Econ Micro exam 2
The consumer surplus with the tax is
$2,000
At the equilibrium price, producer surplus is
$2,500
What is the consumer surplus if the price is $100
$2,500
The total surplus without the tax is
$20,000
The price paid by buyers after the tax is imposed is
$24
The per-unit burden of the tax on the sellers is
$2
The loss of producer surplus as a result of the tax is
$3
If a consumer places a value of $20 on a particular good and if the price of the good is $25, then the
Consumer does not purchase the good.
Suppose the government imposes a tax of P'-P'''. The area measured by J represents
Consumer surplus after the tax
When a tax is placed on the buyers of a product, buyers pay
More and sellers receive less than they did before the tax.
Suppose that a tax is placed on books. If the sellers pay the majority of the tax, then we know that the
Supply is more inelastic than the demand.
Suppose the government imposes a tax of P'-P'''. The area measured by K+L represents
Tax revenue
When we move upward and to the left along a linear, downward-sloping demand curve, price elasticity of demand
always becomes larger
When the price is P1, consumer surplus is
A+B+C
Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 4 if the price is
$1,400
The tax results in a dead weight loss that amounts to
$1,500
In the after-tax equilibrium, government collects
$1,680 in tax revenue; of this amount, $1,260 represents a burden on buyers and $420 represents a burden on sellers
Chad is willing to pay $5 to get his first cup of morning latte. He buys a cup from a vendor selling latte for $3.75 per cup. Chad's consumer surplus is
$1.25
The amount of tax revenue received by the government is
$10,000
Using the midpoint method, in which range is demand most elastic?
$12 to $15
The producer surplus without the tax is
$12,000
Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $250. His consumer surplus is
$150
At the equilibrium price, total surplus is
$3,500
At Nick's Bakery, the cost to make a cheese danish is $1.50 per danish. As a result of selling ten danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his danishes for
$3.50
If the government imposes a price ceiling of $50 in this market, then producer surplus will decrease by
$300
The per-unit burden of the tax on sellers is
$300
If the government imposes a price floor of $100 in this market, then consumer surplus will decrease by
$325
The loss of consumer surplus as a result of the tax is
$4.50
If the price is $20, then consumer surplus in the market is
$45, and Quilana, Wilbur, and Ming-la purchase the good
The amount of tax revenue received by the government is
$5
The amount of dead weight loss as a result of the tax is
$5,000
Which of the following price ceilings would be binding in this market?
$6
At which price would a price floor be binding?
$7
If the equilibrium price is $200, what is the producer surplus?
$7,500
At the equilibrium price, consumer surplus is
$800
Using the midpoint method, the income elasticity of demand for good Y is
-2.33, and good Y is an inferior good.
Using the midpoint method, what is the price elasticity of demand between $0 an $3?
0.11
If the price elasticity of demand for a good is 0.2, then a 3 percent decrease in price results in a
0.6 percent increase in the quantity demanded.
When the price of a bracelet was $28 each, the jewelry shop sold 128 per month. When it raised the price to $32 each, it sold 112 per month. Using the midpoint method, the price elasticity of demand for bracelets is
1
Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000 packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. using the midpoint method, the price elasticity of demand is about.
1, 43, and an increase in the price will cause hotels' total revenue to decrease.
Using the midpoint method, if the price falls from $150 to $100, the absolute value of the price elasticity of demand is
1.1
If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about
1.60, and supply is elastic.
Using the midpoint method, what is the price elasticity of supply between $4 and $5?
1.80
If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is
2
A manufacturer produces 400 units when the market price is $10 per unit and produce 600 units when the market price is $12 per unit. Using the midpoint method, for this range of prices, the price elasticity of supply is about
2.2
Using the midpoint method, the price elasticity of demand between point X and Y is
2.5
If the price elasticity of demand for a good is 2.0, then a 10 percent increase in price results in a
20 percent decrease in the quantity demanded.
Health's income elasticity of demand for concerts is 2. All else equal, this means that if his income increases by 10 percent, he will purchase tickets for
20 percent more concerts.
How many units of the good are sold after the imposition of the price floor?
3
Studies indicate that the price elasticity of demand for cigarettes is about 0.4. A government policy aimed at reducing smoking changed the price of a pack of cigarettes from $2 to $6. According to the midpoint method, the government policy should have reduced smoking by
40%
How many units of the good are sold after the imposition of the price floor?
5
Kristi and Rebecca sell lemonade on the corner. It costs them 7 cents to make each cup. On a certain day, they sell 40 cups. Their producer surplus for the amounts of $19.20. Kristi and Rebecca sold each cup for
55 cents
In which of these instances is demand said to be perfectly inelastic?
