Econ Ch7&8 quiz

Refer to Figure 7-7. If the government imposes a price ceiling of $55 in this market, then total surplus will be $187.50. $266.67. $125.00. $250.00.

$250.00.

Refer to Figure 7-2. If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by $600. $200. $400. $800.

$600.

Refer to Figure 7-5. If the supply curve is S and the demand curve shifts from D to D', what is the increase in producer surplus due to new producers entering the market? $3,125 $5,625 $625 $2,500

$625

Refer to Figure 7-5. If the supply curve is S', the demand curve is D, and the equilibrium price is $150, what is the producer surplus? $2,500 $5,000 $625 $1,250

$625

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

Calvin, Sam, and Andrew

Scenario 8-1 Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week. Refer to Scenario 8-1. Assume Erin is required to pay a tax of $40 when she hires someone to clean her house for a week. Which of the following is correct? Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline. Ernesto will continue to clean Erin's house, but his producer surplus will decline. Erin will now clean her own house. Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase.

Ernesto will continue to clean Erin's house, but his producer surplus will decline.********************

Refer to Figure 8-1. Suppose the government imposes a tax of P'-P''' (note: P' is the highest price shown in the figure). Total surplus before the tax is measured by the area I + J + K + L + M + Y. J + K + L + M. I + Y. L + M + Y.

I + J + K + L + M + Y.

If an allocation of resources is efficient, then producer surplus is maximized. all potential gains from trade among buyers are sellers are being realized. consumer surplus is maximized. the allocation achieves equality as well.

all potential gains from trade among buyers are sellers are being realized.

Refer to Figure 8-1. Suppose the government imposes a tax of P'-P''' (note: P' is the highest price shown in the figure). The area measured by J + K + I represents producer surplus before the tax. consumer surplus before the tax. consumer surplus after the tax. producer surplus after the tax.

consumer surplus before the tax.

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it minimizes the expenditure of buyers. maximizes the combined welfare of buyers and sellers. maximizes costs of the seller. maximizes tax revenue for the government.

maximizes the combined welfare of buyers and sellers.

Refer to Figure 7-8. Total surplus can be measured as the area JNML. JNK. JNL. JRL.

not JNK.***********

Moving production from a high-cost producer to a low-cost producer will raise producer surplus but lower consumer surplus. lower producer surplus. lower total surplus. raise total surplus.

raise total surplus.

Refer to Figure 8-1. Suppose the government imposes a tax of P'-P''' (note: P' is the highest price shown in the figure). The area measured by K + L represents tax revenue. consumer surplus before the tax. total surplus before the tax. producer surplus after the tax.

tax revenue.

Producer surplus is the opportunity cost of production minus the cost of producing goods that go unsold. measured using the demand curve for a good. always a negative number for sellers in a competitive market. the amount a seller is paid minus the cost of production.

the amount a seller is paid minus the cost of production.

Scenario 8-1 Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week. Refer to Scenario 8-1. If Erin pays Ernesto $90 to clean her house, Erin's consumer surplus is $20. $30. $80. $10.

$10.

Refer to Figure 8-1. Suppose the government imposes a tax of P'-P''' (note: P' is the highest price shown in the figure). Total surplus after the tax is measured by the area I + J + K + L + M + Y. J + K + L + M. I + Y + B. I + Y.

J + K + L + M.

Suppose a tax of $5 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units. The tax decreases consumer surplus by $450 and decreases producer surplus by $300. The deadweight loss from the tax is (hint: total deadweight loss is equal to the decrease in consumer and producer surplus after adjusting for total tax revenue generated). $250. $1,000. $750. $500.

$250.

When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will increase tax revenue and decrease the deadweight loss. increase tax revenue and increase the deadweight loss. decrease tax revenue and increase the deadweight loss. decrease tax revenue and decrease the deadweight loss.

increase tax revenue and decrease the deadweight loss.

Refer to Figure 8-1. Suppose the government imposes a tax of P'-P''' (note: P' is the highest price shown in the figure). The area measured by M represents producer surplus after the tax. producer surplus before the tax. consumer surplus before the tax. consumer surplus after the tax.

producer surplus after the tax.

