Question 1

If the government subsidizes a product, what is the relationship between the price that buyers pay (PB) and the price that sellers receive (PS)?

Accepted Answer

A)  PB + subsidy = PS 
B)  PB + PS = subsidy 
C)  PB = PS + subsidy 
D)  PB (1 + subsidy) = PS 
A)  PB + subsidy = PS 
B)  PB + PS = subsidy 
C)  PB = PS + subsidy 
D)  PB (1 + subsidy) = PS

Question 2

(Figure: Market for Comic Books I) The quota at S2 causes consumer surplus to:

Accepted Answer

A)  increase from $8 to $16. 
B)  decrease from $8 to $2. 
C)  decrease from $16 to $12. 
D)  decrease from $12 to $4. 
A)  increase from $8 to $16. 
B)  decrease from $8 to $2. 
C)  decrease from $16 to $12. 
D)  decrease from $12 to $4.

Question 3

Many U.S. states have minimum price laws for cigarettes. Assume that the demand equation for cigarettes is QD = 4,000 - 300P and the supply equation is QS = -1,000 + 200P, with quantity in thousands of packs. The number of cigarette packs actually sold when a binding price floor of $12 is applied to this market will be _____.

Accepted Answer

A price floor of $12 means that Q^D = 4,00

Question 4

Suppose the demand and supply curves for units of university credits are given by
QD = 5,000 - P
QS = -1,000 + 4P
Where QD is the quantity of credits demanded, QS is the quantity supplied, and P is the price in dollars for each unit. In this market, the equilibrium price is ____ and the equilibrium quantity is ____.

Accepted Answer

A)  $3,800; 1,200 
B)  $3,000; 2000 
C)  $1,200; 3,800 
D)  $2,000; 3,000 
A)  $3,800; 1,200 
B)  $3,000; 2000 
C)  $1,200; 3,800 
D)  $2,000; 3,000

Question 5

All else being equal, a negative supply shock:

Accepted Answer

A)  causes consumer surplus to increase and producer surplus to decrease. 
B)  causes consumer surplus to decrease and producer surplus to increase. 
C)  causes both consumer and producer surplus to increase. 
D)  causes both consumer and producer surplus to decrease. 
A)  causes consumer surplus to increase and producer surplus to decrease. 
B)  causes consumer surplus to decrease and producer surplus to increase. 
C)  causes both consumer and producer surplus to increase. 
D)  causes both consumer and producer surplus to decrease.

Question 6

Producer surplus can be calculated as:

Accepted Answer

A)    , where Qe and Pe are the equilibrium quantity and price, respectively, and P(Q
D)  is the inverse demand curve. 
B)    , where Qe and Pe are the equilibrium quantity and price, respectively, and P(QS) is the inverse supply curve. 
C)    , where Qe is the quantity that would occur in free-market equilibrium and P(Q
D)  and P(QS) are inverse demand and supply, respectively. 
D)    , where Qa denotes actual quantity, Qe is the quantity that would occur in free-market equilibrium, and P(Q
D)  and P(QS) are inverse demand and supply, respectively. 
A)    , where Qe and Pe are the equilibrium quantity and price, respectively, and P(Q
D)  is the inverse demand curve. 
B)    , where Qe and Pe are the equilibrium quantity and price, respectively, and P(QS) is the inverse supply curve. 
C)    , where Qe is the quantity that would occur in free-market equilibrium and P(Q
D)  and P(QS) are inverse demand and supply, respectively. 
D)    , where Qa denotes actual quantity, Qe is the quantity that would occur in free-market equilibrium, and P(Q
D)  and P(QS) are inverse demand and supply, respectively.

Question 7

(Figure: Market for Tickets II) As a result of the tax, the deadweight loss is:
​

Accepted Answer

A)  B + E. 
B)  B + C + E + F. 
C)  E + F. 
D)  B + C. 
A)  B + E. 
B)  B + C + E + F. 
C)  E + F. 
D)  B + C.

Question 8

(Figure: Market for Snow Blowers I) Which of the following statements is (are) TRUE?   I. The price sellers receive after tax is $250.
II) With the tax, consumers pay $315 per snow blower.
III) The government collects $200,000 in tax revenue.

