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Agricultural Economics > Test 2 Agricultural Economics > Flashcards

Test 2 Agricultural Economics Flashcards

1
Q

t/f a price floor set below the equilibrium price causes quantity supplied to exceed quantity demanded

A

False

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2
Q

t/f not all sellers benefit from a binding price floor

A

true

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3
Q

t/f a binding minimum wage may not help all workers, but it doesn’t hurt any workers

A

false

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4
Q

t/f advocates of the minimum wage admit that it has some adverse effects, but they believe that these effects are small and that a higher minimum wage makes the poor better off

A

True

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5
Q

t/f a tax of $1 on buyers shifts the demand curve downward by exactly $1

A

True

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6
Q

t/f price controls can generate inequities

A

true

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7
Q

t/f if the equilibrium price of an airline ticket is $400 and the government imposes a price floor of $500 on airline tickets then fewer airline tickets will be sold than at the market equilibrium

A

True

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8
Q

t/f taxes levied on sellers and taxes levied on buyers are equivalent

A

True

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9
Q

t/f if a tax is imposed on the sellers of a product, then the tax burden will fall entirely on the sellers

A

False

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10
Q

when a tax is placed on the sellers of energy drinks, the…

A

burden of the tax will be shared by the buyers and the sellers, but the division of the burden is not always equal

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11
Q

Suppose that a tax is placed on books. If the sellers pay the majority of the tax, then we know that the…

A

supply is more inelastic than the demand

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12
Q

price control are usually enacted when…

A

policymakers believe that the market price of a good or service is unfair to buyers or sellers

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13
Q

why do policymakers use taxes

A

to raise revenue for public purposes and to influence market outcomes

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14
Q

what happens to market price and quantity sold if a price celling is non binding

A

there is no effect

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15
Q

when a tax is placed on the sellers of a product, buyers pay…

A

more, and sellers receive less than they did before the tax

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16
Q

t/f a buyer is willing to buy a product at a price greater than or equal to his willingness to pay, but would refuse to buy a product at a price less than his willingness to pay

A

false

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17
Q

t/f consumer surplus can be measured as the area between the demand curve and the equilibrium price

A

true

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18
Q

t/f producer surplus is the cost of production minus the amount a seller is paid

A

false

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19
Q

t/f if producing a soccer ball costs jake $5 and he sells it for $40 his producer surplus is $45

A

false $35

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20
Q

t/f if the government imposes a binding price ceiling in a market, then the producer surplus in that market will increase

A

false

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21
Q

t/f the equilibrium of supply and demand in a market maximizes the total benefits to buyers and sellers of participating in that market

A

true

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22
Q

t/f ticket scalping can increase total surplus in the market for tickets to sporting events

A

true

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23
Q

t/f suppose you sell a kayak for $600, but you were willing to sell it for $450. the buyer was willing to pay $650. The total surplus is $200

A

true

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24
Q

t/f unless markets are perfectly competitive, they may fail to maximize the total benefits to buyers and sellers

A

true

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25
Q

market power and externalities are examples of market failures

A

true

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26
Q

what is welfare economics

A

the study of how the allocation of resources affects economic well-being

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27
Q

suppose Larry, Moe, and Curly are bidding in an auction for a mint-condition video of Charlie Chaplin’s first movie. Each has in a mind and maximum amount that he will bid. this maximum is called…

A

willingness to pay

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28
Q

what is consumer surplus

A

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

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29
Q

on a graph what does the area below a demand curve and above the price measure

A

consumer surplus

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30
Q

a seller is willing to sell a product only if the seller receives a price that is at least as great as the…

A

sellers cost of production

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31
Q

what is producer surplus

A

the amount a seller is paid minus the cost of production

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32
Q

what is total surplus

A

the total value of the good to buyers minus the cost to sellers of providing the good

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33
Q

what are externalities

A

side effects passed on to a party other than the buyers and sellers in the market

34
Q

what are market power and externalities examples of

A

market failure

35
Q

price ceiling

A

a legal maximum on the price at which a good can be sold

36
Q

price floor

A

a legal minimum on the price and which a good can be sold

37
Q

tax incidence

A

the manner in which the burden of a tax is shared among participants in a market
elasticity determines this

38
Q

cost

A

the value of everything a seller must give up to produce a good

39
Q

efficiency

A

the property of a resource allocation of maximizing the total surplus received by all members of society
goods are consumed by buyers who value them most highly
goods are produced by the producers with the lowest costs
raising or lowering the quantity of a good will not increase total surplus

