Test 3-Microeconomics

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A surplus results when a

binding price floor is imposed on a market

If a price floor is not binding, then

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

All else equal, what happens to consumer surplus if the price of a good increases?

Consumer surplus decreases

A consumer's willingness to pay directly measures

how much a buyer values a good

Under rent control, tenants can expect

lower rent and lower quality housing

tax incidence

depends on the elasticities of supply and demand

If Gina sells a shirt for $40, and her producer surplus from the sale is $32, her cost must have been

$8

Which of the following causes a surplus of a good?

a binding price floor

A price floor is

a legal minimum on the price at which a good can be sold 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 a source of inefficiency in a market

Which of the following causes the price paid by buyers to be different than the price received by sellers?

a tax on the good

A price floor will be binding only if it is set

above the equilibrium price

A price ceiling will be binding only if it is set

below the equilibrium price

A price ceiling is binding when it is set

below the equilibrium price, causing a shortage

to say that a price floor is binding is to say that the price floor

causes quantity supplied to exceed quantity demanded

A tax placed on a good

causes the equilibrium quantity of the good to decrease

The benefit to buyers of participating in a market is measured by

consumer surplus

total surplus with a tax is equal to

consumer surplus plus producer surplus plus tax revenue

the decrease in total surplus that results from a market distortion, such as a tax, is called a

deadweight loss

if the government removes a tax on a good, then the price paid by buyers will

decrease, and the price received by sellers will increase

if the government removed a binding price floor from a market, then the price paid by buyers will

decrease, and the quantity sold in the market will increase

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

decreases a tax on the good sold in that market

if the government removes a binding price ceiling from a market, then the price paid by buyers will

increase, and the quantity sold in the market will increase

An increase in the size of a tax is most likely to increase tax revenue in a market with

inelastic demand and inelastic supply

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

quantity sold in the market will stay the same

When a tax is placed on a product, the price paid by buyers

rises, and the price received by

When a tax is placed on a product, the price paid by buyers

rises, and the price received by sellers falls

Cost is a measure of the

seller's willingness to sell

When a binding price ceiling is imposed on a market to benefit buyers

some buyers benefit, and some buyers are harmed

the benefit that government receives from a tax is measured by

tax revenue

suppose the tax on liquor is increased so that the tax goes from being a "medium" tax to being a "large" tax. As a result, it is likely that

tax revenue increases, and the deadweight loss increases

Welfare economics is the study of how

the allocation of resources affects economic well-being

Consumer surplus is

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

If a price ceiling is not binding, then

the equilibrium price is below the price ceiling


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