded 186,000 Supplied 125,000

There would be a shortage of 61,000

In the table above, if a minimum wage is established at $7.50, what would be the amount of disequilibrium in the labor market? Labor demanded 139,630,000 Labor supplied 159,800,000

There would be a surplus of labor of 20,170,000

As the time frame shifts from the short run to the long run, what happens to producers who are subject to a binding price floor?

They are increasingly willing to substitute away from producing the good, and the supply curve becomes more elastic.

As the time frame shifts from the short run to the long run, what happens to consumers who are subject to a binding price floor?

They are increasingly willing to substitute away from the good, and the demand curve becomes more elastic.

Why do government leaders impose price controls?

They are trying to ensure that a social goal is satisfied.

Which of the following is an accurate statement about the consequence of non-binding price ceilings?

They do not change the quantity of goods bought or sold in the legal market

Why are binding price floor laws passed?

They help producers receive higher prices for products sold in the legal market

Why are binding price floor laws passed?

They help producers receive higher prices for products sold in the legal market.

Why are binding price ceiling laws passed?

They make a good less expensive for those customers who are able to purchase the good in the legal market.

Tina, an economics student, was just named Miss Florida, based in part on her answer to the question of why price gouging laws should be relaxed in that state. Price gouging laws prevent prices from rising in a disaster, and operate as a price ceiling. Tina won because she gave which of the following answers?

They prevent customers who are willing to pay higher prices for needed products from doing so during a time of disaster, thereby making them suffer from the shortage that is created..

Scarcity in economics means:

We do not have sufficient resources to produce all of the goods and services we want.

Equilibrium price will be indeterminate and equilibrium quantity will go down.

What would happen to the equilibrium price and quantity for the market for cigarettes if the government increased the tax and a scientific study came out confirming that smoking cigarettes increased the rate of heart disease?

As a seller of a product subject to a binding price floor, you would be better off in which of the following situations?

You would be better off under a binding price floor because you could sell any of the resulting surplus to the government.

quantity supplied

a change in _______ is a movement along the supply curve

supply

a change in _____is a shift in the supply curve

decrease; decrease

a decrease in demand with no change in supply will lead to ______ in equilibrium quantity and ____ in equilibrium price

Suppose the government decides the Big Mac is an American tradition. To recognize the value of the Big Mac, government passes legislation making it illegal to sell a Big Mac for less than $8. The equilibrium price of a Big Mac is $4. This legislation is an example of

a price floor

price and quantity

a shift of a demand curve to the right all other things unchanged will increase equilibrium ____

Setting a price ceiling below the equilibrium price can result in

a shortage, where the quantity demanded exceeds the quantity supplied

a smaller number of mountain bikes sold than before the legislation

At a price floor of $6, this market is experiencing

a surplus

The government has imposed a price control for many agricultural products in an effort to support farmers. In the case of price floor P2 in the accompanying figure, how much of a disequilibrium in quantity exists?

a surplus of 30,000 units

Farm price supports are an example of a price floor, in this case the market for farm products. A binding price support will cause

a surplus of farm products

If a price floor is imposed at $15 per unit when the equilibrium market price is $12, there will be:

a surplus.

When the price of ground beef increases and all else is held constant, we would expect the supply of hamburgers to _________, causing the price to _________. a. decrease; increase b. decease; decrease c. stay the same; stay the same d. increase; increase e. increase; decrease

a. decrease; increase

In order for a price floor to be binding, it must be set

above the equilibrium price

an excess demand for mountain bikes

income

an increase in ______ will have an uncertain effect on price

indeterminate change; increase

an increase in demand and a decrease in supply will lead to an_____ in equilibrium quantity and _______ in equilibrium price

A sporting goods store observes that as they reduce the price of squash balls from $5 to $4, their quantity demanded rises from 200 to 220. Rounding to the nearest tenth, they correctly compute the elasticity of demand of squash balls to be: a. 0.1 b. 0.4 c. 0.5 d. 0.6 e. 2.3

b. 0.4

Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P What would be the equilibrium quantity for hardcover books? a. 100 b. 45 c. 385 d. 35 e. 11

b. 45

If you were a politician, why would you find it difficult to remove a binding price floor?

because it greatly benefits firms, and they would spend a lot of money to lobby against the law's repeal

If you were a politician, why would you find it difficult to remove a binding price ceiling?

because it greatly benefits some consumers who are also voters

When looking at a supply and demand graph, you would find producer surplus

below market price and above the supply curve

When looking at a supply and demand graph, you would find consumer surplus

below the demand curve and above market price

In order for a price ceiling to be binding, it must be set

below the equilibrium price

You would expect there to be many customers for a black market good when the opportunity cost of finding the good under a:

binding price ceiling is high.

