Test 2 Agricultural Economics

Question 1

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

Answer 1

False

Question 2

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

Answer 2

true

Question 3

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

Answer 3

false

Question 4

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

Answer 4

True

Question 5

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

Answer 5

True

Question 6

t/f price controls can generate inequities

Answer 6

true

Question 7

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

Answer 7

True

Question 8

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

Answer 8

True

Question 9

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

Answer 9

False

Question 10

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

Answer 10

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

Question 11

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

Answer 11

supply is more inelastic than the demand

Question 12

price control are usually enacted when…

Answer 12

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

Question 13

why do policymakers use taxes

Answer 13

to raise revenue for public purposes and to influence market outcomes

Question 14

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

Answer 14

there is no effect

Question 15

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

Answer 15

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

Question 16

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

Answer 16

false

Question 17

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

Answer 17

true

Question 18

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

Answer 18

false

Question 19

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

Answer 19

false $35

Question 20

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

Answer 20

false

Question 21

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

Answer 21

true

Question 22

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

Answer 22

true

Question 23

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

Answer 23

true

Question 24

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

Answer 24

true

Question 25

market power and externalities are examples of market failures

Answer 25

true

Question 26

what is welfare economics

Answer 26

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

Question 27

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...

Answer 27

willingness to pay

Question 28

what is consumer surplus

Answer 28

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

Question 29

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

Answer 29

consumer surplus

Question 30

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

Answer 30

sellers cost of production

Question 31

what is producer surplus

Answer 31

the amount a seller is paid minus the cost of production

Question 32

what is total surplus

Answer 32

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

Question 33

what are externalities

Answer 33

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

Question 34

what are market power and externalities examples of

Answer 34

market failure

Question 35

price ceiling

Answer 35

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

Question 36

price floor

Answer 36

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

Question 37

tax incidence

Answer 37

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

Question 38

cost

Answer 38

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

Question 39

efficiency

Answer 39

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

Question 40

equality

Answer 40

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

Question 41

deadweight loss

Answer 41

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

Question 42

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

Answer 42

false

Question 43

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

Answer 43

false

Question 44

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

Answer 44

false

Question 45

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

Answer 45

true

Question 46

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

Answer 46

true

Question 47

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

Answer 47

false

Question 48

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

Answer 48

false, not necessarily

Question 49

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

Answer 49

true

Question 50

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

Answer 50

false, bread inelastic

Question 51

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

Answer 51

true

Question 52

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

Answer 52

buyers and sellers will share the burden of the tax

Question 53

a tax placed on a good...

Answer 53

causes the equilibrium quantity of the good to decrease

Question 54

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

Answer 54

positively

Question 55

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

Answer 55

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

Question 56

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

Answer 56

the supply curve shifts upward by the amount of the tax

Question 57

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

Answer 57

inelastic demand and inelastic supply

Question 58

what creates shortages

Answer 58

price ceilings

Question 59

what creates surpluses

Answer 59

price floors

Question 60

who pays most of luxury tax?

Answer 60

producers

Question 61

does inelastic or elastic bear most of burden?

Answer 61

inelastic

Question 62

what is the allocation of resources also called

Answer 62

surplus

Question 63

what is a marginal buyer

Answer 63

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

Question 64

what is a marginal seller

Answer 64

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

Question 65

what does PS equal

Answer 65

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

Question 66

which goods or services should the government tax to raise revenue

Answer 66

the ones with the smallest DWL

Question 67

when is DWL small

Answer 67

inelastic

Question 68

marginal tax rate

Answer 68

the tax on the last dollar of earnings about %40

Question 69

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

Answer 69

false

Question 70

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

Answer 70

true

Question 71

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

Answer 71

true

Question 72

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

Answer 72

true

Question 73

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

Answer 73

false, smaller

Question 74

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

Answer 74

false, tax revenue

Question 75

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

Answer 75

true

Question 76

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

Answer 76

false

Question 77

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

Answer 77

false, shortage

Question 78

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

Answer 78

false, other way around

Question 79

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...

Answer 79

zero

Question 80

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

Answer 80

greater than quantity supplied

Question 81

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...

Answer 81

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