Accepted Answer

A)  I and III 
B)  II and III 
C)  II 
D)  I, II, and III 
A)  I and III 
B)  II and III 
C)  II 
D)  I, II, and III

Question 9

If the government quit subsidizing a product, consumer surplus would _____ and producer surplus would _____.

Accepted Answer

A)  increase; decrease 
B)  decrease; decrease 
C)  increase; increase 
D)  decrease; increase 
A)  increase; decrease 
B)  decrease; decrease 
C)  increase; increase 
D)  decrease; increase

Question 10

Consumer surplus can be calculated as:

Accepted Answer

A)    , where Qe and Pe are the equilibrium quantity and price, respectively, and P(Q
D)  is the inverse demand curve. 
B)    , where Qe and Pe are the equilibrium quantity and price, respectively, and P(QS) is the inverse supply curve. 
C)    , where Qe is the quantity that would occur in free-market equilibrium and P(Q
D)  and P(QS) are inverse demand and supply, respectively. 
D)    , where Qa denotes actual quantity, Qe is the quantity that would occur in free-market equilibrium, and P(Q
D)  and P(QS) are inverse demand and supply, respectively. 
A)    , where Qe and Pe are the equilibrium quantity and price, respectively, and P(Q
D)  is the inverse demand curve. 
B)    , where Qe and Pe are the equilibrium quantity and price, respectively, and P(QS) is the inverse supply curve. 
C)    , where Qe is the quantity that would occur in free-market equilibrium and P(Q
D)  and P(QS) are inverse demand and supply, respectively. 
D)    , where Qa denotes actual quantity, Qe is the quantity that would occur in free-market equilibrium, and P(Q
D)  and P(QS) are inverse demand and supply, respectively.

Question 11

(Figure: Market for Tickets II) The size of the tax is:

Accepted Answer

A)  $1.00. 
B)  $0.50. 
C)  $4.00. 
D)  $2.00. 
A)  $1.00. 
B)  $0.50. 
C)  $4.00. 
D)  $2.00.

Question 12

Which of the following supply curves (where P is price per bushel and QS measures number of bushels) generates $64 of producer surplus at a market price of $10 per bushel?

Accepted Answer

A)  QS = 7.5P - 1.5 
B)  QS = 10P - 3 
C)  QS = 2P - 4 
D)  QS = 6P - 8 
A)  QS = 7.5P - 1.5 
B)  QS = 10P - 3 
C)  QS = 2P - 4 
D)  QS = 6P - 8

Question 13

(Figure: Market for Good X II) The total cost of the subsidy for the government is ____.

Accepted Answer

A)  $2.00 
B)  $10.00 
C)  $20.00 
D)  $16.00 
A)  $2.00 
B)  $10.00 
C)  $20.00 
D)  $16.00

Question 14

The demand and supply of movie tickets are given by QD = 30 - 3P and QS = 4P - 19, where P is the price per ticket and Q is in thousands of tickets. If the government places a $1 tax on each ticket, the prices that consumers pay with and without the tax are _____ and _____, respectively.

Accepted Answer

A)  $8; $7 
B)  $7.57; $7 
C)  $7.50; $6.50 
D)  $4.30; $3.80 
A)  $8; $7 
B)  $7.57; $7 
C)  $7.50; $6.50 
D)  $4.30; $3.80

Question 15

(Figure: Market for Peanuts II) If the government mandates a price floor of $750, the area of consumer surplus:

Accepted Answer

A)  increases from A to A + B + C. 
B)  decreases from A + B + C to A. 
C)  increases from A to B + C. 
D)  decreases from B + C to A. 
A)  increases from A to A + B + C. 
B)  decreases from A + B + C to A. 
C)  increases from A to B + C. 
D)  decreases from B + C to A.

Question 16

Suppose that the demand curve for an advanced technology product for businesses is given P =10,000 - 4Q3 and supply is P = 2,000 + 4Q3. The producer surplus at the equilibrium price is ____.

