econ test 2

Refer to Figure 9-6. The amount of deadweight loss caused by the tariff equals a. $100. b. $200. c. $400. d. $500

A

A price floor will be binding only if it is set a. equal to the equilibrium price. b. above the equilibrium price. c. below the equilibrium price. d. either above or below the equilibrium price.

B

. 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.

C

Suppose the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. As a result, a. the demand for treadmills will increase. b. the supply of treadmills will decrease. c. a shortage of treadmills will develop. d. All of the above are correct.

C

Tax incidence a. depends on the legislated burden. b. is entirely random. c. depends on the elasticities of supply and demand. d. falls entirely on buyers or entirely on sellers

C

Producer surplus measures the a. benefits to sellers of participating in a market. b. costs to sellers of participating in a market. c. price that buyers are willing to pay for sellers' output of a good or service. d. benefit to sellers of producing a greater quantity of a good or service than buyers demand.

A

Refer to Figure 9-1. When trade is allowed, a. Guatemalan producers of coffee become better off and Guatemalan consumers of coffee become worse off. b. Guatemalan consumers of coffee become better off and Guatemalan producers of coffee become worse off. c. both Guatemalan producers and consumers of coffee become better off. d. both Guatemalan producers and consumers of coffee become worse off

A

If Martin sells a shirt for $40, and his producer surplus from the sale is $8, his cost must have been a. $48. b. $32. c. $8. d. $40.

B

Refer to Figure 6-1. A binding price ceiling is shown in a. panel (a) only. b. panel (b) only. c. both panel (a) and panel (b). d. neither panel (a) nor panel (b).

B

Refer to Figure 8-6. Without a tax, the equilibrium price and quantity are a. $16 and 300. b. $10 and 600. c. $10 and 300. d. $6 and 300.

B

Refer to Scenario 9-2 How much tax revenue does the tariff generate for Boxland? a. None, the tariff has no impact since Boxland is an exporter of cardboard b. $100 c. $1100 d. $600

B

A price ceiling will be binding only if it is set a. equal to the equilibrium price. b. above the equilibrium price. c. below the equilibrium price. d. either above or below the equilibrium price.

C

If a binding price floor is imposed on the video game market, then a. the demand for video games will decrease. b. the supply of video games will increase. c. a surplus of video games will develop. d. All of the above are correct.

C

Refer to Figure 7-10. Which area represents the increase in producer surplus when the price rises from P1 to P2 due to new producers entering the market? a. BCG b. ACH c. DGH d. AHGB

C

The decrease in total surplus that results from a market distortion, such as a tax, is called a a. wedge loss. b. revenue loss. c. deadweight loss. d. consumer surplus loss.

C

A price floor is a. a legal minimum on the price at which a good can be sold. b. often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price floor. c. a source of inefficiency in a market. d. All of the above are correct.

D

Refer to Figure 6-2. The price ceiling a. causes a shortage of 40 units. b. is not binding, because it is set above the equilibrium price. c. causes a shortage of 45 units. d. causes a shortage of 85 units.

D

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

D

Refer to Figure 8-6. When the tax is imposed in this market, the price buyers effectively pay is a. $4. b. $6. c. $10. d. $16.

D

Refer to Scenario 9-2. Assume the world price of cardboard is $40. In that event: a. Boxland will export 110 tons of cardboard b. Boxland will import 110 tons of cardboard c. Boxland will export 60 tons of cardboard d. Boxland will import 60 tons of cardboard

D

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

A

Refer to Figure 9-1. From the figure it is apparent that a. Guatemala will export coffee if trade is allowed. b. Guatemala will import coffee if trade is allowed. c. Guatemala has nothing to gain either by importing or exporting coffee. d. the world price will fall if Guatemala begins to allow its citizens to trade with other countries.

A

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.

A

Refer to Figure 9-6. The amount of revenue collected by the government from the tariff is a. $200. b. $400. c. $500. d. $600.

A

A tax burden falls more heavily on the side of the market that a. has a fewer number of participants. b. is more inelastic. c. is closer to unit elastic. d. is less inelastic.

B

A tax on an imported good is called a a. quota. b. tariff. c. supply tax. d. trade tax.

B

At present, the United States uses a system of quotas to limit the amount of sugar imported into the country. Which of the following statements is most likely true? a. The quotas are probably the result of lobbying from U.S. consumers of sugar. The quotas increase consumer surplus for the United States, reduce producer surplus for the United States, and harm foreign sugar producers. b. The quotas are probably the result of lobbying from U.S. producers of sugar. The quotas increase producer surplus for the United States, reduce consumer surplus for the United States, and harm foreign sugar producers. c. The quotas are probably the result of lobbying from foreign producers of sugar. The quotas reduce producer surplus for the United States, increase consumer surplus for the United States, and benefit foreign sugar producers. d. U.S. lawmakers did not need to be lobbied to impose the quotas because total surplus for the United States is higher with the quotas than without them.

