IU Econ-B251 Midterm 2 Test
Questions with All Correct Answers
Graded A+ 2025-2026 Updated.
Which of the following would not create a deadweight loss?
a. A tax on a good with no externalities
b. A subsidy on a good with no externalities
c. A price floor above equilibrium price
d. A price floor below equilibrium price - Answer d. a price floor below equilibrium price
Which of the following would most likely result in high government tax revenue, ceteris
paribus? - Answer A good with inelastic supply and inelastic demand
Is inelastic steep or flat? - Answer steep
Is elastic steep or flat? - Answer flat
What is a price floor? - Answer Sets a minimum price that you can't pay below
Who bears most of the burden of the tax? - Answer Consumers will always bear more of a
burden because they are more desperate to buy than producers are to produce. (demand is
steeper which makes it more inelastic which makes consumers less responsive to price changes)
graphically, consumer surplus is: - Answer the area above price but below demand
in terms of total surplus, which of the following outcomes does not create a deadweight loss: -
Answer when the quantity in the market is equal to equilibrium quantity
in our model price allocation and equilibrium mechanisms: - Answer result in efficiency but do
not guarantee equity
graphically, producer surplus is: - Answer the area below price but above supply
Questions with All Correct Answers
Graded A+ 2025-2026 Updated.
Which of the following would not create a deadweight loss?
a. A tax on a good with no externalities
b. A subsidy on a good with no externalities
c. A price floor above equilibrium price
d. A price floor below equilibrium price - Answer d. a price floor below equilibrium price
Which of the following would most likely result in high government tax revenue, ceteris
paribus? - Answer A good with inelastic supply and inelastic demand
Is inelastic steep or flat? - Answer steep
Is elastic steep or flat? - Answer flat
What is a price floor? - Answer Sets a minimum price that you can't pay below
Who bears most of the burden of the tax? - Answer Consumers will always bear more of a
burden because they are more desperate to buy than producers are to produce. (demand is
steeper which makes it more inelastic which makes consumers less responsive to price changes)
graphically, consumer surplus is: - Answer the area above price but below demand
in terms of total surplus, which of the following outcomes does not create a deadweight loss: -
Answer when the quantity in the market is equal to equilibrium quantity
in our model price allocation and equilibrium mechanisms: - Answer result in efficiency but do
not guarantee equity
graphically, producer surplus is: - Answer the area below price but above supply