Accepted Answer

A)  $6,000 
B)  $10 
C)  $70,000 
D)  $30,000 
A)  $6,000 
B)  $10 
C)  $70,000 
D)  $30,000

Question 17

The supply and demand for solar panels are given by QS = 5P - 5,000 and QD = 15,000 - 5P, where P is price per solar panel and Q measures the quantity of solar panels. Suppose the government provides a $500 subsidy per solar panel. The total cost of the subsidy to the government is:

Accepted Answer

A)  $2,500,000.00. 
B)  $7,800,000.00. 
C)  $3.125,000.00. 
D)  $4,500,000.00. 
A)  $2,500,000.00. 
B)  $7,800,000.00. 
C)  $3.125,000.00. 
D)  $4,500,000.00.

Question 18

(Figure: Market for Good X II) Before the subsidy, consumer surplus is ____ and after the subsidy, consumer surplus is ____.

Accepted Answer

A)  $25.00; $16.00 
B)  $32.00; $50.00 
C)  $16.00; $25.00 
D)  $32.00; $30.00 
A)  $25.00; $16.00 
B)  $32.00; $50.00 
C)  $16.00; $25.00 
D)  $32.00; $30.00

Question 19

The price elasticity of demand is -1.25, and the share of the tax borne by consumers is 0.80. What is the price elasticity of supply?

Accepted Answer

A)  6 
B)  5 
C)  1.56 
D)  1 
A)  6 
B)  5 
C)  1.56 
D)  1

Question 20

The demand and supply of pickles are given by QD = 300 - 500P and QS = 400P - 150, where P is the price per pickle and Q measures the quantity of pickles in millions. Suppose the government creates a subsidy of $0.25 per pickle. Which of the following statements are TRUE?
I. Without the subsidy, the equilibrium quantity of pickles is 75 million.
II. With the subsidy, consumers pay 38.9 cents per pickle.
III. With the subsidy, producers receive 75 cents per pickle.
IV. With the subsidy, the equilibrium quantity of pickles is greater than 100 million.

Accepted Answer

A)  II, III, and IV 
B)  I and III 
C)  II and IV 
D)  I, III, and IV 
A)  II, III, and IV 
B)  I and III 
C)  II and IV 
D)  I, III, and IV

If the government subsidizes a product, what is the relationship between the price that buyers pay (P_B) and the price that sellers receive (P_S)?

(Figure: Market for Comic Books I) The quota at S₂ causes consumer surplus to:

All else being equal, a negative supply shock:

Producer surplus can be calculated as:

(Figure: Market for Tickets II) As a result of the tax, the deadweight loss is:

(Figure: Market for Snow Blowers I) Which of the following statements is (are) TRUE? I. The price sellers receive after tax is $250. II) With the tax, consumers pay $315 per snow blower. III) The government collects $200,000 in tax revenue.

If the government quit subsidizing a product, consumer surplus would _ and producer surplus would _.

Consumer surplus can be calculated as:

(Figure: Market for Tickets II) The size of the tax is:

Which of the following supply curves (where P is price per bushel and Q^S measures number of bushels) generates $64 of producer surplus at a market price of $10 per bushel?

(Figure: Market for Good X II) The total cost of the subsidy for the government is ____.

The demand and supply of movie tickets are given by Q^D = 30 - 3P and Q^S = 4P - 19, where P is the price per ticket and Q is in thousands of tickets. If the government places a $1 tax on each ticket, the prices that consumers pay with and without the tax are _ and _, respectively.

(Figure: Market for Peanuts II) If the government mandates a price floor of $750, the area of consumer surplus:

Suppose that the demand curve for an advanced technology product for businesses is given P =10,000 - 4Q³ and supply is P = 2,000 + 4Q³. The producer surplus at the equilibrium price is ____.

The supply and demand for solar panels are given by Q^S = 5P - 5,000 and Q^D = 15,000 - 5P, where P is price per solar panel and Q measures the quantity of solar panels. Suppose the government provides a $500 subsidy per solar panel. The total cost of the subsidy to the government is:

(Figure: Market for Good X II) Before the subsidy, consumer surplus is and after the subsidy, consumer surplus is .

The price elasticity of demand is -1.25, and the share of the tax borne by consumers is 0.80. What is the price elasticity of supply?

