Econ Final Practice

A

A $2 tax per gallon of paint placed on the buyers of paint will shift the demand curve a. downward by exactly $2. b. downward by less than $2. c. upward by exactly $2. d. upward by less than $2.

b

A command-and-control policy is another term for a a. pollution permit. b. government regulation. c. corrective tax. d. Both a and b are correct.

b

A consumption tax is a tax on a. goods but not on services. b. the amount of income that people spend. c. the amount of income that people earn. d. the amount of income that people save.

c

A corrective tax a. causes each factory to reduce pollution by the same amount. b. assigns a legal pollution limit for firms. c. places a price on the right to pollute. d. costs society more than pollution regulations.

B

A deadweight loss is a consequence of a tax on a good because the tax a. induces the government to increase its expenditures. b. induces buyers to consume less, and sellers to produce less. c. increases the equilibrium price in the market. d. imposes a loss on buyers that is greater than the loss to sellers.

c

A free rider is a person who a. will only purchase a product on sale.b. receives the benefit of a good but avoids paying for it. c. can produce a good at no cost. d. rides public transit regularly.

b

A good that is rival in consumption and not excludable is called a a. public good. b. common resource. c. club good. d. private good.

a

A negative externality a. is an adverse impact on a bystander. b. causes the product in a market to be under-produced. c. is an adverse impact on market participants. d. is present in markets where the good or service does not have any impact on bystanders.

c

A positive externality a. is a benefit to the producer of the good. b. is a benefit to the consumer of the good. c. is a benefit to someone other than the producer and consumer of the good. d. results in an optimal level of output.

D

A seller's willingness to sell is a. measured by the seller's cost of production. b. related to her supply curve, just as a buyer's willingness to buy is related to his demand curve. c. less than the price received if producer surplus is a positive number. d. All of the above are correct.

d

A tariff is a a. limit on how much of a good can be exported. b. limit on how much of a good can be imported. c. tax on an exported good. d. tax on an imported good.

$4000 (Answer found by multiplying the tax per unit by the number of units sold)

A tax of four dollars is imposed on each bag of potato chips that is sold. After the tax is imposed, 1000 bags of chips are sold. How many dollars of tax revenues does the tax generate?

C

Abraham drinks Mountain Dew. He can buy as many cans of Mountain Dew as he wishes at a price of $0.55 per can. On a particular day, he is willing to pay $0.95 for the first can, $0.80 for the second can, $0.60 for the third can, and $0.40 for the fourth can. Assume Abraham is rational in deciding how many cans to buy. His consumer surplus is a. $0.50. b. $0.60. c. $0.70. d. $1.00.

a. 40 b. $10.00 c. $80.00. d. 40 e. $5 f. $200 g. It would fall from $80 to only $20.h. It would fall from $120 to only $30. i. When quantities are greater than the equilibrium quantity, the marginal value to buyers is lower than the marginal cost to buyers, causing the surplus to fall. When the quantity is lower than the equilibrium quantity, the marginal cost to sellers is lower than the marginal value to buyers. Under these conditions, when total quantity increases, the surplus will increase until reaching equilibrium quantity.

Answer the following questions based on the graph that represents J.R.'s demand for ribs per week at Judy's Rib Shack. a. At the equilibrium price, how many ribs would J.R. be willing to purchase? b. How much is J.R. willing to pay for 20 ribs? c. What is the magnitude of J.R.'s consumer surplus at the equilibrium price? d. At the equilibrium price, how many ribs would Judy be willing to sell? e. How high must the price of ribs be for Judy to supply 20 ribs to the market? f. At the equilibrium price, what is the magnitude of total surplus in the market? g. If the price of ribs rose to $10, what would happen to J.R.'s consumer surplus? h. If the price of ribs fell to $5, what would happen to Judy's producer surplus? i. Explain why the graph that is shown verifies the fact that the market equilibrium (quantity) maximizes the sum of producer and consumer surplus.

a

Assume that your roommate is very messy. Suppose she gets a $25 benefit from being messy but imposes a $50 cost on you. The Coase theorem would suggest that an efficient solution would be for you to a. pay your roommate at least $25 but no more than $50 to clean up after herself. b. pay your roommate at least $51 to clean up after herself. c. charge your roommate at least $25 to have you clean up after her. d. charge your roommate at least $50 but no more than $100 to keep you from complaining about the mess.

