Exam 3

Directions: Identify the letter of the choice that best completes the statement or answers the question. Then mark your response on the answer sheet. Unless otherwise stated, demand curves are negatively sloped and supply curves are positively sloped. The midpoint and point formulae for elasticity are, respectively:

____ 1. If the government wants to reduce smoking, it should impose a tax on
a.
buyers of cigarettes.
b.
sellers of cigarettes.
c.
either buyers or sellers of cigarettes.
d.
whichever side of the market is less elastic.

Figure 6-23

____ 2. Refer to Figure 6-23. The amount of the tax burden borne by producers is _____ per unit.
a.
$4.
c.
$6.
b.
$5.
d.
$10.

Figure 6-24
Suppose …show more content…

c.
It remains unchanged.
d.
It may increase, decrease, or remain unchanged.

____ 16. Which of the following statements is not correct about a market in equilibrium?
a.
The price determines which buyers and which sellers participate in the market.
b.
Those buyers who value the good more than the price choose to buy the good.
c.
Those sellers whose costs are less than the price choose to produce and sell the good.
d.
Consumer surplus will be equal to producer surplus.

Figure 7-23

____ 17. Refer to Figure 7-23. Which of the following statements is correct?
a.
The market is in equilibrium at Q1.
b.
At Q2, the cost to sellers exceeds the value to buyers.
c.
At Q4, the value to buyers is less than the cost to sellers.
d.
At Q3, the market is producing too much output.

____ 18. The benefit that government receives from a tax is measured by
a.
the change in the equilibrium quantity of the good.
b.
the change in the equilibrium price of the good.
c.
tax revenue.
d.
total surplus.

____ 19. A deadweight loss is a consequence of a tax on a good because the tax
a.
induces buyers to consume less, and sellers to produce less.
b.
decreases consumer surplus.
c.
decreases producer surplus.
d.
All of the above correctly finish the sentence.

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.

____ 20. Refer to Figure 8-5. The tax causes a reduction in consumer surplus that is represented by area
a.