AP Economics Mr. Bordelon

1. Consumer and Producer SurplusExcise Taxes and EfficiencyTheory of Consumer ChoiceSample Questions AP Economics Mr. Bordelon

2. If the price of a ticket to see The Nutcracker is $50 and there is no other market for tickets, then total consumer surplus for the five students is: $105. $130. $270. $320. $200.

3. If the price of a ticket to see The Nutcracker is $50 and there is no other market for tickets, then total consumer surplus for the five students is: $105. $130. $270. $320. $200.

4. Jeanette is willing to pay $100 for the first pair of shoes, $80 for the second pair, $50 for the third, and $30 for the fourth. If shoes cost $50, Jeanette will buy _____ pairs of shoes and her total consumer surplus equals _____. • 4; $110 • 3; $230 • 3; $80 • 4; $80 • 2; $80

5. Jeanette is willing to pay $100 for the first pair of shoes, $80 for the second pair, $50 for the third, and $30 for the fourth. If shoes cost $50, Jeanette will buy _____ pairs of shoes and her total consumer surplus equals _____. • 4; $110 • 3; $230 • 3; $80 • 4; $80 • 2; $80

6. This graph represents one individual’s monthly demand for ice cream cones. At a price of $5 per cone, this individual will consume 10 cones in a month. How much consumer surplus does this consumer receive? • $100 • $50 • $150 • $500 • $75

7. This graph represents one individual’s monthly demand for ice cream cones. At a price of $5 per cone, this individual will consume 10 cones in a month. How much consumer surplus does this consumer receive? • $100 • $50 • $150 • $500 • $75

8. If the price of an apple is $11, what is the value of producer surplus for this firm? $11 $17 $27 $40 $44

9. If the price of an apple is $11, what is the value of producer surplus for this firm? $11 $17 $27 $40 $44

10. Mountain River Adventures offer white water rafting trips down the Colorado River. It costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third, and $160 for the fourth. If the market price for a raft trip is $150, Mountain River Adventures will offer _____ trips per day and _____ will have producer surplus equal to _____. • 3; $90 • 3; $10 • 2; $220 • 4; $80 • 3; $150

11. Mountain River Adventures offer white water rafting trips down the Colorado River. It costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third, and $160 for the fourth. If the market price for a raft trip is $150, Mountain River Adventures will offer _____ trips per day and _____ will have producer surplus equal to _____. • 3; $90 • 3; $10 • 2; $220 • 4; $80 • 3; $150

12. When the imposition of an excise tax causes the quantity demanded and quantity supplied to decrease, this will result in: • deadweight loss. • increases in producer surplus. • increases in consumer surplus. • increases in both consumer and producer surplus. • decreases in consumer surplus and increases in producer surplus.

13. When the imposition of an excise tax causes the quantity demanded and quantity supplied to decrease, this will result in: • deadweight loss. • increases in producer surplus. • increases in consumer surplus. • increases in both consumer and producer surplus. • decreases in consumer surplus and increases in producer surplus.

14. If the government imposes a $60,000 tax on yachts and collects it from the yacht consumers, the _____ curve will shift _____ by _____. • supply; upward; $30,000 • supply; upward; $60,000 • demand; downward; $30,000 • demand; upward; $60,000 • demand; downward; $60,000

15. If the government imposes a $60,000 tax on yachts and collects it from the yacht consumers, the _____ curve will shift _____ by _____. • supply; upward; $30,000 • supply; upward; $60,000 • demand; downward; $30,000 • demand; upward; $60,000 • demand; downward; $60,000

16. If the government imposes a $60,000 tax on yachts (collected from the producers), consumers will pay _____ of the tax and producers will pay _____. • $30,000; $30,000 • $40,000; $20,000 • $20,000; $40,000 • $10,000; $50,000 • $0; $60,000

17. If the government imposes a $60,000 tax on yachts (collected from the producers), consumers will pay _____ of the tax and producers will pay _____. • $30,000; $30,000 • $40,000; $20,000 • $20,000; $40,000 • $10,000; $50,000 • $0; $60,000

18. If the government imposes a $30,000 tax on yachts and collects it from the yacht suppliers, the _____ curve will shift _____ by _____. • demand; downward; $15,000 • supply; upward; $15,000 • supply; upward; $30,000 • demand; downward; $30,000 • supply; downward; $30,000

19. If the government imposes a $30,000 tax on yachts and collects it from the yacht suppliers, the _____ curve will shift _____ by _____. • demand; downward; $15,000 • supply; upward; $15,000 • supply; upward; $30,000 • demand; downward; $30,000 • supply; downward; $30,000

20. Prior to any taxes, suppose the equilibrium price of gasoline is $3 per gallon. A $1 tax is levied on each gallon of gas that is supplied. As a result, the price of gasoline rises to $3.75 per gallon. The incidence of the $1 tax is: • $0.25 paid by consumers, $0.75 paid by producers. • $0.50 paid by consumers, $0.50 paid by producers. • $1.00 paid by producers, $0 paid by consumers. • $0.75 paid by consumers, $0.25 paid by producers. • $0 paid by producers, $1.00 paid by consumers.

