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Econ 202 – Third Quiz - Key
1. One can say with certainty that equilibrium price declines when supply
increases and demand decreases.
2. Welfare economics is the study of
how the allocation of resources affects economic well-being.
3. Efficiency is attained when
total surplus is maximized.
4. An effective minimum wage law will
cause unemployment for some affected workers.
5. Producer surplus is
the amount a seller is paid minus the cost of production.
6. Suppose Lauren, Leslie and Lydia all purchase bulletin boards for their rooms for $15
each. Lauren's willingness to pay was $35, Leslie's willingness to pay was $25, and
Lydia's willingness to pay was $30. Total consumer surplus for these three would be
$45.
7. A price floor on corn would have the effect of
creating a surplus when the price floor is set above the equilibrium price.
8. If the federal government began granting a subsidy of 10 cents per apple to apple
growers and as a result the price of apples to consumers falls by 8 cents,
the actual benefit of this subsidy goes mostly to consumers.
9. A price ceiling
is a legal maximum on the price at which a good can be sold.
10. The area below a demand curve and above the price measures
consumer surplus.
11. Rationing by long lines is
efficient, because those who are willing to wait the longest get the goods.
12. Ronnie operates a lawn-care service. On each day, the cost of mowing the first lawn
is $10; the cost of mowing the second lawn is $12; and the cost of mowing the third lawn
is $15. His producer surplus on the first three lawns of the day is $53. If Ronnie charges
all customers the same price for lawn mowing, that price is
$30.
13. In a market, social welfare is
equal to producer surplus plus consumer surplus.
14. Consumer surplus
is the difference between the amount that a consumer actually pays for a good
and the amount that the consumer is willing to pay for the good.
15. A price floor
is a legal minimum on the price at which a good can be sold.
16. When a tax is placed on a product, the price paid by buyers
rises, and the price received by sellers falls.
17. A deadweight loss is a consequence of a tax on a good because the tax
induces buyers to consume less, and sellers to produce less.