Download Consumer and Producer Surplus Excise Taxes and Efficiency

Consumer Surplus and The Nutcracker
Student
Willingness to Pay
Lois
$100
Miguel
90
Nancy
65
Oscar
50
Pat
15
If the price of a ticket to see The Nutcracker is $50 and there is no other market
for tickets, then total consumer surplus for the five students is:
a.
b.
c.
d.
e.
$105.
$130.
$270.
$320.
$200.
Consumer Surplus and The Nutcracker
Student
Willingness to Pay
Lois
$100
Miguel
90
Nancy
65
Oscar
50
Pat
15
If the price of a ticket to see The Nutcracker is $50 and there is no other market
for tickets, then total consumer surplus for the five students is:
a.
b.
c.
d.
e.
$105.
$130.
$270.
$320.
$200.
Jeanette is willing to pay $100 for the first pair of shoes, $80 for
the second pair, $50 for the third, and $30 for the fourth. If
shoes cost $50, Jeanette will buy _____ pairs of shoes and her
total consumer surplus equals _____.
a.
4; $110
b.
3; $230
c.
3; $80
d.
4; $80
e.
2; $80
Jeanette is willing to pay $100 for the first pair of shoes, $80 for
the second pair, $50 for the third, and $30 for the fourth. If
shoes cost $50, Jeanette will buy _____ pairs of shoes and her
total consumer surplus equals _____.
a.
4; $110
b.
3; $230
c.
3; $80
d.
4; $80
e.
2; $80
This graph represents one
individual’s monthly demand
for ice cream cones. At a price
of $5 per cone, this individual
will consume 10 cones in a
month. How much consumer
surplus does this consumer
receive?
a.
$100
b.
$50
c.
$150
d.
$500
e.
$75
This graph represents one
individual’s monthly demand
for ice cream cones. At a price
of $5 per cone, this individual
will consume 10 cones in a
month. How much consumer
surplus does this consumer
receive?
a.
$100
b.
$50
c.
$150
d.
$500
e.
$75
Total Number of Apples
Lowest Price Orchard is Willing to
Accept
1
$2
2
6
3
8
4
11
5
15
If the price of an apple is $11, what is the value of
producer surplus for this firm?
a. $11
b. $17
c. $27
d. $40
e. $44
Total Number of Apples
Lowest Price Orchard is Willing to
Accept
1
$2
2
6
3
8
4
11
5
15
If the price of an apple is $11, what is the value of
producer surplus for this firm?
a. $11
b. $17
c. $27
d. $40
e. $44
Mountain River Adventures offer white water rafting trips
down the Colorado River. It costs the firm $100 for the first raft
trip per day, $120 for the second, $140 for the third, and $160 for
the fourth. If the market price for a raft trip is $150, Mountain
River Adventures will offer _____ trips per day and _____ will
have producer surplus equal to _____.
a.
3; $90
b.
3; $10
c.
2; $220
d.
4; $80
e.
3; $150
Mountain River Adventures offer white water rafting trips
down the Colorado River. It costs the firm $100 for the first raft
trip per day, $120 for the second, $140 for the third, and $160 for
the fourth. If the market price for a raft trip is $150, Mountain
River Adventures will offer _____ trips per day and _____ will
have producer surplus equal to _____.
a.
3; $90
b.
3; $10
c.
2; $220
d.
4; $80
e.
3; $150
When the imposition of an excise tax causes the quantity
demanded and quantity supplied to decrease, this will result in:
a.
deadweight loss.
b.
increases in producer surplus.
c.
increases in consumer surplus.
d.
increases in both consumer and producer surplus.
e.
decreases in consumer surplus and increases in producer
surplus.
When the imposition of an excise tax causes the quantity
demanded and quantity supplied to decrease, this will result in:
a.
deadweight loss.
b.
increases in producer surplus.
c.
increases in consumer surplus.
d.
increases in both consumer and producer surplus.
e.
decreases in consumer surplus and increases in producer
surplus.