If a store is able to sell a good at the market price, even though the government authorities have set the maximum price that can be charged for it, the store is selling the good in a(n)

black market for a market price that is higher

If a store is able to sell a good at the market price, even though the government authorities have set the minimum price that can be charged, the store is selling the good in a(n)

black market for a market price that is lower

In agriculture, a "bumper crop" refers to a particularly productive harvest. If there is a bumper crop for wheat at the same time that more people become allergic to wheat and all else is held constant, what will happen to the equilibrium price and quantity for wheat? a. The equilibrium price will go up and equilibrium quantity will go up. b. The equilibrium price will be indeterminate and equilibrium quantity will go up. c. The equilibrium price will go down and equilibrium quantity will be indeterminate. d. The equilibrium price will go up and equilibrium quantity will be indeterminate. e. The equilibrium price will be indeterminate and equilibrium quantity will go down.

c. The equilibrium price will go down and equilibrium quantity will be indeterminate.

If resources are scarce if means they:

cannot provide enough goods or services to satisfy all human material wants and needs.

When looking at a graph, the area under the demand curve and above market price is defined as

consumer surplus

Holding all else constant, when the price of a good increases

consumer surplus decreases

Holding all else constant, when the price of a good decreases

consumer surplus increases

Demand: Qd = 325 - 8 P Supply: Qs = -60 + 3 P What would be the equilibrium price for hardcover books? a. $100 b. $45 c. $385 d. $35 e. $11

d. $35

If Jim can sell paper at a lower opportunity cost than Dwight can, then: a. Jim has an absolute advantage in paper sales. b. Dwight has an absolute advantage in paper sales. c. Jim has a positive advantage in paper sales. d. Jim has a comparative advantage in paper sales. e. Dwight has a comparative advantage in paper sales.

d. Jim has a comparative advantage in paper sales.

Producer surplus is defined as the

difference between the price the seller receives and the willingness to sell it

the models used in economics:

emphasize basic relationships by abstracting from complexities in the everyday world.

increase; increase.

f the number of buyers in a market increases from 50 to 100, you would expect the equilibrium price to _________ and the equilibrium quantity to _________, holding all else constant.

Imagine that local suburban leaders decide to enact a minimum wage, and soon after, a nearby city votes to increase the minimum wage to the same rate. As a result

firms will not have an incentive to move to the nearby city and the community will not lose jobs

The importance of an economic model is that is allows us to:

focus on the affects of only one change at a time.

increase

given that pizza is a normal good if students incomes at your college increase substantially there would be an _____ in the demand for pizza

Suppose that the equilibrium wage for teachers in Minnesota is $15/hour. Also suppose that the state of Minnesota raises their minimum wage to $10/hour. Since the equilibrium wage for teachers is ____________ the new minimum wage, we would expect the number of teachers employed to _____________________ and the equilibrium wage for teachers to ______________________.

higher than; stay the same; stay the same

is a constant amount of good Y

if a production possibility frontier is a straight line it tells us that the opportunity cost of producing one more unit of good X..

the paradox of drift

if all the households and businesses in the conomy start saving more during economic hard times that results in a fall in aggregate income hurting everyone in the economy. this is known as:

allocatively efficient

if an economy produces the appropriate mix of goods from its available resources then the mix of goods is

left

if suppliers expect prices to rise next year for their product then one would expect that this will shift the supply curve for the product the ____ this year

Why is it often difficult to remove a binding price floor after it exists?

in general, because sellers benefit from higher prices and would lobby their elected officials to keep the price control

keynesian theory

in recent times the us government has been trying to help the economy through one of the worst economic slumps. the policies used are based on

decrease in supply of wheat

in the market for wheat what would happen if the price of ethanol increases dramatically

The facts that a society's production possibility frontier is bowed out pr concave to the origin of a graph demonstrates the law of:

increasing opportunity cost.

