Figure 7-10

PRACTICE II

Table 7-3

The only four consumers in a market have the following willingness to pay for a good:

Buyer	Willingness to Pay
Carlos	$15
Quilana	$25
Wilbur	$35
Ming-la	$45

1. Refer to Table 7-3. Who experiences the largest loss of consumer surplus when the price of the good increases from $20 to $22?

a.	Quilana
b.	Wilbur
c.	Ming-la
d.	All three buyers experience the same loss of consumer surplus.

Table 7-5

For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Alex, Barb, and Carlos are the only three buyers of oranges, and only three oranges can be supplied per day.

	First Orange	Second Orange	Third Orange
Alex	$2.00	$1.50	$0.75
Barb	$1.50	$1.00	$0.80
Carlos	$0.75	$0.25	$0

2. Refer to Table 7-5. The market quantity of oranges demanded per day is exactly 5 if the price of an orange, P, satisfies

a.	$1.00 < P < $1.50.
b.	$0.80 < P < $1.50.
c.	$0.80 < P < $1.00.
d.	$0.75 < P < $0.80.

3. Refer to Table 7-5. If the market price of an orange is $1.20, consumer surplus amounts to

a.	$0.70.
b.	$1.10.
c.	$1.40.
d.	$5.00.

4. Refer to Table 7-5. If the market price of an orange is $0.40,

a.	6 oranges are demanded per day, and total consumer surplus amounts to $4.45.
b.	6 oranges are demanded per day, and total consumer surplus amounts to $5.10.
c.	7 oranges are demanded per day, and total consumer surplus amounts to $5.35.
d.	7 oranges are demanded per day, and total consumer surplus amounts to $5.50.

5. Refer to Table 7-5. If the market price of an orange increases from $0.60 to $1.05, total consumer surplus

a.	increases by $2.90.
b.	decreases by $2.25.
c.	decreases by $2.70.
d.	decreases by $3.85.

6. Refer to Table 7-5. If the market price of an orange increases from $0.70 to $1.40, total consumer surplus

a.	increases by $2.50.
b.	decreases by $0.80.
c.	decreases by $2.50.
d.	decreases by $3.40.

7. Refer to Table 7-5. Who experiences the largest loss of consumer surplus when the price of an orange increases from $0.70 to $1.40?

a.	Alex
b.	Barb
c.	Carlos
d.	All three individuals experience the same loss of consumer surplus.

8. Refer to Table 7-5. Who experiences the largest gain in consumer surplus when the price of an orange decreases from $1.05 to $0.75?

a.	Alex
b.	Barb
c.	Carlos
d.	Alex and Barb experience the same gain in consumer surplus, and Carlos’s gain is zero.

9. Janine would be willing to pay $50 to see Les Misérables, but she buys a ticket for only $30. Janine values the performance at

a.	$20.
b.	$30.
c.	$50.
d.	$80.

Figure 7-10

10. Refer to Figure 7-10. At the equilibrium price, producer surplus is

a.	$200.
b.	$400.
c.	$450.
d.	$900.

11. Refer to Figure 7-10. If the government imposes a price ceiling of $70 in this market, then the new producer surplus will be

a.	$50.
b.	$100.
c.	$175.
d.	$350.

12. Refer to Figure 7-10. If the government imposes a price ceiling of $70 in this market, then producer surplus will decrease by

a.	$50.
b.	$125.
c.	$150.
d.	$200.

13. When a tax is imposed on a good, the

a.	supply curve for the good always shifts.
b.	demand curve for the good always shifts.
c.	amount of the good that buyers are willing to buy at each price always remains unchanged.
d.	equilibrium quantity of the good always decreases.

14. A tax levied on the sellers of a good shifts the

a.	supply curve upward (or to the left).
b.	supply curve downward (or to the right).
c.	demand curve upward (or to the right).
d.	demand curve downward (or to the left).

15. A tax levied on the buyers of a good shifts the

a.	supply curve upward (or to the left).
b.	supply curve downward (or to the right).
c.	demand curve downward (or to the left).
d.	demand curve upward (or to the right).

16. A tax placed on buyers of tires shifts the

a.	demand curve for tires downward, decreasing the price received by sellers of tires and causing the quantity of tires to increase.
b.	demand curve for tires downward, decreasing the price received by sellers of tires and causing the quantity of tires to decrease.
c.	supply curve for tires upward, decreasing the effective price paid by buyers of tires and causing the quantity of tires to increase.
d.	supply curve for tires upward, increasing the effective price paid by buyers of tires and causing the quantity of tires to decrease.

17. Suppose a tax is imposed on the buyers of fast-food French fries. The burden of the tax will

a.	fall entirely on the buyers of fast-food French fries.
b.	fall entirely on the sellers of fast-food French fries.
c.	be shared equally by the buyers and sellers of fast-food French fries.
d.	be shared by the buyers and sellers of fast-food French fries but not necessarily equally.

18. Which of the following quantities decrease in response to a tax on a good?

a.	the equilibrium quantity in the market for the good, the effective price of the good paid by buyers, and consumer surplus
b.	the equilibrium quantity in the market for the good, producer surplus, and the well-being of buyers of the good
c.	the effective price received by sellers of the good, the wedge between the effective price paid by buyers and the effective price received by sellers, and consumer surplus
d.	None of the above is necessarily correct unless we know whether the tax is levied on buyers or on sellers.

19. For a good that is taxed, the area on the relevant supply-and-demand graph that represents government’s tax revenue is a

a.	triangle.
b.	rectangle.
c.	trapezoid.
d.	None of the above is correct; government’s tax revenue is the area between the supply and demand curves, above the horizontal axis, and below the effective price to buyers.