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# Midterm 2 Answers - 1 Refer to Figure1 The government...

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1 1) Refer to Figure1. The government policy pictured is A) a price ceiling of \$20. B) a price support of \$20. C) a price ceiling of \$15. D) a price support of \$15. E) A quota of 600. Answer: B Diff: 1 Section: 9.4 2) Refer to Figure 1. Before this policy was implemented, consumer surplus was A) \$20. B) \$4000. C) \$6000. D) \$8000. E) \$12000. Answer: B Diff: 2 Section: 9.4 3) Refer to Figure 1. Before this policy was implemented, producer surplus was A) \$10. B) \$2000. C) \$4000. D) \$6000. E) \$12000. Answer: B Diff: 2 Section: 9.4 4) Refer to Figure 1. As a result of this policy, quantity will A) fall to 300. B) rise to 400.

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2 C) stay at 400. D) fall to 400. E) rise to 600. Answer: E Diff: 1 Section: 9.4 5) Refer to Figure 1. As a result of this policy, consumer surplus will A) fall to \$15. B) fall to \$2250. C) rise to \$2500. D) fall to \$5000. E) rise to \$5000. Answer: B Diff: 2 Section: 9.4 6) Refer to Figure 1. As a result of this policy, producer surplus will be A) \$2000. B) \$3375. C) \$4500. D) \$6000. E) \$12,000. Answer: C Diff: 2 Section: 9.4 7) Refer to Figure 1. The amount the government pays in the market to implement this policy is A) \$20. B) \$3000. C) \$4000. D) \$6000. E) \$12,000. Answer: D Diff: 2 Section: 9.4 8) Refer to Figure 1. Including the consumers' expected tax burden, the total change in welfare from this policy is A) -\$6000. B) -\$5250. C) -\$4500. D) \$4500. E) \$5250. Answer: B Diff: 2 Section: 9.4 9) Consider a good whose own price elasticity of demand is -1.5 and price elasticity of supply is 0.5. The fraction of a specific tax that is borne by producers is __________. A) 0 B) 0.25 C) 0.5 D) 0.75 E) 1 Answer: D Diff: 2 Section: 9.6
3 10) In a supply-and-demand graph, producer surplus can be pictured as the A) vertical intercept of the supply curve. B) area between the demand curve and the supply curve to the left of equilibrium output. C) area under the supply curve to the left of equilibrium output. D) area under the demand curve to the left of equilibrium output. E) area between the equilibrium price line and the supply curve to the left of equilibrium output. Answer: E Diff: 2 Section: 8.6 11) Suppose all firms have constant marginal costs that are the same for each firm in the short run. In this case, the market level supply curve is __________ and producer surplus equals __________: A) perfectly inelastic, fixed costs B) perfectly inelastic, zero C) perfectly elastic, fixed costs D) perfectly elastic, zero Answer: D Diff: 2 Section: 8.6 12) In general, the deadweight loss associated with an import tariff or quota becomes relatively larger when: A) supply and demand are inelastic. B) supply is elastic and demand is inelastic.

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Midterm 2 Answers - 1 Refer to Figure1 The government...

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