If the government imposes a
$60,000 tax on yachts and
collects it from the yacht
consumers, the _____ curve will
shift _____ by _____.
a.
supply; upward; $30,000
b.
supply; upward; $60,000
c.
demand; downward;
$30,000
d.
demand; upward; $60,000
e.
demand; downward;
$60,000
If the government imposes a
$60,000 tax on yachts and
collects it from the yacht
consumers, the _____ curve will
shift _____ by _____.
a.
supply; upward; $30,000
b.
supply; upward; $60,000
c.
demand; downward;
$30,000
d.
demand; upward; $60,000
e.
demand; downward;
$60,000
If the government imposes a
$60,000 tax on yachts (collected
from the producers), consumers
will pay _____ of the tax and
producers will pay _____.
a.
$30,000; $30,000
b.
$40,000; $20,000
c.
$20,000; $40,000
d.
$10,000; $50,000
e.
$0; $60,000
If the government imposes a
$60,000 tax on yachts (collected
from the producers), consumers
will pay _____ of the tax and
producers will pay _____.
a.
$30,000; $30,000
b.
$40,000; $20,000
c.
$20,000; $40,000
d.
$10,000; $50,000
e.
$0; $60,000
If the government imposes a
$30,000 tax on yachts and
collects it from the yacht
suppliers, the _____ curve will
shift _____ by _____.
a.
demand; downward;
$15,000
b.
supply; upward; $15,000
c.
supply; upward; $30,000
d.
demand; downward;
$30,000
e.
supply; downward;
$30,000
If the government imposes a
$30,000 tax on yachts and
collects it from the yacht
suppliers, the _____ curve will
shift _____ by _____.
a.
demand; downward;
$15,000
b.
supply; upward; $15,000
c.
supply; upward; $30,000
d.
demand; downward;
$30,000
e.
supply; downward;
$30,000
Prior to any taxes, suppose the equilibrium price of gasoline is
$3 per gallon. A $1 tax is levied on each gallon of gas that is
supplied. As a result, the price of gasoline rises to $3.75 per
gallon. The incidence of the $1 tax is:
a.
$0.25 paid by consumers, $0.75 paid by producers.
b.
$0.50 paid by consumers, $0.50 paid by producers.
c.
$1.00 paid by producers, $0 paid by consumers.
d.
$0.75 paid by consumers, $0.25 paid by producers.
e.
$0 paid by producers, $1.00 paid by consumers.
Prior to any taxes, suppose the equilibrium price of gasoline is
$3 per gallon. A $1 tax is levied on each gallon of gas that is
supplied. As a result, the price of gasoline rises to $3.75 per
gallon. The incidence of the $1 tax is:
a.
$0.25 paid by consumers, $0.75 paid by producers.
b.
$0.50 paid by consumers, $0.50 paid by producers.
c.
$1.00 paid by producers, $0 paid by consumers.
d.
$0.75 paid by consumers, $0.25 paid by producers.
e.
$0 paid by producers, $1.00 paid by consumers.
Paying a tax on $10 on an income of $100, a tax of $20 on an
income of $200, and a tax of $30 on an income of $300 is an
example of a:
a.
regressive tax.
b.
proportional tax.
c.
progressive tax.
d.
benefits tax.
e.
lump-sum tax.
Paying a tax on $10 on an income of $100, a tax of $20 on an
income of $200, and a tax of $30 on an income of $300 is an
example of a:
a.
regressive tax.
b.
proportional tax.
c.
progressive tax.
d.
benefits tax.
e.
lump-sum tax.
Paying a tax on $10 on an income of $100, a tax of $25 on an
income of $200, and a tax of $60 on an income of $300 is an
example of a:
a.
regressive tax.
b.
proportional tax.
c.
progressive tax.
d.
benefits tax.
e.
lump-sum tax.