21. Prior to any taxes, suppose the equilibrium price of gasoline is $3 per gallon. A $1 tax is levied on each gallon of gas that is supplied. As a result, the price of gasoline rises to $3.75 per gallon. The incidence of the $1 tax is: • $0.25 paid by consumers, $0.75 paid by producers. • $0.50 paid by consumers, $0.50 paid by producers. • $1.00 paid by producers, $0 paid by consumers. • $0.75 paid by consumers, $0.25 paid by producers. • $0 paid by producers, $1.00 paid by consumers.

22. Paying a tax on $10 on an income of $100, a tax of $20 on an income of $200, and a tax of $30 on an income of $300 is an example of a: • regressive tax. • proportional tax. • progressive tax. • benefits tax. • lump-sum tax.

23. Paying a tax on $10 on an income of $100, a tax of $20 on an income of $200, and a tax of $30 on an income of $300 is an example of a: • regressive tax. • proportional tax. • progressive tax. • benefits tax. • lump-sum tax.

24. Paying a tax on $10 on an income of $100, a tax of $25 on an income of $200, and a tax of $60 on an income of $300 is an example of a: • regressive tax. • proportional tax. • progressive tax. • benefits tax. • lump-sum tax.

25. Paying a tax on $10 on an income of $100, a tax of $25 on an income of $200, and a tax of $60 on an income of $300 is an example of a: • regressive tax. • proportional tax. • progressive tax. • benefits tax. • lump-sum tax.

26. Paying a tax on $20 on an income of $100, a tax of $15 on an income of $200, and a tax of $12 on an income of $300 is an example of a: • regressive tax. • proportional tax. • progressive tax. • benefits tax. • lump-sum tax.

27. Paying a tax on $20 on an income of $100, a tax of $15 on an income of $200, and a tax of $12 on an income of $300 is an example of a: • regressive tax. • proportional tax. • progressive tax. • benefits tax. • lump-sum tax.

28. Coffee and tea are substitutes. If there is an increase in the price of coffee, total surplus in the tea market: • will increase. • will decrease. • will not change. • may change, but we cannot determine the change without more information. • will fall to zero.

29. Coffee and tea are substitutes. If there is an increase in the price of coffee, total surplus in the tea market: • will increase. • will decrease. • will not change. • may change, but we cannot determine the change without more information. • will fall to zero.

30. Scenario 1. Budget Constraint. Tom is trying to decide how to allocate his $50 budget for CD purchases and DVD rentals when the price of a CD is $10 and the price of a DVD rental is $5. • Which of the following combinations of CD purchases and DVD rentals lies inside Tom’s budget line? • 5 CDs and 10 DVDs • 5 CDs and 0 DVDs • 0 CDs and 5 DVDs • 10 CDs and 5 DVDs • 2 CDs and 7 DVDs

31. Scenario 1. Budget Constraint. Tom is trying to decide how to allocate his $50 budget for CD purchases and DVD rentals when the price of a CD is $10 and the price of a DVD rental is $5. • Which of the following combinations of CD purchases and DVD rentals lies inside Tom’s budget line? • 5 CDs and 10 DVDs • 5 CDs and 0 DVDs • 0 CDs and 5 DVDs • 10 CDs and 5 DVDs • 2 CDs and 7 DVDs

32. Assume that the price of both goods is $1 per unit, and you consume 3 units of Good X and 3 units of Good Y. To maximize utility, assuming that the goods are divisible, you would consume: less of both X and Y. more of both X and Y. less of X and more of Y. more of X and less of Y. the current quantity of both goods.

33. Assume that the price of both goods is $1 per unit, and you consume 3 units of Good X and 3 units of Good Y. To maximize utility, assuming that the goods are divisible, you would consume: less of both X and Y. more of both X and Y. less of X and more of Y. more of X and less of Y. the current quantity of both goods.

34. Assume that the price of both goods is $1 per unit, and you consume 4 units of Good X and 2 units of Good Y. To maximize utility, assuming that the goods are divisible, you would consume: less of X and more of Y. more of both X and Y. less of both X and Y. more of X and less of Y. the current quantity of both goods.

35. Assume that the price of both goods is $1 per unit, and you consume 4 units of Good X and 2 units of Good Y. To maximize utility, assuming that the goods are divisible, you would consume: less of X and more of Y. more of both X and Y. less of both X and Y. more of X and less of Y. the current quantity of both goods.

