Midterm 2

Refer to the graph shown. When the price is P1, consumer surplus is

• A

• A+B

• A+B+C

• A+B+D

Refer to the graph shown. When the price rises from P1 to P2, consumer surplus

• increases by an amount equal to A. 

• decreases by an amount equal to B + C.

• increases by an amount equal to B + C.

• decreases by an amount equal to C.

Starting from February 2002, the new regulation requires all airlines to pay a security fee of $20 for each passenger. With a normal demand and supply, ______. 

• the airlines will pass the entire fee of $20 to their customers. 

• the airlines might split the burden with their customers if their customers are highly sensitive to the total payments they pay for traveling. 

• the airlines will bear the entire fee of $20. 

• the airlines will simply raise the price for the business travelers. 

In the figure above, the tax burden

• is split between consumers and producers.

• is totally borne (paid) by producers.

• is totally borne (paid) by consumers.

• creates no deadweight loss (social loss) to society.

In the above figure, the amount of the tax per unit is

• $.50

• $1.00

• $1.50

• $2.00

According to the graph, the amount that sellers will receive after the tax is imposed is___.  

• $1

• $2

• $3

• $4

The table gives the demand and supply schedule for cookies. The government now levies a $.60 tax on cookies. As a result, the price consumers pay for a packet of cookies increases to __ and the tax revenue collected is __ a week.  

• $4.70, $42

• $5.00, $24

• $4.90, $30 

• $4.80, $36 

Consider a market that is initially in equilibrium with a quantity demanded equal to quantity supplied at a price of $14. If the world price is $12 and the country opens up to international trade, then in this market we would expect 

•  imports will increase, price will fall, quantity supplied will fall 

• exports will increase, price will fall, quantity supplied will fall 

• exports will increase, price will increase, domestic quantity supplied will increase

• imports will increase, price will remain unchanged, the domestic supply curve will shift right 

Suppose that the world price of steel is​ $100 a​ ton, India does not trade​ internationally, and the equilibrium price of steel in India is​ $60 a ton. Suppose that India now begins to trade internationally.The price of steel in India​ ______. The quantity of steel produced in India​ ______. The quantity of steel bought by India​ ______. India​ ______ steel.

• rises, decreases, decreases, imports

• rises, increases, decreases, exports

• decreases, increases, decreases, exports

• rises, increases, increases, imports

A change in the prices of goods ____ and a change in a consumer's income ____.

• shifts the budget line; has no effect on the budget line

• has no effect on the budget line; changes the slope of the budget line

• shifts the budget line; changes the slope of the budget line

• changes the slope of the budget line; shifts the budget line