Paying a tax on $10 on an income of $100, a tax of $25 on an
income of $200, and a tax of $60 on an income of $300 is an
example of a:
a.
regressive tax.
b.
proportional tax.
c.
progressive tax.
d.
benefits tax.
e.
lump-sum tax.
Paying a tax on $20 on an income of $100, a tax of $15 on an
income of $200, and a tax of $12 on an income of $300 is an
example of a:
a.
regressive tax.
b.
proportional tax.
c.
progressive tax.
d.
benefits tax.
e.
lump-sum tax.
Paying a tax on $20 on an income of $100, a tax of $15 on an
income of $200, and a tax of $12 on an income of $300 is an
example of a:
a.
regressive tax.
b.
proportional tax.
c.
progressive tax.
d.
benefits tax.
e.
lump-sum tax.
Coffee and tea are substitutes. If there is an increase in the price
of coffee, total surplus in the tea market:
a.
will increase.
b.
will decrease.
c.
will not change.
d.
may change, but we cannot determine the change without
more information.
e.
will fall to zero.
Coffee and tea are substitutes. If there is an increase in the price
of coffee, total surplus in the tea market:
a.
will increase.
b.
will decrease.
c.
will not change.
d.
may change, but we cannot determine the change without
more information.
e.
will fall to zero.
Scenario 1. Budget Constraint. Tom is trying to decide how to
allocate his $50 budget for CD purchases and DVD rentals when
the price of a CD is $10 and the price of a DVD rental is $5.
1.
Which of the following combinations of CD purchases and
DVD rentals lies inside Tom’s budget line?
1.
2.
3.
4.
5.
5 CDs and 10 DVDs
5 CDs and 0 DVDs
0 CDs and 5 DVDs
10 CDs and 5 DVDs
2 CDs and 7 DVDs
Scenario 1. Budget Constraint. Tom is trying to decide how to
allocate his $50 budget for CD purchases and DVD rentals when
the price of a CD is $10 and the price of a DVD rental is $5.
1.
Which of the following combinations of CD purchases and
DVD rentals lies inside Tom’s budget line?
1.
2.
3.
4.
5.
5 CDs and 10 DVDs
5 CDs and 0 DVDs
0 CDs and 5 DVDs
10 CDs and 5 DVDs
2 CDs and 7 DVDs
Units of Good X
MU Good X
Units of Good Y
MU Good Y
1
20
1
12
2
16
2
10
3
12
3
8
4
8
4
6
5
4
5
4
6
0
6
2
Assume that the price of both goods is $1 per unit, and you consume 3 units of
Good X and 3 units of Good Y. To maximize utility, assuming that the goods
are divisible, you would consume:
a.
b.
c.
d.
e.
less of both X and Y.
more of both X and Y.
less of X and more of Y.
more of X and less of Y.
the current quantity of both goods.
Units of Good X
MU Good X
Units of Good Y
MU Good Y
1
20
1
12
2
16
2
10
3
12
3
8
4
8
4
6
5
4
5
4
6
0
6
2
Assume that the price of both goods is $1 per unit, and you consume 3 units of
Good X and 3 units of Good Y. To maximize utility, assuming that the goods
are divisible, you would consume:
a.
b.
c.
d.
e.
less of both X and Y.
more of both X and Y.
less of X and more of Y.
more of X and less of Y.
the current quantity of both goods.
Units of Good X
MU Good X
Units of Good Y
MU Good Y
1
20
1
12
2
16
2
10
3
12
3
8
4
8
4
6
5
4
5
4
6
0
6
2
Assume that the price of both goods is $1 per unit, and you consume 4 units of
Good X and 2 units of Good Y. To maximize utility, assuming that the goods
are divisible, you would consume:
a.
b.
c.
d.
e.
less of X and more of Y.
more of both X and Y.
less of both X and Y.
more of X and less of Y.
the current quantity of both goods.
