ECON EXAM 2

(Figure: Supply Curve 2) Use the supply curve for bottles of dish soap in the graph to answer the question. If 15 bottles are sold at a price of $8, what is the producer surplus on the last unit sold?

$0

(Figure: Market for Reusable Shopping Bags) Refer to the market for reusable shopping bags that is shown in the figure. The original equilibrium price is $7 per bag. After the subsidy is implemented, the amount that buyers pay is:

$5

(Figure: Market for Engines) According to the figure, if there is international trade in this market, and the world price of an engine is $800, the quantity demanded is _____, and domestic suppliers will sell _____ units to domestic consumers.

500; 500

Assuming the normal S and D curves (not vertical or horizontal), a rise in input costs will have what effect on consumer, producer, and total surplus? Consumer surplus will rise , Producer Surplus will------, and total surplus will ------

fall; fall

The Coase theorem implies that:

given low bargaining costs and clear property rights, private individuals can achieve a socially optimal solution without the involvement of the government.

A nonexcludable good is a good in which:

it is difficult or impossible to prevent someone from using or having access to the good.

A higher income Gini coefficient means what?

less equal income distribution

Income in the United States is ...

less equally distributed than income in other high-income economies.

Normative analysis in economics:

makes prescriptions recommendations about how the economy should work.

One problem with assuming that people's willingness to pay is a measure of the marginal benefit they would receive from the product is that:

willingness to pay reflects ability to pay as well as marginal benefit.

The price elasticity of demand for a particular life-saving drug is zero, and the price elasticity of supply is 0.50. If a $10 tax is levied on producers, how much of this tax will eventually be paid by consumers?

$10.10

The graph shows the marginal social cost, demand, and supply curves in the cinnamon roll market. A corrective tax of _____ per unit will move the cinnamon roll market to the socially optimal output of _____ units.

$2; 8

A tax on buyers causes which of the following? (i) a leftward (or downward) shift of the demand curve (ii) a decrease in quantity sold (iii) an increase in the price buyers pay

(i), (ii), and (iii)

(Figure: Tax on Seller) In the graph shown, the original equilibrium price is $50. A $6 tax is placed on the seller in this market. The economic burden of this tax on the buyer is $_____.

1

In a single year, Germany can raise 100 tons of wheat or produce 1,000 boxes of daisies. In the same growing season, France can raise 50 tons of wheat or produce 750 boxes of daisies. Without trade, the opportunity cost of 1 ton of wheat in Germany is:

10 boxes of daisies.

Why would the government allow companies to buy and sell permits that allow companies to emit specified amounts of pollutants?

It ensures that emissions reductions are primarily undertaken by firms that can reduce emissions at a lower cost than others can.

M and J are going to sell cupcakes and muffins at their third annual fundraiser bake sale. In one day, M can make 40 cupcakes or 20 muffins, and J can make 15 cupcakes or 15 muffins. Based on this information, _____ has the comparative advantage in cupcakes, and _____ has the absolute advantage in muffins.

M; M

How do people's beliefs about the distribution of wealth in the United States compare to the actual distribution of wealth in the country?

People believe the distribution of wealth is more equal than it actually is.

Why might a tariff be preferred to a quota in the importing country?

Tariffs generate government revenue while quotas (normally) do not.

(Figure: Market for Printed Houses) Consider the market for environmentally friendly pre-fabricated houses that is shown in the figure. The government wants to encourage buyers to buy such houses and places a price ceiling on the market at $200,000 per house. What occurs in this market after the implementation of the price ceiling?

a shortage of 300,000 houses.

In a market system, public goods would:

be underproduced

Marginal benefit minus price equals:

consumer surplus.

(Figure: Market for TVs 2) The world price of televisions is $500. According to the figure, international trade will lead to a --------in the domestic producer surplus, an ------ in the domestic consumer surplus, and an ------ in total domestic surplus.

decrease increase decrease

Assume that the United States imposes an import quota on English wool suits. Relative to the equilibrium price that would prevail in the absence of quotas, the equilibrium price of suits in the United States will most likely _____, and the equilibrium price of suits in England will most likely _____.

increase; decrease

Suppose elasticity of demand = 0.3 and elasticity of supply = 0.8. The economic burden of a tax on this product would fall mostly on sellers .

mostly on buyers

The area on a market graph that lies below the price and above the supply curve is equal to:

producer surplus

(Figure: The Market for Grapes in California) Use Figure: The Market for Grapes in California. When the government imposes a tariff on imported grapes, the price of grapes in California rises from PW to PT, and there's a net _____ in total surplus of _____.

reduction; D + F

What word best defines this tax system: Income Income Tax $50,000 $10,000 $100,000 $15,000 $200,000 $20,000

regressive

The graph shows the marginal social benefit, marginal private benefit, and marginal private curves in the taco market. In this market, the socially optimal output would be _____, whereas the market-determined output would be _____.

six; four

The free-rider problem results from:

the inability to prevent individuals who do not pay for a good from consuming it.