micro test 2

You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field. Assume the ticket has no resale value. Willie Nelson is performing on the same night, and his concert is your next-best alternative activity. Tickets to see Willie Nelson cost $40. On any given day, you would be willing to pay up to $50 to see and hear Willie Nelson perform. Assume there are no other costs of seeing either event. Based on this information, at a minimum, how much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game?

$10

The following table represents the costs of five possible sellers. If the market price is $1,100, the combined total cost of all participating sellers is

$2,800

This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. If the price of Vanilla Coke is $6.90, who will purchase the good?

David and Laura.

You have an extra ticket 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 ticket. Who makes the winning bid, and what does he offer to pay for the ticket?

Michael; more than $400 but less than or equal to $500

Suppose that the demand for digital cameras is elastic, and the supply of digital cameras is inelastic. A tax of $20 per camera levied on digital cameras will decrease the effective price received by sellers of digital cameras by

between $10 and $20.

When a tax is placed on the sellers of energy drinks, 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 a tax is levied on buyers of tea,

buyers of tea and sellers of tea both are made worse off.

Suppose that in a particular market, the supply curve is highly elastic and the demand curve is highly inelastic. If a tax is imposed in this market, then the

buyers will bear a greater burden of the tax than the sellers.

You want to hire a professional photographer to take pictures of your family. The table shows the costs of the four potential sellers in the local photography market. Which of the following graphs represents the market supply curve?

c

When the supply of a good decreases and the demand for the good remains unchanged, consumer surplus

decreases

In which market will the majority of the tax burden fall on sellers?

the market shown in panel (a).

Caroline sharpens knives in her spare time for extra income. Buyers of her service are willing to pay $2.95 per knife for as many knives as Caroline is willing to sharpen. On a particular day, she is willing to sharpen the first knife for $2.00, the second knife for $2.25, the third knife for $2.75, and the fourth knife for $3.50. Assume Caroline is rational in deciding how many knives to sharpen. Her producer surplus is

$1.85

The vertical distance between points A and B represents a tax in the market. When the government imposes the tax in this market, tax revenue is

$3,000

The vertical distance between points A and B represents a tax in the market. The loss of consumer surplus as a result of the tax is

$4.50

Suppose the government places a $5 per-unit tax on this good. The amount of tax revenue collected by the government is

$50

Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is

$500

Ronnie operates a lawn-care service. On each day, the cost of mowing the first lawn is $15, the cost of mowing the second lawn is $25, and the cost of mowing the third lawn is $40. His producer surplus on the first three lawns of the day is $100. If Ronnie charges all customers the same price for lawn mowing, that price is

$60

If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by

$600

This figure shows the market demand and market supply curves for good X. Refer to Figure 6-13. Which of the following statements is correct?

A price floor set at $6.50 would result in a surplus.

Which of the following statements is correct concerning the burden of a tax imposed on take-out food?

Buyers and sellers share the burden of the tax.

Which of the following is the most likely explanation for the imposition of a price ceiling on the market for milk?

Buyers of milk, recognizing that the price ceiling is good for them, have pressured policymakers into imposing the price ceiling.

The following table represents the costs of five possible sellers. Who is a marginal seller when the price is $1,100?

Dianne

Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28.

Karla now will decide to mow her own lawn, and Roland will decide it is no longer in his interest to mow Karla's lawn.

Which of the following is the most likely explanation for the imposition of a price floor on the market for corn?

Sellers of corn, recognizing that the price floor is good for them, have pressured policymakers into imposing the price floor.

Which of the following is not correct? a. The wedge between the buyers' price and the sellers' price is the same, regardless of whether the tax is levied on buyers or sellers. b. In the new after-tax equilibrium, buyers and sellers share the burden of the tax. c. Taxes levied on sellers and taxes levied on buyers are not equivalent. d. A tax places a wedge between the price that buyers pay and the price that sellers receive.

Taxes levied on sellers and taxes levied on buyers are not equivalent.

The vertical distance between points A and B represents a tax in the market. Which of the following statements is correct?

The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is $120.

If a tax shifts the demand curve upward (or to the right), we can infer that the tax was levied on

We cannot infer anything because the shift described is not consistent with a tax.