Units of Good X
MU Good X
Units of Good Y
MU Good Y
1
20
1
12
2
16
2
10
3
12
3
8
4
8
4
6
5
4
5
4
6
0
6
2
Assume that the price of both goods is $1 per unit, and you consume 4 units of
Good X and 2 units of Good Y. To maximize utility, assuming that the goods
are divisible, you would consume:
a.
b.
c.
d.
e.
less of X and more of Y.
more of both X and Y.
less of both X and Y.
more of X and less of Y.
the current quantity of both goods.
Units of Good X
MU Good X
Units of Good Y
MU Good Y
1
20
1
12
2
16
2
10
3
12
3
8
4
8
4
6
5
4
5
4
6
0
6
2
Assume that the price of Good X is $2 per unit and the price of Good Y is $1
per unit, and you consume 3 units of Good X and 3 units of Good Y. To
maximize utility, assuming that the goods are divisible, you would consume:
a.
b.
c.
d.
e.
less of both X and Y.
more of both X and Y.
less of X and more of Y.
more of X and less of Y.
the current quantity of both goods.
Units of Good X
MU Good X
Units of Good Y
MU Good Y
1
20
1
12
2
16
2
10
3
12
3
8
4
8
4
6
5
4
5
4
6
0
6
2
Assume that the price of Good X is $2 per unit and the price of Good Y is $1
per unit, and you consume 3 units of Good X and 3 units of Good Y. To
maximize utility, assuming that the goods are divisible, you would consume:
a.
b.
c.
d.
e.
less of both X and Y.
more of both X and Y.
less of X and more of Y.
more of X and less of Y.
the current quantity of both goods.
Units of Good X
MU Good X
Units of Good Y
MU Good Y
1
20
1
12
2
16
2
10
3
12
3
8
4
8
4
6
5
4
5
4
6
0
6
2
Assume that the price of Good X is $1 per unit and the price of Good Y is $2
per unit, and you consume 4 units of Good X and 2 units of Good Y. To
maximize utility, assuming that the goods are divisible, you would consume:
a.
b.
c.
d.
e.
less of both X and Y.
more of both X and Y.
less of X and more of Y.
more of X and less of Y.
the current quantity of both goods.
David’s marginal utilities for
milkshakes and burgers are
given in the accompanying
table. The price of milkshakes is
$2, and the price of burgers is
$5. If Max’s income is $10, how
many milkshakes and how
many burgers does he buy to
maximize his utility?
a.
1 shake and 1 burger
b.
0 shakes and 2 burgers
c.
5 shakes and 0 burgers
d.
2 shakes and 1 burger
e.
6 shakes and 2 burgers.
David’s marginal utilities for
milkshakes and burgers are
given in the accompanying
table. The price of milkshakes is
$2, and the price of burgers is
$5. If Max’s income is $10, how
many milkshakes and how
many burgers does he buy to
maximize his utility?
a.
1 shake and 1 burger
b.
0 shakes and 2 burgers
c.
5 shakes and 0 burgers
d.
2 shakes and 1 burger
e.
6 shakes and 2 burgers.
If a consumer buys more of Good X and less of Good Y, the
_____ of Good X will _____, and the ______ of Good Y will
_____.
a.
marginal utility; fall; marginal utility; rise
b.
marginal utility; rise; marginal utility; fall
c.
total utility; fall; marginal utility; rise
d.
marginal utility; rise; total utility; rise
e.
total utility; rise; total utility; rise
If a consumer buys more of Good X and less of Good Y, the
_____ of Good X will _____, and the ______ of Good Y will
_____.
a.
marginal utility; fall; marginal utility; rise
b.
marginal utility; rise; marginal utility; fall
c.
total utility; fall; marginal utility; rise
d.
marginal utility; rise; total utility; rise
e.
total utility; rise; total utility; rise
If a consumer purchases a combination of commodities A and B
such that MUa/Pa = 50 and MUb/Pb = 30, to maximize utility,
the consumer should:
a.
buy less of both A and B.
b.
buy more of both A and B.
c.
buy more of A and less of B.
d.
buy less of A and more of B.
e.
make no changes to the current combination of A and B.