A decrease in price of 2% causes an increase in quantity demanded of 0%
Which of the following would likely have the smallest dead weight loss relative to the tax revenue?
A head tax (that is, a tax everyone must pay regardless of what one does or buys)
A price ceiling is
A legal maximum on the price at which a good can be sold
If a binding price floor is imposed on the market for eBooks, then
A surplus of eBooks will develop
A price floor will be binding only if it is set
Above the equilibrium price.
When a tax is imposed in a market, it will
Affect the behavior of both buyers and sellers.
Suppose the equilibrium price of a physical examination by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling,
All of the above are correct
The price ceiling
All of the above are correct
A price floor is
All of the above are correct.
If government imposes a price floor at $9, then the price floor causes
All of the above are correct.
The incidence of a tax is
Always determined by the interaction of the demand and supply side of the market
When demand is inelastic, an increase in price will cause
An increase in total revenue
The dead weight loss of the tax is represented by the
Area of the triangle bounded by the points A.B. and C
A price ceiling is binding when it is set
Below the equilibrium price, causing a shortage.
A surplus results when a
Binding price floor is imposed on a market.
A good will have a more inelastic demand, the
Broader the definition of the market
If demand is price inelastic, then
Buyers do not respond much to a change in price
When the price rises from P1 to P2, which of the following statements in not true?
Buyers place a higher value on the good after the price increase.
If a tax is imposed on a market with inelastic demand and elastic supply, then
Buyers will bear most of the burden of the tax.
If the price of the product is $130, then who would be willing to purchase the product
Calvin and Sam
If the price is $1,150, who would be willing to supply the product?
Carlos, Dianne, and Evaline
The original tax can be represented by the vertical distance AB. Suppose the government is deciding whether to lower the tax to CD or raise it to FG. Which of the following statements is correct?
Compared to the original tax, the larger tax will decrease tax revenue and increase dead weight loss.
If the price of Vanilla Coke is $6.90, who will purchase the good?
David and Laura
The decrease in total surplus that results from a market distortion, such as a tax, is called a
Dead weight loss
The imposition of the tax causes the price received by sellers to
Decrease by $2
The imposition of the tax causes the quantity sold to
Decrease by 1 unit
If the government levies a $500 tax per car on sellers of cars, then the price received by sellers of cars would
Decrease by less than $500
If the government changed the per-unit tax from $5.00 to $7.50, then the price paid by buyers would be $10.50, the price received by sellers would be $3, and the quantity sold in the market would be 0.5 units. Compared to the original tax rate, this higher tax rate would
Decrease government revenue and increase the dead weight loss from the tax
When the price falls from P2 to P1, producer surplus
Decreases by and amount equal to A+B
When the price rises from P1 to P2, consumer surplus
Decreases by and amount equal to B+C
If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the
Demand for the good is said to be inelastic
Who is a marginal seller when the price is $1,100?
Dianne
A tax imposed on the sellers of a good will lower the
Effective price received by sellers and lower the equilibrium quantity
Using the midpoint method, if the price falls from $200 to $150, the price elasticity of demand is
Elastic
When the price of an eBook is $15, the quantity demanded is 400 eBooks per day. When the price falls to $10, the quantity demanded increases to 700. Given this information and using the midpoint method, we know that the demand for eBooks is
Elastic
The dead weight loss form a $3 tax will be largest in a market with
Elastic supply and elastic demand
Demand is said to have unit elasticity if the price elasticity of demand is
Equal to 1
The midpoint method is used to compute elasticity because it
Gives the same answer regardless of the direction of change.
A good will have a more elastic demand, the
Greater the availability of close substitutes
If the price decreased from $36 to $12, total revenue would
Increase by $4800, and demand is elastic between points X and Z
Sellers' total revenue would increase if the price
Increased from $6 to $9
An increase in price causes an increase in total revenue when demand is
Inelastic
There are very few, if any, good substitutes for automotive tires. Therefore, the demand for automotive tires would tend to be
Inelastic
To say that a price ceiling is nonbinding is to say that the price ceiling
Is set above the equilibrium price.
Suppose the market is initially in equilibrium. Then the government imposes a price control, as represented by the solid horizontal line on the graph. If the price control is a price floor, then the price control
Means that some firms will not be able to sell all that they want
The price that sellers effectively receive after the tax is imposed is
P1
The equilibrium price before the tax is imposed is
P2
The per-unit burden of the tax on sellers is
P2-P1
The per unit burden of the tax on buyers is
P3-P2
For which pairs of good is the cross-price elasticity most likely to be negative?