C

Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book? a. $6. b. $2. c. $8. d. $4.

D

Consumer surplus a. is the amount a buyer pays for a good minus the amount the buyer is willing to pay for it. b. is represented on a supply-demand graph by the area below the price and above the demand curve. c. measures the benefit sellers receive from participating in a market. d. measures the benefit buyers receive from participating in a market.

D

Consumer surplus is a good measure of economic welfare if policymakers want to a. maximize total benefit. b. minimize deadweight loss. c. respect the preferences of sellers. d. respect the preferences of buyers.

A

Deadweight loss measures the loss a. in a market to buyers and sellers that is not offset by an increase in government revenue. b. in revenue to the government when buyers choose to buy less of the product because of the tax. c. of equality in a market due to government intervention. d. of total revenue to business firms due to the price wedge caused by the tax.

c

Dioxin emission that results from the production of paper is a good example of a negative externality because a. self-interested paper firms are generally unaware of environmental regulations. b. there are fines for producing too much dioxin. c. self-interested paper producers will not consider the full cost of the dioxin pollution they create. d. toxic emissions are the best example of an externality.

A

Efficiency is attained when a. total surplus is maximized. b. producer surplus is maximized. c. all resources are being used.d. consumer surplus is maximized and producer surplus is minimized.

a

Externalities tend to cause markets to be a. inefficient. b. unequal. c. unnecessary. d. overwhelmed.

a

Figure 9-10. The figure applies to Mexico and the good is rifles. a. P0 and Q0. b. P1 and Q1. c. P2 and Q2. d. P1 and Q0

a

For any country, if the world price of copper is higher than the domestic price of copper without trade, that country should a. export copper, since that country has a comparative advantage in copper. b. import copper, since that country has a comparative advantage in copper. c. neither export nor import copper, since that country cannot gain from trade. d. neither export nor import copper, since that country already produces copper at a low cost compared to other countries.

A

If a consumer is willing and able to pay $20 for a particular good and if he pays $16 for the good, then for that consumer, consumer surplus amounts to a. $4. b. $16. c. $20. d. $36.

B

PlayStations and PlayStation games are complementary goods. A technological advance in the production of PlayStations will a. increase consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games. b. increase consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. c. decrease consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. d. decrease consumer surplus in the market for Pl

d

Refer to Figure 10-20 . The graph depicts the market for fertilizer. What is the socially optimal price of fertilizer?a. $100 b. $200 c. $250 d. $300

b

Refer to Figure 10-20. The graph depicts the market for fertilizer. This market would benefit from aa. subsidy on fertilizer equal to $100. b. tax on fertilizer equal to $100. c. tax on fertilizer equal to $50. d. subsidy on fertilizer equal to $50.

c

Refer to Figure 10-20. The graph depicts the market for fertilizer. Without any government regulation, how much fertilizer will be produced? a. 100 units b. 200 units c. 250 units d. 300 units

a.) $11.50 b.) $1.50

Refer to Figure 6-33. a.) Suppose a $3 per-unit tax is imposed on the sellers of this good. What price will buyers pay for the good after the tax is imposed? b.) Refer to Figure 6-33. Suppose a $3 per-unit tax is imposed on the sellers of this good. How much is the burden of this tax on the sellers in this market?

D

Refer to Figure 7-10. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers? a. BCG b. ACH c. DGH d. ABGD

B

Refer to Figure 7-10. Which area represents producer surplus when the price is P2? a. BCG b. ACH c. ABGD d. AHGB

B

Refer to Figure 7-11. If the demand curve is D and the supply curve shifts from S' to S, what is the change in producer surplus? a. Producer surplus increases by $625. b. Producer surplus increases by $1,875. c. Producer surplus decreases by $625. d. Producer surplus decreases by $1,875.

A

Refer to Figure 7-11. If the supply curve is S', the demand curve is D, and the equilibrium price is $150, what is the producer surplus? a. $625 b. $1,250 c. $2,500 d. $5,000

A

Refer to Figure 7-12. If the equilibrium price is $200, what is the producer surplus? a. $7,500 b. $3,750 c. $10,000 d. $15,000

B

Refer to Figure 7-14. If the government imposes a price ceiling of $50 in this market, then the new producer surplus will be a. $200. b. $100. c. $125. d. $250.