If a consumer purchases a combination of commodities A and B
such that MUa/Pa = 50 and MUb/Pb = 30, to maximize utility,
the consumer should:
a.
buy less of both A and B.
b.
buy more of both A and B.
c.
buy more of A and less of B.
d.
buy less of A and more of B.
e.
make no changes to the current combination of A and B.
If a consumer purchases a combination of commodities A and B
such that MUa/Pa = 100 and MUb/Pb = 80, to maximize utility,
the consumer should:
a.
buy less of both A and B.
b.
buy more of both A and B.
c.
buy more of A and less of B.
d.
buy less of A and more of B.
e.
make no changes to the current combination of A and B.
If a consumer purchases a combination of commodities A and B
such that MUa/Pa = 100 and MUb/Pb = 80, to maximize utility,
the consumer should:
a.
buy less of both A and B.
b.
buy more of both A and B.
c.
buy more of A and less of B.
d.
buy less of A and more of B.
e.
make no changes to the current combination of A and B.
Generally, each successive unit of a good consumed will cause
marginal utility to
a.
increase at an increasing rate.
b.
increase at a decreasing rate.
c.
increase at a constant rate.
d.
decrease.
e.
either increase or decrease.
Generally, each successive unit of a good consumed will cause
marginal utility to
a.
increase at an increasing rate.
b.
increase at a decreasing rate.
c.
increase at a constant rate.
d.
decrease.
e.
either increase or decrease.
Assume there are two goods, good X and good Y. Good X costs
$5 and good Y costs $10. If your income is $200, which of
the following combinations of good X and good Y is on your
budget line?
a.
0 units of good X and 18 units of good Y
b.
0 units of good X and 20 units of good Y
c.
20 units of good X and 0 units of good Y
d.
10 units of good X and 12 units of good Y
e.
all of the above.
Assume there are two goods, good X and good Y. Good X costs
$5 and good Y costs $10. If your income is $200, which of
the following combinations of good X and good Y is on your
budget line?
a.
0 units of good X and 18 units of good Y
b.
0 units of good X and 20 units of good Y
c.
20 units of good X and 0 units of good Y
d.
10 units of good X and 12 units of good Y
e.
all of the above.
The optimal consumption rule states that total utility is
maximized when all income is spent and
a.
MU/P is equal for all goods.
b.
MU is equal for all goods.
c.
P/MU is equal for all goods.
d.
MU is as high as possible for all goods.
e.
The amount spent on each good is equal.
The optimal consumption rule states that total utility is
maximized when all income is spent and
a.
MU/P is equal for all goods.
b.
MU is equal for all goods.
c.
P/MU is equal for all goods.
d.
MU is as high as possible for all goods.
e.
The amount spent on each good is equal.
A consumer is spending all of her income and receiving 100
utils from the last unit of good A and 80 utils from the last
unit of good B. If the price of good A is $2 and the price of
good B is $1, to maximize total utility the consumer should
buy
a.
more of good A.
b.
more of good B.
c.
less of good B.
d.
more of both goods.
e.
less of both goods.
A consumer is spending all of her income and receiving 100
utils from the last unit of good A and 80 utils from the last
unit of good B. If the price of good A is $2 and the price of
good B is $1, to maximize total utility the consumer should
buy
a.
more of good A.
b.
more of good B.
c.
less of good B.
d.
more of both goods.
e.
less of both goods.
The optimal consumption bundle is always represented by a
point
a.
inside the consumer’s budget line.
b.
outside the consumer’s budget line.
c.
at the highest point on the consumer’s budget line.
d.
on the consumer’s budget line.
e.
at the horizontal intercept of the consumer’s budget line.
The optimal consumption bundle is always represented by a
point
a.
inside the consumer’s budget line.
b.
outside the consumer’s budget line.
c.
at the highest point on the consumer’s budget line.
d.
on the consumer’s budget line.
e.
at the horizontal intercept of the consumer’s budget line.