Practice Test 2 Flashcards
A price ceiling below the equilibrium price is likely to result in a persistent———-, a transfer of surplus from———-and——— deadweight loss
Shortage, producers to some Consumers, some
Typically the government limits the quantity of a good that can be bought and sold by
Licensing suppliers of the good
The market for Popeyes sandwiches Suppose a price ceiling is set at four dollars at this price. The deadweight loss is equal to.
Three dollars
The Alaskan crab market if the government imposes a quarter limiting sales of crab to 250 pound, it will have the same affect on transactions as a price floor of
$17.50
The government of microstomia, a small dictatorship, restricts the price of automobiles to an amount less than or equal to $12,500 a price below the equilibrium price. Such a policy would create a.
Price ceiling
Price controls in the market for strawberries. The consumer surplus lost to a price floor at point B is equal to the area.
BCGE
Suppose the government wants to control the quantity of output in the milk market. The government policy is therefore to regulate the quantity of milk that can be bought and sold rather than the price at which transactions occurred. Such a policy is called a
Quota
The market for Lyft rides in New York City. If the government imposes a quota limit of 7 million rides, the quota rent that will accrue to the lift owner will be.——-per ride, and there will be a total missed opportunity to consumers and producers of—— million rides
Three dollars, three
The market for kombucha. The table shows the quantity demanded, and quantity supplied of kombucha at various prices, if the government imposes a price ceiling of three dollars per bottle of kombucha, the quantity of kombucha supplied will be——-bottles
Eight
Supply and demand in the market for fresh produce. If a price floor is set at P4 to help improve farm incomes, and the government wants to assure farmers that they’re out, but will be purchased, the government must purchase an amount of output equal to.
Q3minus Q0
A quota limit that is below the market equilibrium quantity results in
A demand price that exceeds the supply price (I believe it’s a quantity demanded that exceeds the quantity supplied )
Rent controls in the market for apartments in New York City. If I rent ceiling or Saturday at $800, archers would be willing to pay the price at least as high as.
$1200 for 1.8 million units.
Markets for apartments in San Francisco. If a price ceiling of $1700 is imposed in this market, the result will be an inefficiency in the form of.—— million apartments
An excess demand of 0.6.
Which of these is a quantity control?
Limit on the number of cod that can be caught in the north Atlantic ocean
If a price ceiling and a price floor, you’re the same quantity restriction the deadweight loss caused by the price ceiling will be —— deadweight caused by the price for
Equal to
If the cross price elasticity of demand between two goods is negative, then the two goods are
Complements
The price elasticity of demand is defined as
The percentage change in the quantity demanded divided by the percentage change in price
When the percentage change in price is greater than the percentage change in quantity demanded, demand is said to be
Inelastic
Jenelle recently received a promotion at her job, increasing her income from $940 per week to $1060 per week. As a result, she decided to purchase 9% more sushi per week. A computer using the midpoint method, the income elasticity of Jenelle’s demand for sushi is.
0.75.
If the price of M&M, peanut candies increases, the demand for cherry, flavored, soft drinks decreases, these two goods are——-good
Complementary
If your purchase of toothpaste remains constant at nine units per year, when the price of shampoo increases from $8.,12 dollars, all other things, equal, for you, toothpaste, and shampoo are—— good
Unrelated
Suppose the price of rye increases by 16.53%. If the stories by 3.28% less barley after that price increase, the total revenue for ride. Producers will—— because the——— effect is greater than the——— effect
Increase, price, quantity
Martinez family, household, income, and expenditures. The Martinez income elasticity of demand for falafel’s computed using the midpoint method is.
Approximately -0.7.
An important determinant for the price elasticity of demand is
What time horizon available to adjust the price changes
The price elasticity of demand for canned fruit is calculated as 0.75. Given this demand is.
Inelastic
The price elasticity of supply is computed as the percent change in——-divided by the percent change in——-
Quantity supplied, price
Since demand for roasted peanuts decreases as the price of pecans increases, we can assume that these two goods are
Compliments
The demand for organic vegetables at the local, farmers market is study, but supply has fallen dramatically because of lack of rainfall. This is good news for farmers if demand is.——-so that the——-effect outweighs the——-affect
Inelastic, price, quantity
The Bellagio hotel in Las Vegas has a fixed capacity of 3950 rooms in the short run. Which statement best describes the short run elasticity of supply for rooms at this hotel.
