Midterm Exam 2 (1)

Midterm Exam 2 (1) - Midterm Exam 2 Econ 251-002 27 May...

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Midterm Exam 2 Econ 251-002 27 May 2011 40 Questions Please choose the best answer for each question. Use the following information to answer the next 4 questions. Demand Qd = -P + 8 OR P = 8 - Qd Supply: Qs = 2P – 4 OR P = 2 + ½ Qs 4 4 S=MC D=MB P Q 8 2 1. If a price floor is mandated at a price of $3, what quantity will be produced? a. 4 b. 3.5 c. 5 d. 2 2. A price ceiling at $3 will result in a dead weight loss of? a. 0 b. 3 c. 6 d. .625 3. A $1 dollar tax per unit sold is imposed on the producer. What is the new quantity sold? a. 3 b. 4 c. 10/3 = 3.33 d. 3.5 4. Based on the $1 dollar tax in the previous questions, how is the tax burden divided?
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Producers pay $0.667 of the tax and consumers pay $0.33 b. Consumers pay $0.667 of the tax and producers pay $0.33 c. Division of tax burden depends on whether government levied the tax on consumers or producers d. None of the above 5. Based on the supply and demand schedule shown immediately below, if a price ceiling is introduced at $100, what is the housing surplus/shortage? Rent Quantity demanded, Apartments Quantity supplied, Apartments 50 30 0 100 24 9 150 18 18 200 12 24 250 6 30 300 0 35 a. Surplus of 15 b. Surplus of 24 c. Shortage of 15 d. Shortage of 0 6. A price floor set above the market equilibrium price _____ , and a price ceiling above the equilibrium price ______. a. Creates shortages; Creates surpluses b. Creates shortages; has no effect c. Has no effect; creates shortages d. Creates surpluses; has no effect 7. Assume the demand for coffee is perfectly inelastic, the supply of coffee is positively sloped, and equilibrium price before the tax is $3. How will a $1 per unit tax on a cup of coffee affect the market? a. The tax increases the price consumers pay, decreasing their quantity demanded. Also, the tax decreases the price firms receive, decreasing quantity supplied. b. The coffee consumers pay the full amount of the tax. The price consumers pay is $4 a cup and vendors receive $3 a cup. The quantity traded doesn’t change. c. The coffee vendors pay the full amount of the tax. The price consumers pay is still $3 a cup but vendors receive $2. The quantity traded decreases. d. The price consumers pay decreases, since demand is perfectly inelastic. The vendors pay the full amount of the tax. 8. If a tax is imposed, a greater portion of the tax will be borne by the produces if a. εd > εs. b.
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Midterm Exam 2 (1) - Midterm Exam 2 Econ 251-002 27 May...

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