Peanut butter and jelly
For which pairs of goods is the cross-price elasticity most likely to be positive?
Pens and Pencils
Economists compute the price elasticity of demand as the
Percentage change in quantity demanded divided by the percentage change in price
Which of the following expressions represents a cross-price elasticity of demand?
Percentage change in quantity demanded of bread divided by percentage change in price of butter
Suppose goods A and B are substitutes for each other. We would expect the cross-price elasticity between these two goods to be
Positive
A legal minimum on the price at which a good can be sold is called a
Price floor
A tax imposed on the buyers of a good will raise the
Price paid by buyers and lower the equilibrium quantity
Which of the following is not a function of prices in a market system?
Prices ensure an equal distribution of goods and services among consumers
A perfectly inelastic demand implies that buyers
Purchase the same amount as before when the price rises or falls.
If the market price for the good is $20, who will purchase the good?
Quilana, wilbur and Ming-la only
A tax imposed on the seller s of a good will
Raise the price buyers pay and lower the effective price sellers receive.
If the market price is $105
Sam's consumer surplus is $30 and total consumer surplus is $90
A seller is willing to sell a product only if the seller receives a price that is at least as great as the
Seller's cost of production
Which of the following statements is correct?
Supply curve C is more inelastic than supply curve D
If a price floor is not binding, then
The equilibrium price is above the price floor.
Based upon the diagram.
The incidence of the tax falls more heavily on sellers.
Which demand curve is perfectly inelastic?
The line that is perfectly vertical
Which of the following price changes would result in no change in sellers' total revenue?
The price decreases from $24 to $18
The amount of dead weight loss that results from a tax of a given size is determined by
The price elasticities of demand and supply
The price elasticity of supply measures how much
The quantity supplied responds to changes in the price of the good.
The Laffer curve relates
The tax rate to tax revenue raised by the tax
we can say that the allocation of resources is efficient if
Total surplus is maximized
Total surplus in a market is equal to
Value to buyers-costs of sellers.
Which of the following statements is not correct?
When the price is $6, there is a surplus of 8 units.
At the equilibrium price of a good, the good will be sold by those sellers
Whose cost is less than price.
If sellers do not adjust their quantity supplied at all in response to a change in price, the price elasticity of supply is
Zero, and the supply curve is vertical.
If the price elasticity of demand for a good is 0.4, then which of the following events is consistent with a 2 percent decrease in the quantity of the good demanded?
a 5 percent increase in the price of the good
A government-imposed price floor is $12 in this market results in
a surplus of 4 units
If the solid horizontal line on the graph represents a price floor, than the price floor is
binding and creates a surplus of 60 units of the good
When a tax is placed on the buyers of lemonade, the
burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal.
When quantity demanded responds strongly to changes in price, demand is said to be
elastic
Suppose that 50 ice cream cones are demanded at a particular price. If the price of ice cream cones rises from that price by 4 percent, the number of ice cream cones demanded falls to 46. Using the midpoint approach to calculate the price elasticity of demand, it follows that the
demand for ice cream cones in this price range is elastic
When the price of chai tea lattes is $5, Maxine buys 20 per month. When the price is $4, she buys 30 per month. Maxine's demand for chai tea Lattes is
elastic, and her demand curve would be relatively flat
An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 per minute. Using the midpoint method, supply is
elastic, and the price elasticity of supply is 1.74
A government-imposed price of $6 in this market could be an example of i binding price ceiling ii non-binding price ceiling iii binding price floor iv non-binding price floor
i and iv only
If price increases form $10 to $20, total revenue will
increase by $120 so demand must be inelastic in the price range.
If the price elasticity of supply is 0.8, and the price increased by 5%, quantity supplied would
increases by 4%
If the price elasticity of supply for wheat is less than 1, then the supply of wheat is
inelastic
The dead weight loss from a tax
is larger, the larger is the amount of the tax per unit
Consumer surplus
is measured using the demand curve for a product
Consumer surplus
is the amount a consumer is willing to pay minus the amount the consumer actually pays.
Willingness to pay
measures the value that a buyer places on a good
Based upon the diagram
more of the incidence of the tax is on sellers, since supply is more inelastic than demand.
Which supply curve represents perfectly inelastic supply?
s1 the vertical one
After a binding price floor becomes effective,
smaller quantity of the good is bought and sold
Consumer surplus is
the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
Which demand curve is perfectly elastic?
the line that is perfectly horizontal
If a price ceiling is not binding, then
there will be no effect on the market price or quantity sold.
Which of the following is likely to have the most price inelastic demand?
toothpaste