B

Refer to Figure 7-15. When the price rises from P1 to P2, what area represents the increase in producer surplus? a. A b. A+B c. A+B+C d. G

B

Refer to Figure 7-16. If the price of the good is $300, then producer surplus amounts to a. $100. b. $200. c. $300. d. $400.

C

Refer to Figure 7-17. If the demand curve is D and the supply curve shifts left from S to S', what is the change in producer surplus when comparing the new equilibrium with the original equilibrium? a. Producer surplus increases by $225. b. Producer surplus increases by $675. c. Producer surplus decreases by $225. d. Producer surplus decreases by $675.

A

Refer to Figure 7-19. At the equilibrium price, consumer surplus is a. $100. b. $200. c. $50. d. $450.

C

Refer to Figure 7-19. If the government imposes a price floor of $55 in this market, then total surplus will be a. $137.50. b. $125.00. c. $187.50. d. $275.00.

A

Refer to Figure 7-24. At equilibrium, consumer surplus is a. $18. b. $36. c. $54. d. $72.

D

Refer to Figure 7-24. If 4 units of the good are produced and sold, then a. producer surplus is greater than consumer surplus. b. consumer surplus is $16. c. total surplus is minimized. d. total surplus is not maximized.

A

Refer to Figure 7-24. If the government imposes a price ceiling at $12, then producer surplus isa. producer surplus is greater than consumer surplus. b. consumer surplus is $16. c. total surplus is minimized. d. total surplus is not maximized

C

Refer to Figure 7-25. Suppose the government imposes a price floor of $28 in this market. If the sellers with the lowest cost are the ones who sell the good and the government does not purchase any excess units produced, then total surplus will be a. $400. b. $800. c. $1,120. d. $1,184.

CS=$312.50, PS=$312.50, SS=$625.

Refer to Figure 7-32. How much are consumer surplus, producer surplus, and total surplus at the market equilibrium price?

CS=$400, PS= $200, and SS=$600.

Refer to Figure 7-32. If the government imposed a price ceiling at $20 in this market, how much are consumer surplus, producer surplus, and total surplus?

CS=$900.

Refer to Figure 7-34. Suppose the government imposes a price floor at $10 per unit in this market. With the price floor, how much is total consumer surplus?

B

Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The price that buyers pay is a. P0. b. P2. c. P5. d. P8.

B

Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The size of the tax is a. P0-P2. b. P2-P8. c. P2-P5. d. P5-P8.

D

Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. With the tax, the producer surplus is a. (P5-0) x Q5. b. 1/2 x (P5-0) x Q5. c. (P8-0) x Q2. d. 1/2 x (P8-0) x Q2.

B

Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. With the tax, the total surplus is a. [1/2 x (P0-P5) x Q5] + [1/2 x (P5-0) x Q5]. b. [1/2 x (P0-P2) x Q2] +[(P2-P8) x Q2] + [1/2 x (P8-0) x Q2]. c. (P2-P8) x Q2. d. 1/2 x (P2-P8) x (Q5-Q2).

B

Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. Without the tax, the producer surplus isa. (P5-0) x Q5. b. 1/2 x (P5-0) x Q5. c. (P8-0) x Q2. d. 1/2 x (P8-0) x Q2.

A

Refer to Figure 8-11. Suppose Q 1 = 4; Q2 = 7; P 1 = $6; P 2 = $8; and P 3 = $10. Then the deadweight loss of the tax isa. $6. b. $8. c. $9. d. $12.

A

Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The amount of deadweight loss resulting from this tax is a. $7.50. b. $15.00. c. $22.50. d. $45.00.

b

Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The loss of producer surplus resulting from this tax is a. $5.50. b. $17.50. c. $22.50. d. $45.00

B

Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The tax causes the price paid by buyers to a. decrease by $3. b. increase by $2. c. decrease by $1. d. increase by $6. 11. Refer to Figure 8-12. Su

d

Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The consumer surplus after this tax is a. $80. b. $40. c. $30. d. $10.