40
Q

equality

A

the property of distributing economic prosperity uniformly among the members of society

41
Q

deadweight loss

A

the fall in total surplus that results from a market distortion such as a tax

42
Q

t/f when a tax is imposed on buyers consumer surplus decreases but producer surplus increases

A

false

43
Q

t/f taxes affect market participants by increasing the price paid by the buyer and received by the seller

A

false

44
Q

t/f the greater the elasticity of demand, the smaller the deadweight loss of tax

A

false

45
Q

t/f the greater the deadweight loss from taxation, the larger the cost of government programs

A

true

46
Q

t/f when the government imposes taxes on buyers and sellers of a good, society loses some of the benefits of market efficiency

A

true

47
Q

t/f total surplus in a market does not change when the government imposes tax on that market because the loss of consumer surplus and producer surplus is equal to the gain of government revenue

A

false

48
Q

t/f if the government imposes a $3 tax in a market, the equilibrium price will rise by $3

A

false, not necessarily

49
Q

t/f if a tax did not include buyers or sellers to change their behavior, it would not cause a deadweight loss

A

true

50
Q

t/f the demand for bread is less elastic than the demand for donuts hence a tax on bread will create a larger deadweight loss than the same tax on donuts, other things equal

A

false, bread inelastic

51
Q

t/f economist Arthur Laffer made the argument that tax rates in the United States were so high that reducing the rates would increase tax revenue

A

true

52
Q

It does not matter whether a tax is levied on the buyers or the sellers of a good because…

A

buyers and sellers will share the burden of the tax

53
Q

a tax placed on a good…

A

causes the equilibrium quantity of the good to decrease

54
Q

how are the size of a tax and the deadweight loss of a tax related

A

positively

55
Q

the more elastic the demand for the good, other thongs…

A

increase as the size of the tax increases, and the increase in deadweight loss is more rapid than the increase in the size of the tax

56
Q

what happens when a tax is imposed on the sellers of a good

A

the supply curve shifts upward by the amount of the tax

57
Q

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

A

inelastic demand and inelastic supply

58
Q

what creates shortages

A

price ceilings

59
Q

what creates surpluses

A

price floors

60
Q

who pays most of luxury tax?

A

producers

61
Q

does inelastic or elastic bear most of burden?

A

inelastic

62
Q

what is the allocation of resources also called

A

surplus

63
Q

what is a marginal buyer

A

a buyer who would leave the market if the price got any higher

64
Q

what is a marginal seller

A

a seller who would leave the market if the price was any lower

65
Q

what does PS equal

A

the area above the supply curve under the price from 0-Q

66
Q

which goods or services should the government tax to raise revenue

A

the ones with the smallest DWL

67
Q

when is DWL small

A

inelastic

68
Q

marginal tax rate

A

the tax on the last dollar of earnings about %40

69
Q

t/f a binding price floor may not help all sellers, but it doesn’t hurt any sellers

A

false

70
Q

t/f if a market is in equilibrium, then it is impossible for a social planner to raise economic welfare by increasing or decreasing the quantity of the good

A

true

71
Q

t/f the current policy on kidney donation effectively sets a price ceiling of zero

A

true

72
Q

t/f the Laffer curve is the curve showing how tax revenue varies as the size of the tax varies

A

true

73
Q

t/f the more inelastic demand and supply are, the bigger deadweight loss

A

false, smaller

74
Q

t/f total surplus is always equal to the sum of consumer surplus and producer surplus

A

false, tax revenue

75
Q

t/f the term tax incidence refers to how the burden of a tax is distributed among the various people who make up the economy

A

true

76
Q

t/f if the size of a tax doubles, the deadweight loss doubles

A

false

77
Q

t/f when the government imposes a binding price ceiling on a competitive market, a surplus of the good arises, and sellers must ration the scarce goods among the large number of buyers

A

false, shortage

78
Q

t/f taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay

A

false, other way around

79
Q

if the price a consumer pays for a product is equal to a consumer’s willingness to pay, then the consumer surplus relevant to that purchase is…

A

zero

80
Q

The imposition of a binding price ceiling on a market causes quantity demanded to be…

A

greater than quantity supplied

81
Q

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…

A

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

Agricultural Economics (3 decks)

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