Q: Which of the following equations correctly represents the area of consumer surplus in a market with a linear demand curve?

$$ CS = \frac{1}{2} \times (Q^*) \times (P_{max} - P^*) $$

Q: Which formula correctly calculates the deadweight loss from a tax in a market with linear supply and demand?

$$ DWL = \frac{1}{2} \times (Q^* - Q_t) \times Tax $$

Question 1

Which of the following best describes consumer surplus?

Accepted Answer

The difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer pays.

Question 2

Suppose the market price for a cup of chai tea is $$3.50. Theresa is willing to pay 6.00$$, Tom $$5.00, Terri 4.00$$, and Tim $3.00. What is the total consumer surplus in this market?

Accepted Answer

$4.50

Question 3

Producer surplus is maximized in a competitive market when:

Accepted Answer

The sum of consumer surplus and producer surplus is at a maximum.

Question 4

A deadweight loss occurs when:

Accepted Answer

The market is not in equilibrium, resulting in a reduction in economic surplus.

Question 5

If the government imposes a price ceiling below the equilibrium price, what is the most likely outcome?

Accepted Answer

A shortage of the good.

Question 6

Which of the following equations correctly represents the area of consumer surplus in a market with a linear demand curve?

Accepted Answer

$$ CS = \frac{1}{2} 	imes (Q^*) 	imes (P_{max} - P^*) $$

Question 7

A $$1.00 per-pack tax is imposed on cigarettes. Before the tax, the equilibrium price is 6.00 $$and 4 billion packs are sold. After the tax, the price paid by consumers is $$6.90 and the price received by producers is 5.90. $$What is the tax incidence on consumers?

Accepted Answer

$$0.90$$

Question 8

Which of the following best explains why the legal obligation to pay a tax does not determine the tax incidence?

Accepted Answer

Because the burden of the tax is determined by the relative elasticities of demand and supply.

Question 9

If the demand for gasoline is relatively inelastic and the supply is relatively elastic, who bears most of the burden of a gasoline tax?

Accepted Answer

Consumers

Question 10

Suppose the government sets a minimum wage above the equilibrium wage. What is the most likely effect on the labor market?

Accepted Answer

There will be a surplus of labor (unemployment).

Question 11

Which of the following is a normative statement regarding price controls?

Accepted Answer

Price controls are bad for society.

Question 12

If a rent ceiling is imposed below the equilibrium rent, what happens to consumer and producer surplus?

Accepted Answer

Consumer surplus increases, producer surplus decreases, and there is a deadweight loss.

Question 13

Which of the following best describes economic efficiency in a competitive market?

Accepted Answer

When the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production.

Question 14

A government imposes a price floor in the wheat market above equilibrium. What is the most likely result?

Accepted Answer

A surplus of wheat.

Question 15

Which formula correctly calculates the deadweight loss from a tax in a market with linear supply and demand?

Accepted Answer

$$ DWL = \frac{1}{2} 	imes (Q^* - Q_t) 	imes Tax $$

Question 16

If Uber’s average ride price is $$13.30 and the demand curve intercept is 65.17$$, with 111 million rides taken, what is the total consumer surplus?

Accepted Answer

$$ CS = \frac{1}{2} 	imes 111,000,000 	imes (65.17 - 13.30) $$

Question 17

Which of the following is an example of a price ceiling?

Accepted Answer

Rent control

Question 18

If the government imposes a per-unit tax on a good, what happens to the supply curve?

Accepted Answer

It shifts upward by the amount of the tax.

Question 19

Which of the following best describes the effect of a price gouging law during an emergency?

Accepted Answer

It prevents prices from rising, leading to shortages.

Question 20

Suppose the demand for apartments is $$Q_D = 2,200,000 - 400P$$ and the supply is $$Q_S = 700,000 + 300P. $$What is the equilibrium price?

Accepted Answer

$$P = 2.00$$

Economic Efficiency, Government Price Setting, and Taxes: Study Notes

Guida di studio - Domande di pratica

Study guide - Flashcard