Adventures in Microeconomics

Supply and Demand

Consumer Behavior

Individual and Market Demand

Producer Behavior

Costs

Supply in a Competitive Market

Market Power and Monopoly

Market Power and Pricing Strategies

Imperfect Competition

Game Theory

Factor Markets

Investment, Time, and Insurance

General Equilibrium

Asymmetric Information

Externalities and Public Goods

Behavioral and Experimental Economics

Filters

Exam 3: Using Supply and Demand to Analyze Markets

If the government subsidizes a product, what is the relationship between the price that buyers pay (PB) and the price that sellers receive (PS)?

(Figure: Market for Comic Books I) The quota at S2 causes consumer surplus to:

All else being equal, a negative supply shock:

Producer surplus can be calculated as:

(Figure: Market for Tickets II) As a result of the tax, the deadweight loss is: ​

(Figure: Market for Snow Blowers I) Which of the following statements is (are) TRUE? I. The price sellers receive after tax is $250. II) With the tax, consumers pay $315 per snow blower. III) The government collects $200,000 in tax revenue.

If the government quit subsidizing a product, consumer surplus would _____ and producer surplus would _____.

Consumer surplus can be calculated as:

(Figure: Market for Tickets II) The size of the tax is:

Which of the following supply curves (where P is price per bushel and QS measures number of bushels) generates $64 of producer surplus at a market price of $10 per bushel?

(Figure: Market for Good X II) The total cost of the subsidy for the government is ____.

The demand and supply of movie tickets are given by QD = 30 - 3P and QS = 4P - 19, where P is the price per ticket and Q is in thousands of tickets. If the government places a $1 tax on each ticket, the prices that consumers pay with and without the tax are _____ and _____, respectively.

(Figure: Market for Peanuts II) If the government mandates a price floor of $750, the area of consumer surplus:

Suppose that the demand curve for an advanced technology product for businesses is given P =10,000 - 4Q3 and supply is P = 2,000 + 4Q3. The producer surplus at the equilibrium price is ____.

The supply and demand for solar panels are given by QS = 5P - 5,000 and QD = 15,000 - 5P, where P is price per solar panel and Q measures the quantity of solar panels. Suppose the government provides a $500 subsidy per solar panel. The total cost of the subsidy to the government is:

(Figure: Market for Good X II) Before the subsidy, consumer surplus is ____ and after the subsidy, consumer surplus is ____.

The price elasticity of demand is -1.25, and the share of the tax borne by consumers is 0.80. What is the price elasticity of supply?

Adventures in Microeconomics

Supply and Demand

Consumer Behavior

Individual and Market Demand

Producer Behavior

Costs

Supply in a Competitive Market

Market Power and Monopoly

Market Power and Pricing Strategies

Imperfect Competition

Game Theory

Factor Markets

Investment, Time, and Insurance

General Equilibrium

Asymmetric Information

Externalities and Public Goods

Behavioral and Experimental Economics

Filters

If the government subsidizes a product, what is the relationship between the price that buyers pay (P_B) and the price that sellers receive (P_S)?

(Figure: Market for Comic Books I) The quota at S₂ causes consumer surplus to:

(Figure: Market for Tickets II) As a result of the tax, the deadweight loss is:

If the government quit subsidizing a product, consumer surplus would _ and producer surplus would _.

Which of the following supply curves (where P is price per bushel and Q^S measures number of bushels) generates $64 of producer surplus at a market price of $10 per bushel?

The demand and supply of movie tickets are given by Q^D = 30 - 3P and Q^S = 4P - 19, where P is the price per ticket and Q is in thousands of tickets. If the government places a $1 tax on each ticket, the prices that consumers pay with and without the tax are _ and _, respectively.

Suppose that the demand curve for an advanced technology product for businesses is given P =10,000 - 4Q³ and supply is P = 2,000 + 4Q³. The producer surplus at the equilibrium price is ____.

The supply and demand for solar panels are given by Q^S = 5P - 5,000 and Q^D = 15,000 - 5P, where P is price per solar panel and Q measures the quantity of solar panels. Suppose the government provides a $500 subsidy per solar panel. The total cost of the subsidy to the government is:

(Figure: Market for Good X II) Before the subsidy, consumer surplus is and after the subsidy, consumer surplus is .