Econ 2200 Exams review

The price elasticity of demand measures how much

quantity demanded responds to a change in price.

The price elasticity of supply measures how responsive

sellers are to a change in price.

A price ceiling is

a legal maximum on the price at which a good can be sold.

Rent-control laws dictate

a maximum rent that landlords may charge tenants.

Elasticity is

a measure of how much buyers and sellers respond to changes in market conditions

Minimum-wage laws dictate

a minimum wage that firms may pay workers.

Price controls are usually enacted

when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

Externalities are

side effects passed on to a party other than the buyers and sellers in the market

Market failure is the inability of

some unregulated markets to allocate resources efficiently.

Welfare economics is the study of how?

the allocation of resources affects economic well-being

Welfare economics is the study of how

the allocation of resources affects economic well-being.

Consumer surplus is

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

Producer surplus is

the amount a seller is paid minus the cost of production

Refer to Table 7-1. If price of the product is $135, then the total consumer surplus is

$15.

Refer to Table 7-10. If the market price is $1,000, the producer surplus in the market is

$300

In general, elasticity is a measure of

how much buyers and sellers respond to changes in market conditions

Refer to Table 7-1. If the price of the product is $122, then the total consumer surplus is

$41.

Refer to Table 7-10. If the market price is $1,200, the producer surplus in the market is

$800

Which of the following statements is correct?

Buyers always want to pay less and sellers always want to be paid more.

Which of the following is the most likely explanation for the imposition of a price ceiling on the market for milk?

Buyers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling.

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

Calvin and Sam

Refer to Table 7-1. If the price of the product is $110, then who would be willing to purchase the product?

Calvin, Sam, and Andrew

If the government removes a tax on a good, then the quantity of the good sold will

increase

If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would?

increase by less than $1,000

Which of the following is not correct?

Economic policies rarely have effects that their architects did not intend or anticipate.

How does the concept of elasticity allow us to improve upon our understanding of supply and demand?

Elasticity allows us to analyze supply and demand with greater precision than would be the case in the absence of the elasticity concept

Which of the Ten Principles of Economics does welfare economics explain more fully?

Markets are usually a good way to organize economic activity

Which of the following is not a function of prices in a market system

Prices ensure an equal distribution of goods and services among consumers

Refer to Table 7-1. If the market price is $105,

Sam's consumer surplus is $30 and total consumer surplus is $90.

Suppose the government has imposed a price ceiling on laptop computers. Which of the following events could transform the price ceiling from one that is not binding into one that is binding?

The number of firms selling laptop computers decreases

Consumer surplus is equal to the

Value to buyers - Amount paid by buyers

Consumer surplus

is measured using the demand curve for a product.

Market power refers to the

ability of market participants to influence price

Producer surplus equals the

amount received by sellers minus the cost to sellers

When studying how some event or policy affects a market, elasticity provides information on the

magnitude of the effect on the market.

If demand is price inelastic, then

buyers do not respond much to a change in price.

Demand is said to be price elastic if

buyers respond substantially to changes in the price of the good

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because of it

maximizes the combined welfare of buyers and sellers

Consumer surplus,

measures the benefit buyers receive from participating in a market

When a tax is placed on the sellers of a product, buyers pay

more, and sellers receive less than they did before the tax

Price controls

can generate inequities of their own

A legal maximum on the price at which a good can be sold is called a price.

ceiling

Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?

consumer and producer surplus

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

decrease, and the price received by sellers will increase

A tax on the sellers of coffee mugs

decreases the size of the coffee mug market

The presence of a price control in a market for a good or service usually is an indication that

policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.

A tax imposed on the sellers of a good will raise the

price paid by buyers and lower the equilibrium quantity

The price elasticity of supply measures how much

the quantity supplied responds to changes in the price of the good.

When studying how some event or policy affects a market, elasticity provides information on the.

direction and magnitude of the effect.

Which of the following is not an example of a public policy?

equilibrium laws

The decisions of buyers and sellers that affect people who are not participants in the market create

externalities