If you asked us to have supplies zero in the short run, because the short run supply curve is vertical
If the quantity supplied does not respond substantially to the relatively large change in price, supply is
Inelastic
If demand and supply are both very inelastic, a decrease in the right of an exercise tax will likely
Decrease the amount of revenue collected by the government
The market for summer sandals. The government Lavada a $10 tax on the producers of summer sandals. What area or areas of the graph identify tax revenue
B plus D
A progressive tax
Requires higher income earners to pay higher taxes
Market for fried cheesecake. The government decides to tax fried cheesecake at a rate of $.30 per cheesecake and collects the tax from producers. According to the table, Consumers will pay——-per cheesecake and by——— cheesecakes after the tax
$3.50, 5000
Suppose the governor of California implements estate tax of 10% on all income up to $50,000. Income about $50,000 is not taxed an individual earning $75,000 will have an average tax rate of.
6.67%
If the tax system is designed to minimize the sum of the deadweight loss, due to distorted incentives, and the administrative costs of taxation, it’s principal goal is
Maximizing efficiency
State governments Levi excise taxes on tobacco, because
The demand for most tobacco products is inelastic
An analysis of the effect of excise taxes on markets allows us to conclude that
Whether the tax is levied on consumers or producers, the quantity sold will be the same(I said, when the price elasticity of demand is higher than the price elasticity of supply, an excess tax falls, mainly on the consumers)
—— taxes are paid out of wages
Income
Taxes, spending and income in California. Suppose the governor of California implement a state sales tax of 5% on all purchases of good and services. From the information provided in the table this tax will be.
Regressive: the tax takes a larger percent of income from lower income earners than it does from higher income earners
The market for travel mugs. If a one dollar per unit tax is imposed, the price of travel mugs will increase by approximately.
Demand equals 50-0.5Q
Supply equals 0.33.Q
$.60
The market for travel mugs. The tax revenue collected by government from a one dollar per unit tax will be.
Demand equals 50-0.5.Q
Supply equals 0.33Q
59.04
The structure of the American federal income tax system reflects the——-principal
Ability to pay
The ability to pay principal says that
Those with a greater ability to pay, should pay more tax
Suppose that income up to and including $30,000 is not taxed income over $30,001-$60,000 is taxed at 10% and income over $60,000 is taxed at 25%. If Nadine is earning income of $100,000 she will pay.—— in personal taxes
$13,000
When an economy moves from autarky to free international trade, for industries in the export sector, consumer surplus——-, producer surplus——-, and the economy as a whole———.
Falls rises gains
A tax on imports of foreign goods is called a
Tariff
If I countries price in the absence of trade exceeds the price with trade, the domestic quantity supplied with trade is—— the domestic quantity demanded
Less then
If a Countries domestic price of labor in the absence of trade exceeds the price with trade, the country will likely
Import lumber
Production possibilities for the United States and Brazil.——-has an comparative advantage in producing sugar
Brazil
France must give up the production of 100 ties to produce 50 additional dress shirts. The opportunity cost of producing for a dress shirt is—— ties
Eight
Countries that trade in accordance with the Heckscher Ohlin model will find that
Imported goods are primarily goods that utilize their relatively scares factors of production most intensively
Spain and Italy, both produce port and wall with constant opportunity costs. Spain can produce 150 barrels of port if it produces no wall or 100 bolts of wall if it produces no port. Italee can produce 50 barrels of port if it produces no wool or 150 bolts of wall if it produces no port. When international trade takes place, each country specializes completely in the production of the good in which it has a comparative advantage. One barrel of port exchanges for one bolt of wall, and Spain exports 50 units of port. We can conclude that Italee produces——— units of port, and——-units of wall, and that Italy consumes——— units of port, and——— units of wool
Zero, 150, 50, 100
The market for Swiss watches. Assume that SND represent the domestic demand and supply of Swiss watches. The world price PW equals $100. The government imposes a quarter restricting imports to 25 watches if import licenses are granted to foreigners, but net loss due to the import quota is equal to the area.:
G H I J J
The market for Swiss watches. Assume that DNS represent domestic demand for aunt supply of Swiss watches. The world price PW equals $100 the government imposes a quarter restricted imports to 25 watches. Did the domestic price rises to——-end of the quarter rent is equal to the area——-
$120, H I
Spain and Italy, both produce port and wall with constant opportunity costs. Spain can produce 150 barrels of port if it produces no wall and 100 V of wall if it produces no port. Italy can produce 50 perils of port if it produces no wool or 100 barrels of wall if it produces no port. Using this information we can conclude that.
Italy has a comparative advantage in wall production
The world trade organization
Resolve disputes between member nations arising from alleged violations of previous agreements regarding international trade
If South Korea must give up the production of 75 notebook computers to produce 25 additional cell phones, the opportunity cost of producing for cell phones is—-Notebook computers
12
Production possibilities for farm, tractors, and motorcycles. The opportunity cost of.——-is——-in the United States as than in Germany.
