Micro Quiz 4

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. $100.

Refer to Figure 7-19. At the equilibrium price, total surplus is a. $125. b. $450. c. $250. d. $500.

b. $450.

The Social Security tax is a tax on a. capital. b. labor. c. land. d. savings.

b. labor.

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. deadweight loss.

Refer to Figure 8-4. The price that buyers effectively pay after the tax is imposed is a. $12. b. between $8 and $12. c. between $5 and $8. d. $5.

a. $12.

Refer to Figure 8-4. The amount of tax revenue received by the government is equal to a. $245. b. $350. c. $490. d. $700.

a. $245.

Pat bought a new car for $15,500 but was willing to pay $24,000. The consumer surplus is a. $8,500. b. $15,500. c. $24,000. d. $39,500.

a. $8,500.

Refer to Figure 7-3. When the price is P2, consumer surplus is a. A. b. B. c. A+B. d. A+B+C.

a. A.

Refer to Table 7-7. You have two essentially identical extra tickets to the Midwest Regional Sweet 16 game in the men's NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You hold an auction to sell the two tickets. Who makes the winning bids, and what do they offer to pay for the tickets? a. Michael and Earvin; more than $350 but less than or equal to $400 b. Michael and Earvin; more than $400 but less than or equal to $500 c. Earvin and Larry; more than $300 but less than or equal to $350 d. Larry and Charles; less than $300

a. Michael and Earvin; more than $350 but less than or equal to $400

The price elasticities of supply and demand affect a. both the size of the deadweight loss from a tax and the tax incidence. b. the size of the deadweight loss from a tax but not the tax incidence. c. the tax incidence but not the size of the deadweight loss from a tax. d. neither the size of the deadweight loss from a tax nor the tax incidence.

a. both the size of the deadweight loss from a tax and the tax incidence.

When a tax on a good is enacted, a. buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers. b. buyers always bear the full burden of the tax. c. sellers always bear the full burden of the tax. d. sellers bear the full burden of the tax if the tax is levied on them; buyers bear the full burden of the tax if the tax is levied on them.

a. buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers.

The Laffer curve relates a. the tax rate to tax revenue raised by the tax. b. the tax rate to the deadweight loss of the tax. c. the price elasticity of supply to the deadweight loss of the tax. d. government welfare payments to the birth rate.

a. the tax rate to tax revenue raised by the tax.

Refer to Figure 8-4. The equilibrium price before the tax is imposed is a. $12, and the equilibrium quantity is 35. b. $8, and the equilibrium quantity is 50. c. $5, and the equilibrium quantity is 35. d. $5, and the equilibrium quantity is 50.

b. $8, and the equilibrium quantity is 50.

A seller is willing to sell a product only if the seller receives a price that is at least as great as the a. seller's producer surplus. b. seller's cost of production. c. seller's profit. d. average willingness to pay of buyers of the product.

b. seller's cost of production.

Refer to Figure 8-4. The amount of deadweight loss as a result of the tax is a. $35.00. b. $45.25. c. $52.50. d. $105.00.

c. $52.50.

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it a. maximizes costs of the seller. b. maximizes tax revenue for the government. c. maximizes the combined welfare of buyers and sellers. d. minimizes the expenditure of buyers.

c. maximizes the combined welfare of buyers and sellers.

Suppose the tax on automobile tires is increased so that the tax goes from being a "medium" tax to being a "large" tax. As a result, it is likely that a. tax revenue increases, and the deadweight loss increases. b. tax revenue increases, and the deadweight loss decreases. c. tax revenue decreases, and the deadweight loss increases. d. tax revenue decreases, and the deadweight loss decreases.

c. tax revenue decreases, and the deadweight loss increases.

Refer to Figure 8-4. The price that sellers effectively receive after the tax is imposed is a. $12. b. between $8 and $12. c. between $5 and $8. d. $5.

d. $5.

Refer to Figure 7-19. If the government imposes a price floor of $55 in this market, then total surplus will be a. $100.00 higher than it would be without the price floor. b. $50.00 lower than it would be without the price floor. c. $125.00 lower than it would be without the price floor. d. $62.50 lower than it would be without the price floor.

d. $62.50 lower than it would be without the price floor.

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

d. AHGB