Scenario 8-1 Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week. Refer to Scenario 8-1. If Ernesto cleans Erin's house for $90, Ernesto's producer surplus is $30. $20. $80. $10.

$20.

If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the price of the good will fall due to market forces. consumer does not purchase the good. market is not a competitive market. consumer has consumer surplus of $2 if he or she buys the good.

consumer does not purchase the good.

Refer to Figure 8-1. Suppose the government imposes a tax of P'-P''' (note: P' is the highest price shown in the figure). The area measured by I + Y represents the loss in producer surplus due to the tax. deadweight loss due to the tax. loss in consumer surplus due to the tax. total surplus before the tax.

deadweight loss due to the tax.

When a tax is imposed on a good, the equilibrium quantity of the good always decreases. demand curve for the good always shifts. supply curve for the good always shifts. amount of the good that buyers are willing to buy at each price always remains unchanged.

equilibrium quantity of the good always decreases.

If the labor supply curve is very elastic, a tax on labor results in a large tax burden on the firms that hire labor. has a large deadweight loss. has a relatively small impact on the number of hours that workers choose to work. raises enough tax revenue to offset the loss in welfare.

has a large deadweight loss.

Suppose the federal government doubles the gasoline tax. The deadweight loss associated with the tax less than doubles. more than doubles. also doubles.

more than doubles.

Refer to Figure 8-1. Suppose the government imposes a tax of P'-P''' (note: P' is the highest price shown in the figure). The area measured by L + M + Y represents producer surplus after the tax. consumer surplus after the tax. producer surplus before the tax. consumer surplus before the tax.

producer surplus before the tax.

We can say that the allocation of resources is efficient if consumer surplus is maximized. total surplus is maximized. sellers' costs are minimized. producer surplus is maximized.

total surplus is maximized.

When a good is taxed, only buyers are made worse off, because they ultimately bear the burden of the tax. only sellers are made worse off, because they ultimately bear the burden of the tax. neither buyers nor sellers are made worse off, since tax revenue is used to provide goods and services that would otherwise not be provided in a market economy. both buyers and sellers of the good are made worse off.

both buyers and sellers of the good are made worse off.

Refer to Figure 7-2. At the equilibrium price, consumer surplus is $1,400. $1,600. $800. $700.

$800

Refer to Table 7-2. Who experiences the largest loss of consumer surplus when the price of the good increases from $20 to $22? Wilbur Ming-la Quilana All three of these buyers experience the same loss of consumer surplus.

All three of these buyers experience the same loss of consumer surplus.

Refer to Figure 7-5. If the supply curve is S and the demand curve shifts from D to D', what is the increase in producer surplus to existing producers? $2,500 $5,625 $625 $3,125

$3,125

Allen tutors in his spare time for extra income. Buyers of his service are willing to pay $40 per hour for as many hours Allen is willing to tutor. On a particular day, he is willing to tutor the first hour for $10, the second hour for $18, the third hour for $28, and the fourth hour for $40. Assume Allen is rational in deciding how many hours to tutor. His producer surplus is $12. $56. $40. $64.

$64.

Refer to Figure 7-4. Which area represents producer surplus when the price is P1? DGH ABGD ACH BCG

BCG

Refer to Figure 8-1. Suppose the government imposes a tax of P'-P''' (note: P' is the highest price shown in the figure). The area measured by J represents consumer surplus before the tax. producer surplus after the tax. producer surplus before the tax. consumer surplus after the tax.

consumer surplus after the tax.

The deadweight loss from a tax per unit of good will be smallest in a market with inelastic supply and inelastic demand. inelastic supply and elastic demand. elastic supply and inelastic demand. elastic supply and elastic demand.

inelastic supply and inelastic demand.

Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, producer surplus would necessarily increase even if the higher price resulted in a surplus of widgets. would necessarily decrease because the higher price would create a surplus of widgets. would be unaffected. might increase or decrease.

might increase or decrease.