Question

A minimum wage law that stipulates $25 per hour for domestic workers in the state of Virginia is:

(a)A binding price ceiling

(b)A non-binding price floor

(c)Going to increase the rent of domestic workers

(d)Going to increase consumers’ surplus

(36)Suppose a government sets a pricing policy of $8 per ticket in a market for train tickets where the demand for these tickets is represented by the demand equation D=120-4P and the supply equation of these tickets is represented by S=90 +P, the government’s pricing policy could be aptly described as a:

(a)Binding price floor

(b)Non-Binding price floor

(c)Binding price ceiling

(d)None of the above

(37)The difference between the price that Felix is willing to pay for a gallon of orange juice and the price that he actually pays for it in a market is called:

(a)A minimum price

(b)Producers’ surplus

(c)Economic rent

(d)Consumer surplus

(38)Which of the following statements is false?

If a group of consumers are participants in a market for lettuce at a price of $4.50 per package of lettuce, if the price of lettuce decreases to $2.65, which of the following outcomes is likely?

(a)The total area of consumer surplus will expand below the demand curve for all consumers in the market and above the lower market price

(b)The area of consumer surplus for the consumers who bought lettuce at $4.50 will be bigger than the area of consumer surplus for consumers who enter the market at the lower price

(c)The consumption of lettuce by the consumers who enter the market at $2.65 will decrease if the price of lettuce increases to$4.50

(d)All of the above

               

(39)Which of the following statements is false?

Producers’ surplus:

(a)Is also known as economic rent

(b)Is a measure of the economic welfare of producers

(c)Varies inversely with changes in producers’ prices

(d)All of the above         

Answer 1

Q35. A minimum wage law that stipulates $25 per hour for domestic workers in the state of Virginia is:

Answer: (d) Going to increase consumers’ surplus.

Explanation: When minimum wage law imposed the worker will get more wage than the equilibrium wage which increases the surplus.

Q.36 Suppose a government sets a pricing policy of $8 per ticket in a market for train tickets where the demand for these tickets is represented by the demand equation D=120-4P and the supply equation of these tickets is represented by S=90 +P, the government’s pricing policy could be aptly described as a:

Answer: (a)Binding price floor

Explanation: Equilibrium price is 120-4P=90+P i.e 5P=30 and P=6. Here the price is higher than the equilibrium price, so it is binding price floor.

Q.37  The difference between the price that Felix is willing to pay for a gallon of orange juice and the price that he actually pays for it in a market is called:

Answer: (d)Consumer surplus

Explanation:  As per the definition consumer surplus is the difference between the willingness to pay and actually pays.

Q38. Which of the following statements is false?

If a group of consumers are participants in a market for lettuce at a price of $4.50 per package of lettuce if the price of lettuce decreases to $2.65, which of the following outcomes is likely?

Answer: (a)The total area of consumer surplus will expand below the demand curve for all consumers in the market and above the lower market price

Explanation: When the price of the commodity decrease it increases the consumer surplus and the area showing consumer surplus expands.

Q39. Which of the following statements is false?

Producers’ surplus:

Answer: (c)Varies inversely with changes in producers’ prices

Explanation:  Price change has a direct relation with producer surplus, not an inverse relation. Hence the given statement is false.