Which of the following causes a shortage of a good?

a binding price ceiling

Which of the following price controls would cause a shortage of 20 units of the good?

a price ceiling set at $6

Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling becomes effective,

a smaller quantity of the good is bought and sold.

The burden of a luxury tax falls

more on the middle class than on the rich.

The welfare of sellers is measured by

producer surplus

When the price is P1, area C represents

producer surplus

If a nonbinding price ceiling is imposed on a market, then the

quantity sold in the market will stay the same.

For a good that is taxed, the area on the relevant supply-and-demand graph that represents government's tax revenue is a

rectangle

When a tax is imposed on a good for which the demand is relatively elastic and the supply is relatively inelastic,

sellers of the good will bear most of the burden of the tax.

Consumer surplus is equal to the

value to buyers - willingness to pay by buyers

The marginal seller is the seller who

would leave the market first if the price were any lower

The only four producers in a market have the following costs: If the sellers bid against each other for the right to sell the good to a single consumer, then the producer surplus will be

$10 or slightly less.

The vertical distance between points A and B represents a tax in the market. When the tax is imposed in this market, the price buyers effectively pay is

$16

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is

$175

Both the demand curve and the supply curve are straight lines. If 6 units are bought and sold, then total surplus is

$18 lower than it would be if the equilibrium number of units were bought and sold.

The amount of the tax per unit is

$8.

The vertical distance between points A and C represents a tax in the market. The loss of producer surplus as a result of the tax is

$9,000

Suppose the government has imposed a price ceiling on sliced sandwich bread. Which of the following events could transform the price ceiling from one that is binding to one that is not binding?

A decease in the price of unsliced bread, which people consider as a substitute for sliced bread.

Suppose that the government imposes a tax of P3 - P1. The total surplus with the tax is represented by area

A+B+D+F

Buyers who value this good more than the equilibrium price are represented by which line segment?

AC

Suppose buyers of vodka are required to send $5.00 to the government for every bottle of vodka they buy. Further, suppose this tax causes the effective price received by sellers of vodka to fall by $3.00 per bottle. Which of the following statements is correct?

All of the above are correct.

Which of the following is correct? a. Consumer surplus refers to a situation in which there are more buyers than sellers in a market. b. Producer surplus refers to a situation in which there are more sellers than buyers in a market. c. Total surplus is measured as the area below the demand curve and above the supply curve, up to the equilibrium quantity. d. All of the above are correct.

C

Suppose the government imposes a $10 per unit tax on a good. The decrease in consumer and producer surpluses that is not offset by tax revenue is the area

C+F

If the price of the product is $90, then who would be willing to purchase the product?

Calvin, Sam, Andrew, and Lori

Suppose a tax is imposed on baseball bats. In which of the following cases will the tax cause the equilibrium quantity of baseball bats to shrink by the smallest amount?

The response of buyers and sellers to a change in the price of baseball bats is weak.

The price paid by buyers in a market will decrease if the government

decreases a tax on the good sold in that market.

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

demand for the product is more elastic than the supply of the product.

Suppose the government imposes a $40 tax on the buyers of refrigerators. The tax would

discourage market activity

The deadweight loss from a $3 tax will be largest in a market with

elastic supply and elastic demand.

A tax levied on the sellers of blueberries

increases sellers' costs, reduces profits, and shifts the supply curve up.

The vertical distance between points A and B represents a tax in the market. When the tax is placed on this good, the quantity sold

is 300, and buyers effectively pay $16.

Suppose a tax of $1 per unit is imposed on a good. The more elastic the supply of the good, other things equal, the

larger is the deadweight loss of the tax.

The size of a tax and the deadweight loss that results from the tax are

positively related

A legal minimum on the price at which a good can be sold is called a

price floor

When government imposes a price ceiling or a price floor on a market,

price no longer serves as a rationing device.

A tax imposed on the buyers of a good will raise the

price paid by buyers and lower the equilibrium quantity.

If a tax is levied on the buyers of a product, then the demand curve will

shift down

When a binding price floor is imposed on a market to benefit sellers,

some sellers will not be able to sell any amount of the good.

Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the

supply of the product is more elastic than the demand for the product.

One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the

tax reduces the welfare of both buyers and sellers.

Efficiency in a market is achieved when

the sum of producer surplus and consumer surplus is maximized.

If a price ceiling is not binding, then

there will be no effect on the market price or quantity sold.