Scarcity exists when:

individuals can have more of one good but only at the expense of another.

Consider a production possibility frontier for Iraq. If in 2014 Iraq's resources are not being fully utilied, Iraq will be somewhere____ of its production possibility frontier

inside

If a store legally sells a good at the market price, even though the government authorities have set the maximum price that can be charged for it, the store is selling the good in a(n):

legal market for a market price that is lower because the price ceiling is non-binding.

quantity supplied will decrease

market demand for a good is initially made up of 50 buyers. suppose there is a decrease in the number of buyers by 10. holding everything else constant one would expect that:

inflation

means that although overall prices are increasing some prices may be increasing and some may be decreasing

If the state government allocates additional spending on education, the opportunity cost is:

measured in terms of the best alternative uses for that money.

What is the minimum wage that employees can receive in California?

more than $7.25 per hour

If a price ceiling is imposed at $15 per unit when the equilibrium market price is $12, there will be:

no surplus or shortage.

In the market portrayed in this graph, a nonbinding price floor of $2 will result in a price set

of $3

Many states have laws that limit the maximum amount of interest that a lender can charge a borrower. Such a law is an example of a(n):

price ceiling.

The minimum wage law is an example of a

price floor

When the price of a good decreases and all else is held constant

producer surplus decreases

As a politician, you would be more inclined to propose an increase in the minimum wage when you believe that the new minimum wage would

remain below the equilibrium wage and be non-binding

As a politician, you would be more inclined to propose an increase in the minimum wage when you believe that the new minimum wage would:

remain below the equilibrium wage and be nonbinding.

A real-life example of a binding price ceiling is

rent control

An example of a binding price ceiling is:

rent control that is set below the equilibrium price

Click to view enlarged image. At a price ceiling of $0.50, this market is experiencing a(n)

shortage

Suppose that a group of die-hard sports fans is upset about the high price of tickets to many events. As a result of their lobbying efforts, a new law caps the maximum ticket price to any sporting event at $50. Assume there are a fixed amount of seats in the stadium, all seats are available to be sold, and the price of tickets before the ceiling was at an equilibrium point above $50. The price ceiling will create a ___________ of tickets, which will be greater if demand is more _______________. _________ people will attend the events.

shortage; elastic; the same number of

Gains from trade arise because of:

specialization in production.

Suppose you have a choice between studying one more hour for your history exam or studying one more hour for your psychology exam. Your decision on what to study should be based on:

the additional benefits of studying for each class.

The University recently inherited a large mansion from a wealthy alumnus. The University plans to use the mansion to host faculty parties and to house distinguished guests. The opportunity cost of the mansion to the University is:

the amount the university would receive if it sold the mansion.

Specialization and trade usually lead to:

the exchange of goods and services in markets.

market demand

the horizontal summation of individual demand curves for a particular product, holding the quantity demanded constant is referred to as:

The opportunity cost of something is:

the next best alternative given up to acquire it.

The best measure of the opportunity cost of any choice is:

the next best alternative you have given up to make that choice, even if no monetary costs are involved.

A binding price floor creates a surplus, which means:

the quantity demanded will always be smaller than the quantity supplied.

long run growth

the sustained upward trend in the economys overall output per person that generates higher incomes and higher standard of living for its members represents

Opportunity cost is:

the value of the best alternative forgone in making any choice.

Consumer surplus is the difference between

the willingness to pay for a good and the amount that is paid to get it

Although water is very abundant in most places, it is scare because:

there is not enough of it to meet all needs.

A market has reached an efficient outcome when

total surplus is maximized

A new fast-food restaurant offered a free meal (valued at $5) a week for a year to its first 100 customers. Ramona camped out for 48 hours before the opening to be one of the first 100 customers. The cost of the free meal a week for a year for Ramona was:

whatever she would have done with those 48 hours.

Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is:

whatever she would have purchased with $10,000 and whatever she would have earned had she not been in college.

long run growth per capita

when an economys overall production grows faster than its population this is referred to as

simplify reality

when building a model economists _____ in order to highlight what really matters

The local Taco Hut charges the same price for everything on its menu: $3 will buy a taco, a burrito, or nachos. You buy the taco and think that if you had not purchased the taco, you would have purchased the burrito. The opportunity cost of the taco is:

continue pt 2

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