Quiz III Consumer and Producer Surplus. 1. Determine the consumer surplus at the equilibrium price shown below. 0 10 20 30 40 50 60 70 80 90 100 110 120.

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Presentation transcript:

Quiz III Consumer and Producer Surplus

1. Determine the consumer surplus at the equilibrium price shown below P Q S D

2. Determine the total (consumer and producer) surplus at the equilibrium price shown below P Q S D

3. The deadweight loss resulting from an excise (consumption tax) is greater when: A. Demand and supply are inelastic B. Demand is less elastic C. Demand is more elastic D. Supply is inelastic elastic E. Demand is more inelastic

4. An excise (consumption) tax will generate more tax revenue when the demand for the good it is imposed on : A. is elastic B. is inelastic C. is vertical D. is more sensitive to a price change E. has a high income elasticity

5. You go to the mall with the intention of buying a certain sweater for $50. (You would not buy it if it were sold at a higher price.) The sweater is on sale; if you buy one at the full price of $50 you will get a second one for free. Your purchase will likely result in a consumer surplus: A. equal to $50 because you are getting a $50 sweater for free B. equal to zero because $50 was the maximum price you were willing to pay C. less than $50 D. more than $50 but less than $100 E. $100 because that is how much they are really worth