Quiz III

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Quiz III

• Consumer and Producer Surplus

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1. Determine the consumer surplus at the
equilibrium price shown below.
P
8
S
7
6
5
4
3
2
1
D
Q
0 10 20 30 40 50 60 70
80 90 100 110 120 130
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2. Determine the total (consumer and producer)
surplus at the equilibrium price shown below.
P
8
7
S
6
5
4
3
2
D
1
Q
0 10 20 30 40 50 60 70
80 90 100 110 120 130
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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

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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

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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