a

Refer to Figure 8-14. Which of the following combinations will minimize the deadweight loss from a tax? a. supply 1 and demand 1 b. supply 2 and demand 2 c. supply 1 and demand 2 d. supply 2 and demand 1

a

Refer to Figure 8-15. Panel (a) and Panel (b) each illustrate a $4 tax placed on a market. In comparison to Panel (a), Panel (b) illustrates which of the following statements? a. When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic. b. When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic. c. When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic. d. When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic.

c

Refer to Figure 8-6. The tax results in a deadweight loss that amounts to a. $600. b. $900. c. $1,500. d. $1,800.

d

Refer to Figure 8-6. When the government imposes the tax in this market, tax revenue isa. $600. b. $900. c. $1,500. d. $3,000.

b

Refer to Figure 8-6. When the tax is imposed in this market, consumer surplus is a. $600. b. $900. c. $1,500. d. $3,000.

d

Refer to Figure 8-6. Without a tax, consumer surplus in this market is a. $1,500. b. $2,400. c. $3,000. d. $3,600.

c

Refer to Figure 9-1. When trade in coffee is allowed, consumer surplus in Guatemalaa. increases by the area B + D. b. increases by the area C + F. c. decreases by the area B + D. d. decreases by the area D + G.

c

Refer to Figure 9-1. With trade, Guatemala will a. export 22 units of coffee. b. export 10 units of coffee. c. import 30 units of coffee. d. import 12 units of coffee.

d

Refer to Figure 9-10. When trade takes place, the quantity Q2 - Q1 is a. the number of rifles bought and sold in Mexico. b. the number of rifles produced in Mexico. c. the number of rifles exported by Mexico. d. the number of rifles imported by Mexico

b

Refer to Table 10-1. What is the equilibrium quantity of output in the market? a. 2 units b. 3 units c. 4 units d. 5 units

c

Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally. If the residents decide to build a park with size equal to the number of acres that maximizes total surplus from the park, how much total surplus will Sophia receive? a. -$5 b. -$2 c. $0 d. $2

c

Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally. If the residents vote to determine the size of park to build, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the largest park size for which the majority of residents would vote "yes?"a. 0 acres b. 1 acre c. 2 acres d. 3 acres

a

Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally. To maximize his own surplus, how many acres would Cedric like Springfield to build? a. 0 acres b. 1 acrec. 2 acres d. 3 acres

c

Refer to Table 11-1. Suppose the cost to build the park is $24 per acre. How many acres should the park be to maximize total surplus from the park in Springfield? a. 1 acres b. 2 acres c. 3 acres d. 4 acres

b

Refer to Table 11-6. Suppose the cost of cleaning the lake is $40 per hour, and that the residents have agreed to split the cost of cleaning the lake equally. If the residents vote to determine the number of hours spent cleaning the lake, basing their decision solely on what maximizes their own surplus, what is the most number of hours for which all four residents would vote "yes?"a. 0 hours b. 1 hour c. 2 hours d. 3 hours

c

Refer to Table 11-6. Suppose the cost to clean the lake is $20 per hour. How many hours should be spent cleaning the lake to maximize total surplus for the residents in Widgetapolis? a. 4 hours b. 5 hours c. 6 hours d. 7 hours

c

Refer to Table 11-6. Suppose the cost to clean the lake is $40 per hour and that the residents have agreed to split the cost of cleaning the lake equally. If it was decided that the lake will be cleaned for the number of hours that maximizes total surplus of Widgetapolis, how much individual surplus will James receive in total? a. -$20 b. -$10 c. $0 d. $100

c

Refer to Table 11-6. Suppose the cost to clean the lake is $40 per hour and that the residents have agreed to split the cost of cleaning the lake equally. To maximize his own surplus, how many hours of cleaning would John like to have completed?a. 2 hours b. 3 hours c. 4 hours d. 5 hours

B

Refer to Table 7-1. If the price of the product is $130, then who would be willing to purchase the product? a. Calvin b. Calvin and Sam c. Calvin, Sam, and Andrew d. Calvin, Sam, Andrew, and Lori

B

Refer to Table 7-10. If the market price is $1,000, the producer surplus in the market is a. $1000. b. $300. c. $1,700. d. $700.

A

Refer to Table 7-11. If Evan, Selena, and Angie sell the good, and the resulting producer surplus is $300, then the price must have been a. $200. b. $300. c. $450. d. $600.

