1. Which of the following statements is (are) correct?

(x) If the price control is binding, price ceilings and price floors reduce total surplus because quantity demanded does not equal quantity supplied at the price specified by the price control.

(y) The particular price that results in quantity supplied being equal to quantity demanded is the best price because it maximizes the welfare of buyers and sellers.

(z) Suppose the market is competitive and externalities are not present. At the price that reflects market equilibrium the value to buyers of the last unit is equal to the cost to sellers of that unit if the market is at equilibrium.

Select one:

A.

(x), (y) and (z)

B.

(x) and (y) only

C.

(x) and (z) only

D.

(y) and (z) only

E.

(z) only

2. Suppose that the equilibrium quantity in the market for gadgets has been 85,000 per month. Then a tax of $6 per gadget is imposed on gadgets. As a result, the price paid by buyers increases by $4 and the after-tax price received (and kept) by sellers falls by $2. Given this tax imposition, the government is able to raise $481,740 per month in tax revenue. We can conclude that the imposition of the tax

(x) has reduced the equilibrium quantity of gadgets by more than 4,450 but less than 4,675 gadgets per month.

(y) has caused a deadweight loss by an amount more than $13,750 but less than $14,500 per month.

(z) has reduced consumer surplus by more than $328,750 per month and has reduced producer surplus by more than $164,775 per month.

Select one:

A.

(x), (y) and (z)

B.

(x) and (y) only

C.

(x) and (z) only

D.

(y) and (z) only

E.

(z) only

3. Suppose that in the market for widgets, the supply curve is the typical upward-sloping line, and the demand curve is the typical downward-sloping line. A tax of $4.80 per unit is imposed on widgets and the price rises by $3.25. The equilibrium quantity before the tax imposition was 400,000 widgets and the equilibrium quantity after the tax is 364,000 widgets. The deadweight loss from the tax is

A.

more than $74,150 but less than $76,600

B.

more than $76,600 but less than $79,050

C.

more than $79,050 but less than $81,500

D.

more than $81,500 but less than $83,950

E.

more than $83,950 but less than $86,500