Tractors, less
Suppose the United States places a tariff on imported Brazilian ipe. As a result of the tariff, the domestic price of lumber well.——-, consumer surplus well——— and producer surplus will——-
Rise, fall, rise
Suppose the demand equation is given by P equals 100 minus 2Q, and the supply equation is given by P equals 20+ 2Q. If a quantity restriction is set at two equals 10, what is the deadweight loss associated with this quantity control?
$200
A market for oranges is an equilibrium at a price of two dollars per pound if the government imposes a price ceiling on oranges of one dollar per pound
There will be an excess demand for the good
Quantity control set below the equilibrium quantity does not
Cause the supply price at the quantity bought and sold to exceed the demand price at the quantity bought and sold
Price control is
Illegal restriction on how high or low on market price may go
Nicolas maduro is the controversial president of Venezuela. Venezuela is also a major producer of petroleum products. Which remain a critical component of Venezuela’s economy. Suppose president Maja wanted to increase his popularity with the citizens of Venezuela buy an acting a government policy to reduce the price of gasoline sold at State Old gas stations to 60% of the previous price. This policy is called a.
Price ceiling
Rent controls in the market for apartments in New York City. If I rent ceiling is that at $900.
Rental apartments may be of inefficiently low quality
Suppose the government such a price floor of $4.85 per bushel of wheat when an equilibrium price is $4.55 per bushel. This price floor will.
Cause a surplus of wheat
All else equal if a price floor above, the equilibrium price is impose on the market, and the government buys the surplus, consumer surplus well——-and producer surplus well——-
Fall, rise
An economic markets, a quota is a
Upper limit on quantity of goods that can be bought or sold
The market for a Lyft rides in New York City. If the government imposes a quarter limit on 6 million rides, the quota rent accruing to the lift owner will be.—— pride, and there will be a total missed opportunity to consumers and producers of—-million rides
Four dollars, 4
If the government has a maximum allowable rent that is above the equilibrium rental rate than the
Lautt will have no effect on the rental market
A price ceiling is a
Maximum price sellers can charge for a good or service
The market for audiobooks. A price for a five dollars is imposed in this market would
Have no immediate effect
To be binding a price ceiling must be set at a price—-the equilibrium price
Below
A non-binding price floor is a—— price set—— the equilibrium price
Minimum below
If the quantity supplied does not respond, substantially to a large change in price supply is
Inelastic
The demand for most farm fresh produce is generally price elastic. This means that is farmers taken collectively, have a bumper crop, they will have —— prices—— quantity sold, and—— incomes
Lower, greater higher
Milk is an inexpensive good that most would consider to be a necessity. You were there for expected’s demand to be.
Inelastic
Markets for Mexican takeout. If income changes from $1000-$14,000 per month, the income elasticity of demand computed using the midpoint method it at a price of $10 per Mexican takeout meal is.
1.2.
Suppose the price of right increases by 16.53%. If the seller is by 3.28% less barley after the price increase, the total revenue for Rhye producers will.—— because——-effect is greater than the—— affect
Increase, price, quantity
The demand for online movies. If the price of online movies decreases from six dollars to four dollars total revenue—— which means the demand is——-
Remains constant, unit elastic
A rancher in Texas, decides to raise the prices for cattle by 19% over the prevailing market price. If the demand for beef is perfectly elastic this rancher quantity demanded well.
Fall 0
The demand for winter gloves. If the price is below.—— demand is inelastic
$30 or the midpoint
The demand curve for toll roads. This graphic statements, the demand for highway travel on Florida’s Turnpike, a toll road. Demand between $.90 and $1.10 is.——-since the price elasticity of demand computed using the midpoint method is——-
Unit elastic, equal to one
The price elasticity of supply is computed as the percentage change in——-divided by the percentage change in——-
Quantity supplied, price
Butter producers know that the price elasticity of demand for butter is 0.2 if they want to increase sales by 4% they will have to lower prices by.
20%
In the price of M&M, peanut candies, increases the demand for cherry, flavored, soft drinks decreases, these two goods are—-good
Complementary
If the price elasticity of demand for cotton is 0.5, and the income elasticity of demand for cotton is 0.4.
A 50% increase in income will increase the quantity demanded of cotton by 20%
The income elasticity of demand for fresh flowers has been estimated to be 0.67. If income gross by 12% in a given period demand will.
Increased by about 8%
Homework producers know that the price elasticity of demand for whole milk is 0.1. If they want to increase sales by 5%, they will have to lower prices by.