36. Assume that the price of Good X is $2 per unit and the price of Good Y is $1 per unit, and you consume 3 units of Good X and 3 units of Good Y. To maximize utility, assuming that the goods are divisible, you would consume: less of both X and Y. more of both X and Y. less of X and more of Y. more of X and less of Y. the current quantity of both goods.

37. Assume that the price of Good X is $2 per unit and the price of Good Y is $1 per unit, and you consume 3 units of Good X and 3 units of Good Y. To maximize utility, assuming that the goods are divisible, you would consume: less of both X and Y. more of both X and Y. less of X and more of Y. more of X and less of Y. the current quantity of both goods.

38. Assume that the price of Good X is $1 per unit and the price of Good Y is $2 per unit, and you consume 4 units of Good X and 2 units of Good Y. To maximize utility, assuming that the goods are divisible, you would consume: less of both X and Y. more of both X and Y. less of X and more of Y. more of X and less of Y. the current quantity of both goods.

39. David’s marginal utilities for milkshakes and burgers are given in the accompanying table. The price of milkshakes is $2, and the price of burgers is $5. If Max’s income is $10, how many milkshakes and how many burgers does he buy to maximize his utility? • 1 shake and 1 burger • 0 shakes and 2 burgers • 5 shakes and 0 burgers • 2 shakes and 1 burger • 6 shakes and 2 burgers.

40. David’s marginal utilities for milkshakes and burgers are given in the accompanying table. The price of milkshakes is $2, and the price of burgers is $5. If Max’s income is $10, how many milkshakes and how many burgers does he buy to maximize his utility? • 1 shake and 1 burger • 0 shakes and 2 burgers • 5 shakes and 0 burgers • 2 shakes and 1 burger • 6 shakes and 2 burgers.

41. If a consumer buys more of Good X and less of Good Y, the _____ of Good X will _____, and the ______ of Good Y will _____. • marginal utility; fall; marginal utility; rise • marginal utility; rise; marginal utility; fall • total utility; fall; marginal utility; rise • marginal utility; rise; total utility; rise • total utility; rise; total utility; rise

42. If a consumer buys more of Good X and less of Good Y, the _____ of Good X will _____, and the ______ of Good Y will _____. • marginal utility; fall; marginal utility; rise • marginal utility; rise; marginal utility; fall • total utility; fall; marginal utility; rise • marginal utility; rise; total utility; rise • total utility; rise; total utility; rise

43. If a consumer purchases a combination of commodities A and B such that MUa/Pa = 50 and MUb/Pb = 30, to maximize utility, the consumer should: • buy less of both A and B. • buy more of both A and B. • buy more of A and less of B. • buy less of A and more of B. • make no changes to the current combination of A and B.

44. If a consumer purchases a combination of commodities A and B such that MUa/Pa = 50 and MUb/Pb = 30, to maximize utility, the consumer should: • buy less of both A and B. • buy more of both A and B. • buy more of A and less of B. • buy less of A and more of B. • make no changes to the current combination of A and B.

45. If a consumer purchases a combination of commodities A and B such that MUa/Pa = 100 and MUb/Pb = 80, to maximize utility, the consumer should: • buy less of both A and B. • buy more of both A and B. • buy more of A and less of B. • buy less of A and more of B. • make no changes to the current combination of A and B.

46. If a consumer purchases a combination of commodities A and B such that MUa/Pa = 100 and MUb/Pb = 80, to maximize utility, the consumer should: • buy less of both A and B. • buy more of both A and B. • buy more of A and less of B. • buy less of A and more of B. • make no changes to the current combination of A and B.

47. Generally, each successive unit of a good consumed will cause marginal utility to • increase at an increasing rate. • increase at a decreasing rate. • increase at a constant rate. • decrease. • either increase or decrease.

48. Generally, each successive unit of a good consumed will cause marginal utility to • increase at an increasing rate. • increase at a decreasing rate. • increase at a constant rate. • decrease. • either increase or decrease.

49. Assume there are two goods, good X and good Y. Good X costs $5 and good Y costs $10. If your income is $200, which of the following combinations of good X and good Y is on your budget line? • 0 units of good X and 18 units of good Y • 0 units of good X and 20 units of good Y • 20 units of good X and 0 units of good Y • 10 units of good X and 12 units of good Y • all of the above.

50. Assume there are two goods, good X and good Y. Good X costs $5 and good Y costs $10. If your income is $200, which of the following combinations of good X and good Y is on your budget line? • 0 units of good X and 18 units of good Y • 0 units of good X and 20 units of good Y • 20 units of good X and 0 units of good Y • 10 units of good X and 12 units of good Y • all of the above.