Econ Exam 2
A binding minimum wage causes the quantity of labor demanded to exceed the quantity of labor supplied.
False
A binding price ceiling causes quantity demanded to be less than quantity supplied.
False
A binding price floor causes a shortage in the market.
False
A price ceiling is a legal minimum on the price at which a good or service can be sold.
False
A tax of $1 on sellers always increases the equilibrium price by $1.
False
A tax on buyers shifts the demand curve to the right.
False
A technology spillover is a type of negative externality.
False
All externalities impose a cost on others.
False
Barking dogs cannot be considered an externality because externalities must be associated with some form of market exchange.
False
Buyers and sellers always share the burden of a tax equally.
False
Consumer surplus can be measured as the area between the demand curve and the supply curve.
False
A tax on a market with elastic demand and elastic supply will shrink the market more than a tax on a market with inelastic demand and inelastic supply will shrink the market.
True
A tax on buyers usually causes buyers to pay more for the good and sellers to receive less for the good than they did before the tax was levied.
True
A tax on golf clubs will cause buyers of golf clubs to pay a higher price, sellers of golf clubs to receive a lower price, and fewer golf clubs to be sold.
True
A tax on sellers and an increase in input prices affect the supply curve in the same way.
True
A tax on sellers shifts the supply curve but not the demand curve.
True
A tax on the sellers of coffee will increase the price of coffee paid by buyers,
decrease the effective price of coffee received by sellers, and decrease the equilibrium quantity of coffee
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 $1.50 tax levied on the buyers of pomegranate juice will shift the demand curve
downward by exactly $1.50
If the government removes a binding price ceiling from a market, then the price paid by buyers will
increase, and the quantity sold in the market will increase
A binding price ceiling causes a shortage in the market.
True
A congestion toll imposed on a highway driver to force the driver to take into account the increase in travel time she imposes on all other drivers is an example of internalizing the externality.
True
A corrective tax places a price on the right to pollute.
True
A market for pollution permits can efficiently allocate the right to pollute by using the forces of supply and demand.
True
A price ceiling set above the equilibrium price is not binding.
True
A price floor set above the equilibrium price causes a surplus in the market.
True
A price floor set above the equilibrium price is binding.
True
A tax burden falls more heavily on the side of the market that is less elastic.
True
A tax of $1 on sellers shifts the supply curve upward by exactly $1.
True
According to the Coase theorem, if private parties can bargain without cost, then the private market will solve the problem of externalities.
True
Buyers and sellers neglect the external effects of their actions when deciding how much to demand or supply.
True
Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually has to pay for it.
True
Consumer surplus measures the benefit to buyers of participating in a market.
True
If the demand curve is very elastic and the supply curve is very inelastic in a market, then the sellers will bear a greater burden of a tax imposed on the market, even if the tax is imposed on the buyers.
True
If the equilibrium price of an airline ticket is $400 and the government imposes a price floor of $500 on airline tickets, then fewer airline tickets will be sold than at the market equilibrium.
True
Price controls can generate inequities.
True
Producer surplus is the amount a seller is paid minus the cost of production.
True
Producer surplus measures the benefit to sellers from receiving a price above their costs.
True
Total surplus = Value to buyers - Costs to sellers.
True
When a binding price ceiling is imposed on a market for a good, some people who want to buy the good cannot do so.
True
A price ceiling is
a legal maximum on the price at which a good can be sold
A tax on the buyers of cameras encourages
buyers to demand a smaller quantity at every price
Negative externalities lead markets to produce
greater than efficient output levels and positive externalities lead markets to produce smaller than efficient output levels
An externality is the uncompensated impact of
one person's actions on the well-being of a bystander
A legal minimum on the price at which a good can be sold is called a
price floor
If a nonbinding price floor is imposed on a market, then the
quantity sold in the market will stay the same
A benevolent social planner would prefer that the output of good x be increased from its current level if, at the current level of output of good x,
social cost = private cost = private value < social value
Producer surplus directly measures
the well-being of sellers