50%
The governor wants to Levi a one dollar excise tax on a product but wants to minimize the deadweight loss of the tax. To achieve this, the governor should choose a good for which the demand is.—— and the supply is——
Inelastic, inelastic
If the United States removed an excise tax on all alcohol and tobacco, which affect would not occur
Decrease in producer surplus
With perfectly inelastic supply in a downward sloping demand curve
Producers will be there the entire burden of a tax
Attacks that takes a—— percentage of income as income rises is a—-tax
Higher, progressive
To maximize the tax revenue collected, the government should impose excise taxes in markets in which demand is relatively—— and supplies relatively——-
Inelastic, inelastic
The market for green tea. In the green tea market the pre-tax equilibrium price is three dollars and the pre-tax equilibrium quantity is 20 cups and excise tax charged on suppliers is levied on each cup of green tea shifting the supply curve upward. The total tax revenue collected by the government is.
$26,250
Tax incidence analysis, six to determine
Who actually pays the tax
Three tax structure proposals. The government of new tax city is considering three tax proposals given in the table below policymakers interested in implementing a progressive tax, would suggest using.
Proposal 2
Taxes on the purchase of specific items, such as gasoline, tobacco, or alcoholic beverages are called—-taxes
Excise
Attacks that takes a—— percentage of income as income rises is——
Lower, regressive
The market for beyond meat burgers. If the market is originally an equilibrium and the government imposes an excise tax of $.80 per unit of the goods sold, the government revenue from the tax will be.
$240
The market for Amazon echo. The figure shows the pre-tax and post tax positions, S1 and S2, respectively of the supply curve for Amazon echo. The deadweight loss arising from the imposition of this tax is equal to the area.
C F
Suppose the government is considering imposing, an excise tax on protective gear for cycling. Additionally, I suppose that the government does not know whether supply and demand are elastic, or any lasting, but doesn’t know that the imposition of the tax will cause output to decrease relative to the no tax equilibrium. The government cannot be sure that the tax will result in.
Deadweight loss
The market for online movie downloads. If the government impose a tax of three dollars in this market, the deadweight loss will equal.
$22.50
If economy of Alta Vista, a Imports, a good when the economy is open to trade, the domestic price of the Goodwill be—— the autarky price and domestic consumption will be——-the autarky quantity
Less then, greater than
The production possibilities for Taiwan in Japan. Both nations were gains from trade one one pair of rain boots trades for.
1.5 microchips
The term autarky refers to a situation when a country
Does not trade with other countries
In a single year, Germany can raise 100 tons of weight or produce 1000 boxes of daisies. And the same growing season France country is 50 tons of weight or produce 750 boxes of daisies. From this information we know that.
Germany has a comparative advantage in raising wheat
The production of computers and cell phones in Canada and the United States. The table describes the production of two goods, computers, and cell phones, and Canada and the United States. Each country has a litter, production possibility frontier with respect to the production of the two cats. The number in each column represent the total numbers of units each country could produce if it used all of its resources to Bruce, the good if each country specializes in a good mood, she has a comparative advantage, then the price of computers in terms of cell phones will be.
Between two units of cell phones and three units of cell phones
The market for pineapples in Brazil Brazil trades based on compared to Vantage end of the world trade prices day then Brazil has—-in the production of pineapples
A comparative advantage
Attacks and put it on. Foreign goods is called a.
Tariff
Japan must give up the production of 100 computers to produce 25 additional cell phones. The opportunity cost of producing for computers is.
One cell phone
Frances give up the production of 100 times +50 additional sweaters. The opportunity cost of producing for ties is.
Two sweaters
The market for Swiss watches. Assume that DNS represent domestic man for and supply of Swiss watches. The worlds price PW equals $100 the government imposes a quarter restricting imports 25. Watched the domestic price rises to—— and quota. Rent is equal to the area.——
$120,H I
When a business harass people, in other countries to perform various tasks—— has occurred
Offshore outsourcing
If South Korea must give up the production of 75 notebook computers to produce 25 additional cell phone is the opportunity cost of producing for cell phones is
12 notebook computers
The market for grapes in California and I’ll talk to you. The price of grapes in California is PA when the economy is open to trade the price falls to PW and the change in consumer surplus will be given by the area.
NOP
The United Kingdom must give up the production of 300 motorcycles to produce 15 additional convertible, Jaguars with the same resources. The opportunity cost of producing 100 motorcycles is.
Five convertible Jaguars
The production possibility for Taiwan in Japan opportunity, cost of producing one pair of rain boots, in Taiwan is—— micro chips, will the opportunity cost of producing one pair of rain boots in Japan is—— micro chips
0.5, two.
