ECO 201 - Units #5-8 Exam Questions and Answers Fully Solved
UNIT FIVE - Answers
Who was planning on climbing Half Dome with your instructor two years ago? - Answers His father.
How did the parks handle the fact that too many people were climbing Half Dome for it to be safe? -
Answers By requiring permits to climb Half Dome
When should you not buy the next latte? - Answers When the marginal cost of another latte is greater
than the marginal benefit
What is consumer surplus? - Answers The difference between how much a consumer was willing to pay
and how much they had to pay
Graphically, where is consumer surplus? - Answers Above the market price and under the demand curve
Producer surplus is the: - Answers Difference between how much a firm gets to charge for their good
and how much they would have to charge to cover their cost.
Graphically, where is producer surplus? - Answers Above the supply curve and below the market price
Graphically, what is total surplus? - Answers The area below the demand curve and above the supply
curve
Consumer surplus is the same thing as a market surplus. - Answers False
When Adam Smith speaks of the "invisible hand," he is saying that: - Answers That society is better off
when individuals and business pursue their own self-interests.
According to the video "Price, the Invisible Hand, and Advantages of Markets and Free Choice," Dr.
Sarbaum cannot think of a better mechanism than ________ to figure out who gets what. - Answers
Price
How would Dr. Sarbaum determine the value of the tickets to society if he allocated the tickets using a
communist system? - Answers By asking each person who received a ticket how much they would be
willing to pay for the ticket and adding up the responses.
In the U2 ticket example, the total surplus was: - Answers The difference between how much the buyer
was willing to spend on the ticket and how much they actually paid plus the difference between the
price the seller received for the ticket and the price at which they were willing to sell the ticket.
UNIT SIX - Answers
Why is there sometimes a role for an institution like a government? - Answers Sometimes transactions
between two parties have positive/negative effects on third parties.
, True or false: in a strong democracy, what's "good" or "bad" for society is largely dictated by a majority
voting populace. - Answers True
If the equilibrium price in the market for lattes is $3 and the government sets a price ceiling of $3.50,
what will happen in the market? - Answers There will be no change in the equilibrium quantity/price
A price ceiling benefits _____ producers and ______ consumers. - Answers No; some
The equity effect in the rent control example means that: - Answers Some money leaves the pockets of
the landlords and goes into the pocket of the renters since the rent is lower than it would have been
When rent control is in place, the quality of the apartments - Answers The quality of apartments
declines
What if the rent ceiling in the situation described in the video was $750? - Answers The quantity of
apartments rented would decrease.
If the equilibrium price in the market for lattes is $3 and the government sets a price floor of $3.50, what
will happen in the market? - Answers A surplus of lattes
A price floor benefits _____ producers and ______ consumers. - Answers Some; no
What has happened for to the elasticity of demand for labor over time? - Answers It has become more
elastic.
What happens when in the minimum wage is less than the equilibrium wage rate? - Answers There will
be no change in the labor market.
A floor that is binding is ________ the equilibrium price. It gets in the way of the price going ______. -
Answers Above; down
A ceiling that is binding is _______ the equilibrium price. It gets in the way of the price going _______. -
Answers Below; up
Suppose Qd=100-5P and Qs=5P. If a price floor of $12 is imposed there will be a _____ of ____ units. -
Answers Surplus; 20
Suppose Qd=100-5P and Qs=5P. If a price floor of $5 is imposed, there will be a _____ of ____ units. -
Answers The market will end up in equilibrium
When the government imposes a tax: - Answers Some of the consumer and producer surplus transfers
to the government as tax revenue, and some of the total surplus is lost.
If in the market for lattes, the elasticity of supply is .44 and the elasticity of demand is 1.22. If a tax is
imposed on the market, who has to pay more of the tax? - Answers The seller
UNIT FIVE - Answers
Who was planning on climbing Half Dome with your instructor two years ago? - Answers His father.
How did the parks handle the fact that too many people were climbing Half Dome for it to be safe? -
Answers By requiring permits to climb Half Dome
When should you not buy the next latte? - Answers When the marginal cost of another latte is greater
than the marginal benefit
What is consumer surplus? - Answers The difference between how much a consumer was willing to pay
and how much they had to pay
Graphically, where is consumer surplus? - Answers Above the market price and under the demand curve
Producer surplus is the: - Answers Difference between how much a firm gets to charge for their good
and how much they would have to charge to cover their cost.
Graphically, where is producer surplus? - Answers Above the supply curve and below the market price
Graphically, what is total surplus? - Answers The area below the demand curve and above the supply
curve
Consumer surplus is the same thing as a market surplus. - Answers False
When Adam Smith speaks of the "invisible hand," he is saying that: - Answers That society is better off
when individuals and business pursue their own self-interests.
According to the video "Price, the Invisible Hand, and Advantages of Markets and Free Choice," Dr.
Sarbaum cannot think of a better mechanism than ________ to figure out who gets what. - Answers
Price
How would Dr. Sarbaum determine the value of the tickets to society if he allocated the tickets using a
communist system? - Answers By asking each person who received a ticket how much they would be
willing to pay for the ticket and adding up the responses.
In the U2 ticket example, the total surplus was: - Answers The difference between how much the buyer
was willing to spend on the ticket and how much they actually paid plus the difference between the
price the seller received for the ticket and the price at which they were willing to sell the ticket.
UNIT SIX - Answers
Why is there sometimes a role for an institution like a government? - Answers Sometimes transactions
between two parties have positive/negative effects on third parties.
, True or false: in a strong democracy, what's "good" or "bad" for society is largely dictated by a majority
voting populace. - Answers True
If the equilibrium price in the market for lattes is $3 and the government sets a price ceiling of $3.50,
what will happen in the market? - Answers There will be no change in the equilibrium quantity/price
A price ceiling benefits _____ producers and ______ consumers. - Answers No; some
The equity effect in the rent control example means that: - Answers Some money leaves the pockets of
the landlords and goes into the pocket of the renters since the rent is lower than it would have been
When rent control is in place, the quality of the apartments - Answers The quality of apartments
declines
What if the rent ceiling in the situation described in the video was $750? - Answers The quantity of
apartments rented would decrease.
If the equilibrium price in the market for lattes is $3 and the government sets a price floor of $3.50, what
will happen in the market? - Answers A surplus of lattes
A price floor benefits _____ producers and ______ consumers. - Answers Some; no
What has happened for to the elasticity of demand for labor over time? - Answers It has become more
elastic.
What happens when in the minimum wage is less than the equilibrium wage rate? - Answers There will
be no change in the labor market.
A floor that is binding is ________ the equilibrium price. It gets in the way of the price going ______. -
Answers Above; down
A ceiling that is binding is _______ the equilibrium price. It gets in the way of the price going _______. -
Answers Below; up
Suppose Qd=100-5P and Qs=5P. If a price floor of $12 is imposed there will be a _____ of ____ units. -
Answers Surplus; 20
Suppose Qd=100-5P and Qs=5P. If a price floor of $5 is imposed, there will be a _____ of ____ units. -
Answers The market will end up in equilibrium
When the government imposes a tax: - Answers Some of the consumer and producer surplus transfers
to the government as tax revenue, and some of the total surplus is lost.
If in the market for lattes, the elasticity of supply is .44 and the elasticity of demand is 1.22. If a tax is
imposed on the market, who has to pay more of the tax? - Answers The seller
