ECON 210 TEST 2 – Flashcards

Price Elasticity of Demand measures

The price elasticity of supply measures how much

A decrease in supply will cause the largest increase in price when

Elasticity is a measure of

Price elasticity of supply measures how responsive

Price elasticity of demand is defined as

When consumers face rising gasoline prices, they typically

In general, demand curves for necessities tend to be

A key determinant of the price elasticity of supply is the time period under consideration

If demand is price inelastic, then

Demand is said to be inelastic if

A key determinant of the price elasticity of supply is the

Goods with close substitutes tend to have more or less elastic demands than do goods without close substitutes?

The demand for Rice Krispies is more or less elastic than the demand for cereal in general

The demand for soap is more or less elastic than the demand for Dove soap

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is

In a competitive market free of government regulation

If the government removes a tax on a good, then the quantity of the good sold will

If the government removes a tax on a good, then the price paid by buyers will

In a free, competitive market, what is the rationing mechanism?

A tax on the sellers of coffee mugs

Rent-control laws dictate

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

A legal maximum on the price at which a good can be sold is called a price?

A tax imposed on the sellers of a good will raise the

If a price ceiling is not binding, then

Price controls

If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would

If the government levies a $500 tax per car on sellers of cars, then the price received by sellers of cars would

A price ceiling will be binding only if it is set

Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? After the price ceiling becomes effective,

When a tax is placed on the sellers of cell phones, the size of the cell phone market

Suppose the government has imposed a price ceiling on sliced sandwich bread. Which of the following events could transform the price ceiling from one that is binding to one that is not binding?

Suppose sellers of perfume are required to send $1.00 to the government for every bottle of perfume they sell. Further, suppose this tax causes the price paid by buyers of perfume to rise by $0.60 per bottle. Which of the following statements is correct?

When a binding price ceiling is imposed on a market,

When a binding price ceiling is imposed on a market to benefit buyers,

If a tax is levied on the sellers of a product, then there will be a(n)

A binding price ceiling causes quantity demanded to be more or less than quantity supplied

A price ceiling set above the equilibrium price causes quantity demanded to exceed quantity supplied

To say that a price ceiling is binding is to say that the price ceiling

If the government levies a $0.25 tax per MP3 music file downloaded on buyers of MP3 music files, then the price received by sellers of MP3 music files would

The maximum price that a buyer will pay for a good is called

A seller's opportunity cost measures the

Economists typically measure efficiency using

Consumer surplus equals the

A supply curve can be used to measure producer surplus because it reflects

Producer surplus equals the

A consumer's willingness to pay directly measures

Total surplus

consumer surplus

When a buyer's willingness to pay for a good is equal to the price of the good, the

Producer surplus measures the

Consumer surplus can be measured as the area between the demand curve and the supply curve

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it

On a graph, the area below a demand curve and above the price measures

If the government imposes a binding price floor in a market, then the consumer surplus in that market will decrease

All else equal, an increase in demand will always increase consumer surplus

At the equilibrium price of a good, the good will be purchased by those buyers who

In a market, the marginal buyer is the buyer

At the equilibrium price of a good, the good will be sold by those sellers

The lower the price, the lower the consumer surplus, all else equal

When a tax is levied on a good, the buyers and sellers of the good share the burden

A decrease in the size of a tax is most likely to increase tax revenue in a market with

Total surplus is always equal to the sum of consumer surplus and producer surplus

Taxes are costly to market participants because they

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

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

A tax on a good

The price elasticities of supply and demand affect

If the size of a tax increases, tax revenue

The size of the deadweight loss generated from a tax is affected by the

The government's benefit from a tax can be measured by

When a tax is imposed on sellers, consumer surplus and producer surplus both decrease

What happens to the total surplus in a market when the government imposes a tax?

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

When a good is taxed

Sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the

Taxes affect market participants by increasing the price paid by the buyer and received by the seller

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic

When a tax is imposed on a good, the

When a tax is imposed on a good for which the demand is relatively elastic and the supply is relatively inelastic

When a tax on a good is enacted,

The amount of deadweight loss from a tax depends upon the

Rationing mechanisms

Rationing mechanisms are often unfair, and inefficient

when prices are not controlled, the rationing mechanism is efficient and impersonal

Allocation of resources

Welfare economics

Laissez faire

An allocation of resources is efficient if it maximizes total surplus

Efficiency means: