ECON 224 Quizzes 5,6,7,8

Bob purchases a book, and his consumer surplus is $3. If Bob is willing to pay $8 for the book, then the price of the book must be

$5.

A competitive firm a. is a price taker, whereas a monopolist is a price maker. b. and a monopolist are price takers. c. is a price maker, whereas a monopolist is a price taker. d. and a monopolist are price makers.

A

A positive externality occurs when a. Jack receives a benefit from John's consumption of a certain good. b. Jack receives personal benefits from his own consumption of a certain good. c. Jack's benefit exceeds John's benefit when they each consume the same good. d. Jack's receives a loss from John's consumption of a certain good.

A

An oligopoly is a market in which a. there are only a few sellers, each offering a product similar or identical to the products offered by other firms in the market. b. there are many price-taking firms, each offering a product similar or identical to the products offered by other firms in the market. c. the actions of one seller in the market have no impact on the other sellers' profits. d. firms are price takers.

A

For an economy as a whole a. income must equal expenditure. b. consumption must equal income. c. consumption must equal saving. d. wages must equal profit.

A

For the purpose of calculating GDP, investment is spending on a. capital equipment, inventories, and structures, including household purchases of new housing. b. real estate and financial assets such as stocks and bonds. c. stocks, bonds, and other financial assets. d. capital equipment, inventories, and structures, excluding household purchases of new housing.

A

If a price ceiling is not binding, then a. there will be no effect on the market price or quantity sold. b. the market will be less efficient than it would be without the price ceiling. c. there will be a surplus in the market. d. there will be a shortage in the market.

A

A farmer produces oranges and sells them to Fresh Juice, which makes orange juice. The oranges produced by the farmer are called a. transitory goods. b. intermediate goods. c. inventory goods. d. final goods.

B

GDP includes the value of all a. goods and services produced within a country using primarily a survey of consumers to measure the value of goods and services. b. final goods and services produced within a country using primarily market prices to measure the value of goods and services. c. final goods and services produced within a country using primarily a survey of consumers to measure the value of goods and services. d. goods and services produced within a country using primarily market prices to measure the value of goods and services.

B

James owns two houses. He rents one house to the Johnson family for $10,000 per year. He lives in the other house. If he were to rent the house in which he lives, he could earn $12,000 per year in rent. How much do the housing services provided by the two houses contribute to GDP? a. $12,000 b. $22,000 c. $10,000 d. $0

B

The Laffer curve relates a. the price elasticity of supply to the deadweight loss of the tax. b. the tax rate to tax revenue raised by the tax. c. government welfare payments to the birth rate. d. the tax rate to the deadweight loss of the tax.

B

Which of the following statements is correct? a. Government can decide who actually pays a tax. b. Who actually pays a tax depends on the price elasticities of supply and demand. c. A tax levied on buyers will never be partially paid by sellers. d. A tax levied on sellers always will be passed on completely to buyers.

B

For which pairs of goods is the cross-price elasticity most likely to be positive? a. college textbooks and iPods b. bicycle frames and bicycle tires c. pens and pencils d. peanut butter and jelly

C

Technology spillover is one type of a. negative externality. b. producer surplus. c. positive externality. d. subsidy.

C

Thomas, a U.S. citizen, works only in Canada. The value of the output he produces is a. included in both U.S. GDP and U.S. GNP. b. included in U.S. GDP, but it is not included in U.S. GNP. c. included in U.S. GNP, but it is not included in U.S. GDP. d. included in neither U.S. GDP nor U.S. GNP.

C

When externalities exist, buyers and sellers a. neglect the external effects of their actions, but the market equilibrium is still efficient. b. do not neglect the external effects of their actions, and the market equilibrium is not efficient. c. neglect the external effects of their actions, and the market equilibrium is not efficient. d. do not neglect the external effects of their actions, and the market equilibrium is efficient.

C

Which of the following is a characteristic of a competitive market? a. There are many buyers but few sellers. b. There are many barriers to entry. c. Buyers and sellers are price takers. d. Firms sell differentiated products.

C

A price ceiling will be binding only if it is set a. either above or below the equilibrium price. b. above the equilibrium price. c. equal to the equilibrium price. d. below the equilibrium price.

D

An example of a price floor is a. any restriction on price that leads to a shortage. b. the regulation of gasoline prices in the U.S. in the 1970s. c. rent control. D. the minimum wage

D

For which of the following goods is the income elasticity of demand likely lowest? a. filet mignon steaks b. fresh fruit c. sapphire pendant necklaces D. water

D

Suppose the government increases the size of a tax by 20 percent. The deadweight loss from that tax a. increases by 20 percent. b. decreases by 20 percent. c. increases but by less than 20 percent. d. increases by more than 20 percent.

D

Which of the following is not included in U.S. GDP? a. Production of foreign citizens living in the United States that work in an oil packaging facility. b. The market value of an oil change at Speedy Lube. c. The market value of oil purchased by Ben. d. The market value of an oil change that Ben performs on his own car.

D

When a good is taxed, the burden of the tax a. falls more heavily on the side of the market that is closer to unit elastic. b. falls more heavily on the side of the market that is more elastic. c. is distributed independently of relative elasticities of supply and demand. d. falls more heavily on the side of the market that is more inelastic.

D. falls more heavily on the side of the market that is more inelastic

A tax on the buyers of sofas a. decreases the size of the sofa market. b. may increase, decrease, or have no effect on the size of the sofa market. c. increases the size of the sofa market. d. has no effect on the size of the sofa market.

a. decreases the size of the sofa market

Suppose researchers at the University of Wisconsin discover a new vitamin that increases the milk production of dairy cows. If the demand for milk is relatively inelastic, the discovery will a. raise both price and total revenues. b. lower both price and total revenues. c. raise price and lower total revenues. d. lower price and raise total revenues.

b. lower both price and total revenues

Which of the following is not an example of a public policy? a. taxes b. rent-control laws c. minimum-wage laws d. equilibrium laws

d. equilibrium laws

Tax incidence

depends on the elasticities of supply and demand

Consumer surplus

measures the benefit buyers receive from participating in a market

Income elasticity of demand measures how

the quantity demanded changes as consumer income changes.