Test II Practice Problems

# Test II Practice Problems - Test II Practice Problems Short...

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Test II Practice Problems Short Answer 1. Using a supply-demand diagram, show a labor market with a binding minimum wage. Now, use the diagram to show those who are helped by the minimum wage, and those who are hurt by the minimum wage. 2. a. Using the graph shown, analyze the effect a \$300 price ceiling would have on the market for ten-speed bicycles. Would this be a binding price ceiling? b. Using the graph shown, analyze the effect a \$700 price floor would have on this market. Would this be a binding price floor? c. Why would policymakers choose to impose a price ceiling or price floor? 3. Using the graph shown, answer the following questions. a. What was the equilibrium price in this market before the tax? b. What is the amount of the tax? c. How much of the tax will the buyers pay? d. How much of the tax will the sellers pay? e. How much will the buyer pay for the product after the tax is imposed? f. How much will the seller receive after the tax is imposed? g. As a result of the tax, what has happened to the level of market activity?

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4. Using the graph shown, answer the following questions. a. What was the equilibrium price and quantity in this market before the tax? b. What is the amount of the tax? c. How much of the tax will the buyers pay? d. How much of the tax will the sellers pay? e. How much will the buyer pay for the product after the tax is imposed? f. How much will the seller receive after the tax is imposed? g. As a result of the tax, what has happened to the level of market activity? 5. How does elasticity affect the burden of a tax? Justify your answer using supply and demand diagrams. 6. Answer each of the following questions about demand and consumer surplus. a. What is consumer surplus, and how is it measured? b. What is the relationship between the demand curve and the willingness to pay? c. Other things equal, what happens to consumer surplus if the price of a good falls? Why? Illustrate using a demand curve. d. In what way does the demand curve represent the benefit consumers receive from participating in a market? In addition to the demand curve, what else must be considered to determine consumer surplus?
7. Answer each of the following questions about supply and producer surplus. a. What is producer surplus, and how is it measured? b. What is the relationship between the cost to sellers and the supply curve? c. Other things equal, what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve. 8. Answer the following questions based on the graph that represents J.R.'s demand for ribs per week of ribs at Judy's rib shack. a. At the equilibrium price, how many ribs would J.R. be willing to purchase? b.

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## This note was uploaded on 05/01/2011 for the course ECON 2100 taught by Professor Darrinv.gulla during the Summer '08 term at Morehouse.

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Test II Practice Problems - Test II Practice Problems Short...

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