ECO 201 - Exam 3 Review Questions
and Answers 100% Pass
sales tax - ✔✔tax on seller (we often times end up paying it but it is the businesses on
whom that tax falls)
two types of sales tax - ✔✔ad valorum and per unit
example of per unit sales tax - ✔✔gasoline (a tax per gallon)
adding tax (inc or dec) the cost of the producer? - ✔✔increases
what parts of graph are sales tax revenue? - ✔✔B + D
what group is affected by sales tax? - ✔✔loss of welfare is on producers AND
consumers
tax revenue are made up of both - ✔✔consumer and producer surplus
is the impact on producers and consumers equal? - ✔✔no! bigger impact is on
consumers (we lose more!)
more elastic contributes what to impact? - ✔✔greater the impact on producer
more inelastic contributes what to impact? - ✔✔greater the impact on consumer
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, economic agents are - ✔✔rational and self-interested
rationality - ✔✔doing only those things that we believe will not make us worse off
utility - ✔✔a measure of happiness or satisfaction
altruism - ✔✔the gain of utility by doing things for others
utility function - ✔✔U(x, y) = x + y
utility function is U(4, 3) = 7, therefore X + Y so..... - ✔✔substitutes
utility function is U(4, 3) = 12, therefore X * Y so..... - ✔✔compliments
utility function is U(x, y) = 3x^2 + 2xy +7y^3, so..... - ✔✔compliments & substitutes
cardinal utility - ✔✔the order and magnitude of the utility matters
ordinal utility - ✔✔the order of the utility is all that matters
total utility - ✔✔the amount of utility from consuming some number of units
marginal utility (MU) - ✔✔the additional utility we receive from consuming an
additional unit of the good
MU > 0 ☺︎ (Consume +1, you're better off!)
MU < 0 ☹︎ (Consume +1, you're worse off!)
decreasing marginal utility - ✔✔the more you have, the less utility brought by having
an additional of them
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
and Answers 100% Pass
sales tax - ✔✔tax on seller (we often times end up paying it but it is the businesses on
whom that tax falls)
two types of sales tax - ✔✔ad valorum and per unit
example of per unit sales tax - ✔✔gasoline (a tax per gallon)
adding tax (inc or dec) the cost of the producer? - ✔✔increases
what parts of graph are sales tax revenue? - ✔✔B + D
what group is affected by sales tax? - ✔✔loss of welfare is on producers AND
consumers
tax revenue are made up of both - ✔✔consumer and producer surplus
is the impact on producers and consumers equal? - ✔✔no! bigger impact is on
consumers (we lose more!)
more elastic contributes what to impact? - ✔✔greater the impact on producer
more inelastic contributes what to impact? - ✔✔greater the impact on consumer
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
, economic agents are - ✔✔rational and self-interested
rationality - ✔✔doing only those things that we believe will not make us worse off
utility - ✔✔a measure of happiness or satisfaction
altruism - ✔✔the gain of utility by doing things for others
utility function - ✔✔U(x, y) = x + y
utility function is U(4, 3) = 7, therefore X + Y so..... - ✔✔substitutes
utility function is U(4, 3) = 12, therefore X * Y so..... - ✔✔compliments
utility function is U(x, y) = 3x^2 + 2xy +7y^3, so..... - ✔✔compliments & substitutes
cardinal utility - ✔✔the order and magnitude of the utility matters
ordinal utility - ✔✔the order of the utility is all that matters
total utility - ✔✔the amount of utility from consuming some number of units
marginal utility (MU) - ✔✔the additional utility we receive from consuming an
additional unit of the good
MU > 0 ☺︎ (Consume +1, you're better off!)
MU < 0 ☹︎ (Consume +1, you're worse off!)
decreasing marginal utility - ✔✔the more you have, the less utility brought by having
an additional of them
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
