ec 201 practice test review

What is the value of the total surplus at the quantity of watermelons with economic efficiency?

$12.50

(Figure: Tax) The size of the tax in the diagram is:

$4

(Figure: Tax Imposed According to the figure, the equilibrium price and quantity before the tax is imposed are:

$4 and 1,000.

Refer to the figure below. With a $2-per-unit subsidy, the price received by sellers is ________ and the price paid by consumers is ________.

$4; $2

Refer to the figure below. Assume a subsidy of $2 per unit is applied. What is the total cost of the subsidy for taxpayers?

$800

Bae is willing to pay up to $160 for a particular pair of boots. She is able to buy the boots for $120. The marginal cost of producing the boots is $70. How large is the economic surplus associated with her purchase of the boots?

$90

which of the following is caused by a subsidy for seller of a particular item

(ii) and increase in quantity sold (iii) a decrease in the consumer price

In the graph of the soft drink market shown here, the original equilibrium price is $2.50 per bottle. A tax is then placed on the sellers of soft drinks. The economic burden of this tax on the seller is $ _____.

.50

In the graph shown, the original equilibrium price of boots is $50. Assume a $6 tax is placed on boots. As a result of the tax, the quantity of boots traded in the market changed from _____ units to _____ units.

50, 45

According to economic theory, which of the following best represents the misallocation of resources that would occur under a price ceiling on bottled water following a major hurricane?

A family in a distant state gives bottled water to its dog, but a family in the hurricane area cannot find bottled water to drink.

The graph below shows the market for pineapples. Which of the following statements is/are true? (There may be more than one true statement. Pick all correct statements.)

A price floor of $2 will not affect the equilibrium quantity of pineapples traded in the market.

Which of the following is a correct statement about tax burdens?

A tax burden falls most heavily on consumers when supply is relatively elastic.

Which of the following is a positive economic statement?

If the government raises taxes, people will have less income available for purchases and saving.

What is positive analysis?

It describes what is happening, explains why it is happening, or predicts what will happen.

How are people affected when economic efficiency increases?

Overall gains exceed any change in costs, but some people may be worse off.

According to the textbook, which of the following is NOT a common criticism of the focus on economic efficiency as a measure of welfare?

Using monetary values for measurements ignores feelings and perceptions.

The graph depicts the market for furniture made from sustainable, man-made bamboo. The government wants to encourage buyers to buy such furniture and uses a price ceiling to lower the price to $250. What occurs as a result of the price ceiling?

a shortage of 400,000 pieces of furniture.

In 2016, Amazon began charging a 5.75% sales tax on products it sells in the District of Columbia. Holding all else constant, the effect of this tax would be to _____ in the District of Columbia.

decrease Amazon sales

Unlike price floors, subsidies _______.

do not create surpluses.

True, False or Uncertain? All else constant, if the equilibrium wage is $10 an hour and the government enacts a price floor by setting a minimum wage of $8, this will create a shortage of labor.

false

two ways to calculate economic surplus are ____ and ____

marginal benefit minus marginal cost; consumer surplus plus producer surplus

A tax on sellers of popcorn will:

reduce the size of the popcorn market because fewer units of popcorn will be traded.

The highest price that Duke would be willing to pay for a particular video game is equal to:

the marginal benefit he would receive from the game.

When the actual pounds produced and sold is two, economic surplus in the market is represented by the area between the demand and supply curves and __________:

to the left of the quantity of two (2) units.

In the diagram below, sellers receive _____ without the tax and _____ with the tax.

$4; $3

In the graph of the soft drink market shown here, the original equilibrium price is $2.50 per bottle. A tax is then placed on the sellers of soft drinks. The amount of the tax is $ _____.

1.00

Based on the graph below, what market intervention did the government employ to change the market equilibrium of printers? (There may be more than one answer.)

A $30 subsidy

Bae is willing to pay up to $160 for a particular pair of boots. The price of the boots is $120. The marginal cost of producing the boots is $70. Which of the following is TRUE regarding the economic surplus associated with her purchase of the boots?

Consumer surplus is $40, and producer surplus is $50.

Which of the following statements is TRUE? I. A $0.50 tax on each unit sold raises the price of the good by $0.50.II. The outcome of a" tax on sellers" is equivalent to the outcome of a "tax on buyers."III. A tax is analyzed by shifting the supply curve and the demand curve up by the amount of the tax.

II. The outcome of a" tax on sellers" is equivalent to the outcome of a "tax on buyers."

Which of the following statements is FALSE?I. The market outcome from subsidizing buyers is no different than subsidizing sellers.II. Unlike taxes, subsidies reduce the quantity traded in the market.III. Subsidies and price ceilings create very similar market outcomes.IV. Both consumers and producers gain surplus when a subsidy in enacted.

II. Unlike taxes, subsidies reduce the quantity traded in the market. III. Subsidies and price ceilings create very similar market outcomes.

San Francisco decides to remove a binding price ceiling on train fares. Which of the following is likely to happen in the market?

Overcrowding on trains will go down.

Choose the statement below which correctly fills in both blanks. Consider the market for environmentally friendly "3D printed" houses shown in the figure. The government wants to encourage buyers to buy these houses and places a ____________ on the market at $200,000 per house which makes _________________. (Hint: the slope of the demand curve is -2.)

Price Ceiling; Consumer surplus increase and the number of houses sold decrease.

If the mayor of your town stated, "Price ceilings are good for consumer welfare." How would her economic advisor respond?

That is not always true. It is possible that a price ceiling could hurt consumers (as a group) because the lower price will result in fewer items supplied.

Refer to the figure below which shows the market for timber. Which of the following statements is correct

The economic burden of this tax is greater on the seller.

Evaluate both statements: 1. A price ceiling is a minimum price that can be legally charged. 2. For a price ceiling to change behavior in the market, it must be below the market price.

The first statement is FALSE, the second statement is TRUE

Refer to the figure below which shows the market for timber. Which of the following statements is correct?

The incidence of this tax is greater on the seller.

(Figure: Market for Electrical Components) Refer to the figure which shows the market for electrical components. Which of the following statements is correct?

The tax burden is greater on the buyer.

A major hurricane damages many oil refineries, which increases the market price of gasoline from $3.50 to $5.00 per gallon. The attorney general threatens legal action against gas station owners who raise prices above pre-hurricane levels, causing gas station owners to reluctantly sell gas for $3.50 per gallon.What do we expect to happen next?

There will be a shortage of gasoline in the region.

For a price floor to prevent market forces from finding the equilibrium price, it must be set:

above the equilibrium price, causing a market surplus.

When nine teddy bears are produced and sold the deadweight loss is represented by the_______.

area between the demand and supply curves between quantities of 5 and 9.

(Figure: Losses from Price Ceilings) Refer to the figure. A price ceiling of $1 causes lost consumer surplus equal to area ________ and lost producer surplus equal to area ________.

c; de

When goods are allocated in a way that creates the largest economic surplus ______.

efficient allocation has been achieved.

When goods are allocated in a way that creates the largest economic surplus:

efficient allocation has been achieved.

Refer to the graph below. Suppose that a binding price floor of $35 is removed. The number of consumers who are able to purchase the product after this happens will _____.

increase from 25 to 50.

It is possible the get the same change in price and quantity sold using different market interventions, while creating different changes in welfare for producers and consumers. Which two market interventions could be used to illustrate this statement?

price floor and tax