B

On a graph, the area below a demand curve and above the price measures a. producer surplus. b. consumer surplus. c. deadweight loss. d. willingness to pay.

B

Refer to Figure 6-30. In which market will the majority of the tax burden fall on buyers? a. the market shown in panel (a). b. the market shown in panel (b). c. the market shown in panel (c). d. All of the above are correct.

B

Refer to Figure 8-14. Which of the following combinations will maximize 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

B

Refer to Figure 8-6. When the tax is imposed in this market, the price sellers effectively receive is a. $4. b. $6. c. $10. d. $16.

B

. Refer to Figure 8-6. What happens to producer surplus when the tax is imposed in this market? a. Producer surplus falls by $600. b. Producer surplus falls by $900. c. Producer surplus falls by $1,800. d. Producer surplus falls by $2,100.

C

A consumer's willingness to pay directly measures a. the extent to which advertising and other external forces have influenced the consumer's preferences. b. the cost of a good to the buyer. c. how much a buyer values a good. d. consumer surplus.

C

A tariff a. lowers the domestic price of the exported good below the world price. b. keeps the domestic price of the exported good the same as the world price. c. raises the domestic price of the imported good above the world price. d. lowers the domestic price of the imported good below the world price.

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.

C

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

C

Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers? a. BDF b. AFG c. BCGD d. ABC

C

Refer to Figure 8-23. If the economy is at point B on the curve, then a small decrease in the tax rate will a. increase the deadweight loss of the tax and increase tax revenue. b. increase the deadweight loss of the tax and decrease tax revenue. c. decrease the deadweight loss of the tax and increase tax revenue. d. decrease the deadweight loss of the tax and decrease tax revenue.

C

Refer to Figure 8-23. The curve that is shown on the figure is called the a. deadweight-loss curve. b. tax-incidence curve. c. Laffer curve. d. Lorenz curve.

C

Refer to Figure 9-1. From the figure it is apparent that a. Guatemala will experience a shortage of coffee if trade is not allowed. b. Guatemala will experience a surplus of coffee if trade is not allowed. c. Guatemala has a comparative advantage in producing coffee, relative to the rest of the world. d. foreign countries have a comparative advantage in producing coffee, relative to Guatemala.

C

Refer to Figure 9-6. The imposition of a tariff on roses a. increases the number of roses imported by 100. b. increases the number of roses imported by 200. c. decreases the number of roses imported by 200. d. decreases the number of roses imported by 400.

C

Refer to Scenario 9-2 Assume that Boxland producers successfully lobby for a $10 tariff on cardboard. In that event: a. Boxland will export 60 tons of cardboard b. Boxland will export 10 tons of cardboard c. Boxland will import 10 tons of cardboard d. Boxland will import 60 tons of cardboard

C

Refer to Scenario 9-2. If Boxland prohibits international trade in cardboard, then the equilibrium price of a ton of cardboard is a. $36 and the equilibrium quantity of cardboard is 74 tons. b. $44 and the equilibrium quantity of cardboard is 88 tons. c. $52 and the equilibrium quantity of cardboard is 96 tons. d. $60 and the equilibrium quantity of cardboard is 100 tons

C

The term tax incidence refers to a. whether buyers or sellers of a good are required to send tax payments to the government. b. whether the demand curve or the supply curve shifts when the tax is imposed. c. the distribution of the tax burden between buyers and sellers. d. widespread view that taxes (and death) are the only certainties in life.

C

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

C

A legal maximum on the price at which a good can be sold is called a price a. floor. b. subsidy. c. support. d. ceiling.

D

Refer to Figure 9-6. The size of the tariff on roses is a. $4. b. $2. c. $2. d. $1.

D

Refer to Scenario 9-2 How much Dead Weight Loss does the tariff create? a. None, Boxland is an exporter of cardboard. b. $150 c. $100 d. $250

D

The price of a good that prevails in a world market is called the a. absolute price. b. relative price. c. comparative price. d. world price.

D

When a tax is placed on the buyers of lemonade, the a. sellers bear the entire burden of the tax. b. buyers bear the entire burden of the tax. c. burden of the tax will be always be equally divided between the buyers and the sellers. d. burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal.

D