Question 2:

The demand for good B is not perfectly inelastic or perfectly elastic, and the supply is not perfectly elastic or perfectly elastic. A sales tax is levied on sellers. A(n) ________ in the tax per unit would __________ producer surplus.

increase; have no effect on

decrease; decrease

decrease; have no effect on

increase; decrease

increase; increase

Question 3:

A binding price floor is imposed on the market. Will the surplus increase or decrease in long run? Explain.

Group of answer choices

The surplus will increase because buyers will buy more in long run.

The surplus will decrease because sellers will sell more in long run.

The surplus will increase because both demand and supply become more elastic in long run.

The surplus will increase because sellers will sell less and buyers will buy more in long run.

The surplus will decrease because both demand and supply become more elastic in long run.

Question 4:

Suppose a binding price ceiling is imposed. Which of the following statements is correct?

Group of answer choices

The black-market price will be higher than the legal market price.

The black-market price will be lower than the legal market price.

There will be surplus of the good in the legal market.

The equilibrium price is below the legal market price.

The shortage of the good will decrease in long run.

Question 5:

Taxes will very likely cause consumer prices to increase. How much the consumer prices increase _____________

Group of answer choices

does not depend on the elasticity of demand or the elasticity of supply.

depends on the stage of production at which the tax is imposed.

depends on whether the amount of the tax is added to the price as it is labeled or at the point of purchase.

depends on whether the tax is levied on buyers or sellers.

depends on both the elasticities of supply and demand.

Question 7:

Why does a surplus exist under a binding price floor?

Group of answer choices

A binding price floor will never create a surplus.

A price floor encourages buyers to purchase more of the product.

A price floor makes the price so high that the quantity supplied exceeds the quantity demanded in the legal market.

A price floor makes the price so low that the quantity demanded exceeds the quantity supplied in the legal market.

A price floor cause sellers to decrease the quality of the products they sell. Buyers will buy more as a result.

Question 8: An example of a binding price floor is ________ the equilibrium price.

Group of answer choices

a minimum price of alcohol that is set above

rent control that is set above

a black market that sets the price above

a minimum wage law that is set below

rent control that is set below

Question 13:

Consider the market for a textbook. The current price of a copy of the textbook is $150. Two students, Mary and John, are willing to pay $200 and $180, respectively, for a copy of the textbook. Seller A has a copy of the textbook and is willing to sell it for as little as $125. Seller B has a copy of the textbook and is willing to sell it $130. Mary buys the textbook from seller A, and John buys it from seller B.

How much is total surplus in this market?

Question 14:

Fitness classes sell 20 participant spots at a price of $4.00 each. When the instructor raised the prices to $5.00, 15 people attended the class. Using the midpoint method, calculate the price elasticity of demand for fitness classes. (Round your answer to the nearest two decimal places.)