D

Refer to Table 7-16. The equilibrium price is a. $10.00. b. $8.00. c. $6.00. d. $4.00.

CS=$45.

Refer to Table 7-19. How much is total consumer surplus at the equilibrium price in this market?

c

Refer to figure 9-26. After opening the U.S. baseball market to international trade, total surplus is a. $4800.b. $5400. c. $6000. d. $1200.

d

Refer to figure 9-26. After the opening of the baseball market to international trade, producer surplus in the U.S. a. increases by the area G. b. decreases by the area E + F. c. decreases by the area B + E. d. increases by the area B + E + G.

c

Refer to figure 9-26. Consumer surplus in the U.S. prior to the opening of the baseball market to international trade is the area a. A b. A + B + C c. A + B + E d. C + F

b

Refer to figure 9-26. The figure shows that a. the U.S. will import baseballs when the market opens to international trade. b. the U.S. will export baseballs when the market opens to international trade. c. the U.S. will be a net loser when the market for baseballs opens to international trade. d. if the U.S. opens its baseball market to international trade, the price will plummet.

d

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 a. $80. b. $30. c. $20.

d

Sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the a. tax is placed on the sellers of the product. b. tax is placed on the buyers of the product. c. supply of the product is more elastic than the demand for the product. d. demand for the product is more elastic than the supply of the product.

B

Suppose that Firms A and B each produce high-resolution computer monitors, but Firm A can do so at a lower cost. Cassie and David each want to purchase a high-resolution computer monitor, but David is willing to pay more than Cassie. Which of the following market outcomes is efficient? a. Firm A produces a monitor that Cassie buys. David does not purchase a monitor. b. Firm A produces a monitor that David buys. c. Firm B produces a monitor that Cassie buys. David does not purchase a monitor. d. Firm B produces a monitor that David buys.

a

Suppose that installing an overhead pedestrian walkway would cost a college town $150,000. The walkway is expected to reduce the risk of fatality by 3 percent, and the cost of a human life is estimated at $10 million. The town should a. install the walkway because the estimated benefit is twice the cost. b. install the walkway because the estimated benefit equals the cost. c. not install the walkway, since the cost is twice the estimated benefit. d. install the walkway, since the cost of even a single life is too great not to take action.

B

The numbers in Table 7-1 reveal the maximum willingness to pay for a ticket to a Chicago Cubs vs. St. Louis Cardinal's baseball game at Wrigley Field. If tickets sell for $40 each, then what is the total consumer surplus in the market? a. $90. b. $30. c. $70. d. $110.

C

Total surplus in a market is equal to a. value to buyers - amount paid by buyers. b. amount received by sellers - costs of sellers. c. value to buyers - costs of sellers. d. amount received by sellers - amount paid by buyers.

a. 5$ b. 3$ c. 2$ d. 1$ e. 7$ f. 4$ g. The level of market activity has fallen from 10 units sold at equilibrium to 8 units.

Using the graph shown, answer the following questions: a. What was the equilibrium price in this market before the tax? b. What is the amount of the tax? c. How much of the tax will the buyers pay? d. How much of the tax will the sellers pay? e. How much will the buyer pay for the product after the tax is imposed? f. How much will the seller receive after the tax is imposed? g. As a result of the tax, what has happened to the level of market activity?

A

What happens to consumer surplus in the iPod market if iPods are normal goods and buyers of iPods experience an increase in income? a. Consumer surplus decreases. b. Consumer surplus remains unchanged. c. Consumer surplus increases. d. Consumer surplus may increase, decrease, or remain unchanged.

a

When a country allows trade and becomes an exporter of a good, a. the gains of the domestic producers of the good exceed the losses of the domestic consumers of the good. b. the gains of the domestic consumers of the good exceed the losses of the domestic producers of the good. c. the losses of the domestic producers of the good exceed the gains of the domestic consumers of the good. d. the losses of the domestic consumers of the good exceed the gains of the domestic producers of the good

a

When the government imposes taxes on buyers or sellers of a good, society a. loses some of the benefits of market efficiency. b. gains efficiency but loses equality. c. is better off because the government's tax revenues exceed the deadweight loss. d. moves from an elastic supply curve to an inelastic supply curve.