Microeconomics- Quiz 5 (Chapters 7 & 8)

Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is A. $150. B. $200. C. $350. D. $550.

A. $150.

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic, A. buyers of the good will bear most of the burden of the tax. B. sellers of the good will bear most of the burden of the tax. C. buyers and sellers will each bear 50 percent of the burden of the tax. D. both equilibrium price and quantity will increase.

A. buyers of the good will bear most of the burden of the tax.

Kelly is willing to pay $68 for a pair of shoes for a wedding. She finds a pair at her favorite outlet shoe store for $48. Kelly's consumer surplus is A. $10. B. $20. C. $48. D. $68.

B. $20.

Producer surplus equals A. Value to buyers - Amount paid by buyers. B. Amount received by sellers - Costs of sellers. C. Value to buyers - Costs of sellers. D. Value to buyers - Amount paid by buyers + Amount received by sellers - Costs of sellers.

B. Amount received by sellers - Costs of sellers.

All else equal, what happens to consumer surplus if the price of a good increases? A. Consumer surplus increases. B. Consumer surplus decreases. C. Consumer surplus is unchanged. D. Consumer surplus may increase, decrease, or remain unchanged.

B. Consumer surplus decreases.

On a graph, consumer surplus is represented by the area A. between the demand and supply curves. B. below the demand curve and above price. C. below the price and above the supply curve. D. below the demand curve and to the right of equilibrium price.

B. below the demand curve and above price.

If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the A. consumer has consumer surplus of $2 if he or she buys the good. B. consumer does not purchase the good. C. market is not a competitive market. D. price of the good will fall due to market forces.

B. consumer does not purchase the good.

When a good is taxed, the burden of the tax A. falls more heavily on the side of the market that is more elastic. B. falls more heavily on the side of the market that is more inelastic. C. falls more heavily on the side of the market that is closer to unit elastic. D. is distributed independently of relative elasticities of supply and demand.

B. falls more heavily on the side of the market that is more inelastic.

Consumer surplus A. is the amount of a good that a consumer can buy at a price below equilibrium price. B. is the amount a consumer is willing to pay minus the amount the consumer actually pays. C. is the number of consumers who are excluded from a market because of scarcity. D. measures how much a seller values a good.

B. is the amount a consumer is willing to pay minus the amount the consumer actually pays.

For a good that is taxed, the area on the relevant supply-and-demand graph that represents government's tax revenue is a A. triangle. B. rectangle. C. trapezoid. D. None of the above is correct; government's tax revenue is the area between the supply and demand curves, above the horizontal axis, and below the effective price to buyers.

B. rectangle.

Total surplus is equal to A. value to buyers - profit to sellers. B. value to buyers - cost to sellers. C. consumer surplus x producer surplus. D. (consumer surplus + producer surplus) x equilibrium quantity.

B. value to buyers - cost to sellers.

Suppose Chris and Laura attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called A. deadweight loss. B. willingness to pay. C. consumer surplus. D. producer surplus.

B. willingness to pay.

Karen sharpens knives in her spare time for extra income. Buyers of her service are willing to pay $2.50 per knife for as many knives as Karen is willing to sharpen. On a particular day, she is willing to sharpen the first knife for $1.75, the second knife for $2.25, the third knife for $2.75, and the fourth knife for $3.25. Assume Karen is rational in deciding how many knives to sharpen. Her producer surplus is A. $0.25. B. $0.50. C. $1.00. D. $1.75.

C. $1.00.

If Roberta sells a shirt for $30, and her producer surplus from the sale is $23, her cost must have been A. $53. B. $30. C. $7. D. We would have to know the consumer surplus in order to make this determination.

C. $7.

What happens to the total surplus in a market when the government imposes a tax? A. Total surplus increases by the amount of the tax. B. Total surplus increases but by less than the amount of the tax. C. Total surplus decreases. D. Total surplus is unaffected by the tax.

C. Total surplus decreases.

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.

The deadweight loss from a tax A. does not vary in amount when the price elasticity of demand changes. B. does not vary in amount when the amount of the tax per unit changes. C. is larger, the larger is the amount of the tax per unit. D. is smaller, the larger is the amount of the tax per unit.

C. is larger, the larger is the amount of the tax per unit.

A supply curve can be used to measure producer surplus because it reflects A. the actions of sellers. B. quantity supplied. C. sellers' costs. D. the amount that will be purchased by consumers in the market.

C. sellers' costs.

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. the amount a seller is paid minus the cost of production.

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. total surplus is maximized.

Sarah buys a new MP3 player for $135. She receives consumer surplus of $25 on her purchase if her willingness to pay is A. $25. B. $110. C. $135. D. $160.

D. $160.

Which of the following equations is not valid? A. Consumer surplus = Value to buyers - Amount paid by buyers B. Producer surplus = Amount received by sellers - Cost to sellers C. Total surplus = Value to buyers - Amount paid by buyers + Amount received by sellers - Costs of sellers D. Total surplus = Value to sellers - Cost to sellers

D. Total surplus = Value to sellers - Cost to sellers

Total surplus is represented by the area A. under the demand curve and above the price. B. above the supply curve and up to the price. C. under the supply curve and up to the price. D. between the demand and supply curves up to the point of equilibrium.

D. between the demand and supply curves up to the point of equilibrium.

A tax affects A. buyers only. B. sellers only. C. buyers and sellers only. D. buyers, sellers, and the government.

D. buyers, sellers, and the government.

When a tax is imposed on a good, the A. supply curve for the good always shifts. B. demand curve for the good always shifts. C. amount of the good that buyers are willing to buy at each price always remains unchanged. D. equilibrium quantity of the good always decreases.

D. equilibrium quantity of the good always decreases.

Welfare economics is the study of A. taxes and subsidies. B. how technology is best put to use in the production of goods and services. C. government welfare programs for needy people. D. how the allocation of resources affects economic well-being.

D. how the allocation of resources affects economic well-being.

When a tax is levied on a good, the buyers and sellers of the good share the burden, A. provided the tax is levied on the sellers. B. provided the tax is levied on the buyers. C. provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers. D. regardless of how the tax is levied.

D. regardless of how the tax is levied.

One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the A. size of the market is unchanged. B. price the seller effectively receives is higher. C. supply curve for the good shifts upward by the amount of the tax. D. tax reduces the welfare of both buyers and sellers.

D. tax reduces the welfare of both buyers and sellers.