Make sure your name, date, section number and Exam 2 appear on the scantron please.
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1 Exam 2 Make sure your name, date, section number and Exam 2 appear on the scantron please. 1. Price controls are usually enacted a. as a means of raising revenue for public purposes. b. when policymakers believe that the market price of a good or service is unfair to buyers or sellers. c. when policymakers detect inefficiencies in a market. d. All of the above are correct. 2. Price controls a. always produce a fair outcome. b. always produce an efficient outcome. c. can generate inequities of their own. d. All of the above are correct. Figure Refer to Figure 6-2. The price ceiling a. is binding. b. causes a shortage. c. causes the quantity demanded to exceed the quantity supplied. d. All of the above are correct. 4. Refer to Figure 6-2. The price ceiling causes a a. surplus of 40 units. b. surplus of 85 units. c. shortage of 45 units. d. shortage of 85 units. Page 1
2 Figure Refer to Figure 6-5. If the horizontal line on the graph represents a price ceiling, then the price ceiling is a. binding and creates a surplus of 40 units of the good. b. binding and creates a surplus of 90 units of the good. c. not binding but creates a surplus of 40 units of the good. d. not binding, and there will be no surplus or shortage of the good. Figure Refer to Figure The amount of the tax per unit is a. $1. b. $1.50. c. $2.50. d. $3.50. Page 2
3 7. Refer to Figure Buyers pay how much of the tax per unit? a. $1. b. $1.50. c. $2.50. d. $ Refer to Figure Sellers pay how much of the tax per unit? a. $1.00. b. $1.50. c. $2.50. d. $ Refer to Figure Suppose the same supply and demand curves apply, and a tax of the same amount per unit as shown here is imposed. Now, however, the buyers of the good, rather than the sellers, are required to pay the tax to the government. After the buyers pay the tax, relative to the case depicted in the figure, the burden on buyers will be a. larger, and the burden on sellers will be smaller. b. smaller, and the burden on sellers will be larger. c. the same, and the burden on sellers will be the same. d. The relative burdens in the two cases cannot be determined without further information. 10. Refer to Figure How much tax revenue does this tax generate for the government? a. $75 b. $125 c. $175 d. $300 Page 3
4 Figure 6-25 Panel (a) Panel (b) Panel (c) 11. Refer to Figure In which market will the majority of the tax burden fall on buyers? a. market (a) b. market (b) c. market (c) d. All of the above are correct. 12. Suppose Larry, Moe, and Curly are bidding in an auction for a mint-condition video of Charlie Chaplin's first movie. Each has in mind a maximum amount that he will bid. This maximum is called a. a resistance price. b. willingness to pay. c. consumer surplus. d. producer surplus. Page 4
5 13. Consumer surplus is a. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. b. the amount a buyer is willing to pay for a good minus the cost of producing the good. c. the amount by which the quantity supplied of a good exceeds the quantity demanded of the good. d. a buyer's willingness to pay for a good plus the price of the good. Table 7-1 Buyer Willingness To Pay Lori $50.00 Audrey $30.00 Zach $20.00 Calvin $ Refer to Table 7-1. If the price of the product is $18, then the total consumer surplus is a. $38. b. $42. c. $46. d. $ Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for $3,000. Michael's willingness to pay is a. $500. b. $3,000. c. $3,500. d. $6,500. Page 5
6 Figure Refer to Figure At the equilibrium price, consumer surplus is a. $150. b. $200. c. $250. d. $ Refer to Figure At the equilibrium price, producer surplus is a. $80. b. $100. c. $120. d. $ Refer to Figure At the equilibrium price, total surplus is a. $150. b. $200. c. $250. d. $300. Page 6
7 Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. 19. Refer to Figure 8-8. After the tax goes into effect, consumer surplus is the area a. A. b. B+C. c. A+B+C. d. A+B+D+J+K. 20. Refer to Figure 8-8. After the tax goes into effect, producer surplus is the area a. D+F+G+H+J. b. D+F+G+H. c. D+F+J. d. J. 21. Refer to Figure 8-8. The government collects tax revenue that is the area a. L. b. B+D. c. C+F. d. F+G+L. 22. Refer to Figure 8-8. The deadweight loss of the tax is the area a. B+D. b. C+F. c. A+C+F+J. d. B+C+D+F. 23. A tariff is a a. limit on how much of a good can be exported. b. limit on how much of a good can be imported. c. tax on an exported good. d. tax on an imported good. Page 7
8 Figure 9-1 The figure illustrates the market for wool in Scotland. 24. Refer to Figure 9-1. With international trade, Scotland will a. export 11 units of wool. b. export 5 units of wool. c. import 15 units of wool. d. import 6 units of wool. 25. Refer to Figure 9-1. When international trade in wool is allowed, consumer surplus in Scotland a. increases by the area B + D. b. increases by the area C + F. c. decreases by the area B + D. d. decreases by the area D + G. 26. Refer to Figure 9-1. When international trade in wool is allowed, producer surplus in Scotland a. increases by the area B + D. b. increases by the area B + D + G. c. decreases by the area C + F. d. decreases by the area G. Page 8
9 27. Refer to Figure 9-1. Relative to the no-trade situation, trade with the rest of the world results in a. an increase total surplus in Scotland. b. a decrease in producer surplus in Scotland. c. a decrease in total surplus in Scotland. d. All of the above are correct. Figure Refer to Figure Consumer surplus with international trade and without a tariff is a. A. b. A + B. c. A + C + G. d. A + B + C + D + E + F. 29. Refer to Figure Consumer surplus with the tariff is a. A. b. A + B. c. A + C + G. d. A + B + C + D +E + F. 30. Refer to Figure Producer surplus with international trade and without a tariff is a. G. b. C + G. c. A + C + G. d. A + B + C + G. 31. Refer to Figure Producer surplus with the tariff is a. G. b. C + G. c. A + C + G. d. A + B + C + G. Page 9
10 32. Refer to Figure The amount of government revenue created by the tariff is a. B. b. E. c. D + F. d. B + D + E + F. 33. Refer to Figure As a result of the tariff, there is a deadweight loss that amounts to a. B. b. E. c. D + F. d. B + D + E + F. 34. (BONUS) A minimum wage that is set above a market's equilibrium wage will result in an excess a. demand for labor, that is, unemployment. b. demand for labor, that is, a shortage of workers. c. supply of labor, that is, unemployment. d. supply of labor, that is, a shortage of workers. 35. (BONUS) Lawmakers designed the burden of the FICA payroll tax to be split evenly between workers and firms. Labor economists believe that a. lawmakers may have actually achieved their goal because statistics show that the tax burden is currently equally divided. b. the tax raises too little revenue for the government, so it should be eliminated. c. firms bear most of the burden of the tax. d. workers bear most of the burden of the tax. Page 10
11 ID: A Exam 2 Answer Section MULTIPLE CHOICE 1. B 2. C 3. D 4. D 5. D 6. C 7. A 8. B 9. C 10. B 11. B 12. B 13. A 14. C 15. C 16. A 17. B 18. C 19. A 20. D 21. B 22. B 23. D 24. A 25. C 26. B 27. A 28. D 29. B 30. A 31. B 32. B 33. C 34. C 35. D Page 1
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