Question 1

Market equilibrium guarantees that all mutually beneficial transactions take place.

Accepted Answer

A) True 
 B)False  True

Question 2

Why is the market equilibrium efficient?

Accepted Answer

The market equilibrium is efficient because it maximizes the total surplus of the market.All mutually beneficial trades that are possible occur when the market is at equilibrium.

Question 3

A $2000 tax levied on the maker of MRIs will cause:

Accepted Answer

A) an upward movement along the supply curve as the price of MRIs rises. 
B) a downward movement along the supply curve as the after tax price received by the seller falls. 
C) a leftward shift of the supply curve. 
D) a rightward shift of the supply curve. 
A) an upward movement along the supply curve as the price of MRIs rises. 
B) a downward movement along the supply curve as the after tax price received by the seller falls. 
C) a leftward shift of the supply curve. 
D) a rightward shift of the supply curve. C

Question 4

An import restriction on automobiles would lead to an increase in the price of automobiles and a decrease in consumer surplus.

Accepted Answer

A) True 
 B)False

Question 5

-Refer to Figure 6.2.If the price of a DVD rental is $4.00,consumer surplus will be $ ________ each week.

Accepted Answer

A) 6.00 
B) 4.00 
C) 2.00 
D) 12.00 
A) 6.00 
B) 4.00 
C) 2.00 
D) 12.00

Question 6

Market equilibrium maximizes the total surplus in a market and therefore it is efficient.

Accepted Answer

A) True 
 B)False

Question 7

Assume that linen pants are a normal good and consumer income rises.If the supply of linen pants remains constant,producer surplus:

Accepted Answer

A) will decrease. 
B) will increase. 
C) will remain constant. 
D) may increase or decrease depending on the amount of the price increase. 
A) will decrease. 
B) will increase. 
C) will remain constant. 
D) may increase or decrease depending on the amount of the price increase.

Question 8

A supply curve reflects buyers' willingness to pay.

Accepted Answer

A) True 
 B)False

Question 9

-Figure 6.8 shows the market for taxicab services in a small town.If the government limits taxicab services to 20 per day,the price per mile traveled will be:

Accepted Answer

A) $1.00. 
B) $1.50. 
C) $2.00. 
D) It is impossible to determine. 
A) $1.00. 
B) $1.50. 
C) $2.00. 
D) It is impossible to determine.

Question 10

Suppose a tax is imposed on energy drinks that have a price elasticity of demand equal to 2,and a price elasticity of supply equal to 1.We would expect that:

Accepted Answer

A) the producers of energy drinks containing sugar would pay a larger portion of the tax. 
B) the consumer would pay a larger portion of the tax. 
C) the consumer would pay the entire tax. 
D) the producers of energy drinks containing sugar would pay the entire tax. 
A) the producers of energy drinks containing sugar would pay a larger portion of the tax. 
B) the consumer would pay a larger portion of the tax. 
C) the consumer would pay the entire tax. 
D) the producers of energy drinks containing sugar would pay the entire tax.

Question 11

-Figure 6.8 shows the market for taxicab services in a small town.If the government limits taxicab services to 20 per day,then producer surplus will:

Accepted Answer

A) increase by $10. 
B) increase by $6.25. 
C) decrease by $3.75. 
D) increase by $20. 
A) increase by $10. 
B) increase by $6.25. 
C) decrease by $3.75. 
D) increase by $20.

Question 12

Consumer surplus is the difference between the price that a buyer pays and the price a seller requires.

Accepted Answer

A) True 
 B)False

Question 13

-Figure 6.7 shows the supply and demand curves for human kidneys.If the government allowed the market to seek equilibrium,then:

Accepted Answer

A) 50 kidneys are donated. 
B) 30 kidneys are donated. 
C) 20 kidneys are donated. 
D) 0 kidneys are donated. 
A) 50 kidneys are donated. 
B) 30 kidneys are donated. 
C) 20 kidneys are donated. 
D) 0 kidneys are donated.

Question 14

Recall the application on rent control and mismatches.Under rent control,the government sets a maximum price for housing,decreasing the quantity supplied and the total value of the market.Rent control and other maximum prices cause ________ possibly ________.

Accepted Answer

A) inefficiency;mismatches. 
B) efficiency: mismatches 
C) mismatches: equilibrium 
D) none of the above 
A) inefficiency;mismatches. 
B) efficiency: mismatches 
C) mismatches: equilibrium 
D) none of the above

Question 15

Jerry has a guitar that he is willing to sell for $150.If someone offers him $175,his producer surplus is $25.

Accepted Answer

A) True 
 B)False

Question 16

A minimum price set below the market equilibrium will lead to excess supply and to a drop in the total surplus of the market.

Accepted Answer

A) True 
 B)False

Question 17

A burden of a tax on a good will not always be borne entirely by the seller.

Accepted Answer

A) True 
 B)False

Question 18

At the free market equilibrium,the efficient level of output is produced because:

Accepted Answer

A) government regulates the output level that must be produced. 
B) firms are maximizing profit. 
C) willingness to pay is the same for all consumers. 
D) total surplus is maximized. 
A) government regulates the output level that must be produced. 
B) firms are maximizing profit. 
C) willingness to pay is the same for all consumers. 
D) total surplus is maximized.

Question 19

-Refer to Figure 6.3.If the price of one hour of tutoring falls from $30 to $20,then producer surplus will:

Accepted Answer

A) increase. 
B) decrease. 
C) not change. 
D) cease to exist. 
A) increase. 
B) decrease. 
C) not change. 
D) cease to exist.

Question 20

-Refer to Figure 6.6.If the government will not allow landlords to charge more than $400 for an apartment,the deadweight loss will be equal to:

Accepted Answer

A) $2000. 
B) $2500. 
C) $5000. 
D) $7500. 
A) $2000. 
B) $2500. 
C) $5000. 
D) $7500.

Market equilibrium guarantees that all mutually beneficial transactions take place.

Why is the market equilibrium efficient?

A $2000 tax levied on the maker of MRIs will cause:

An import restriction on automobiles would lead to an increase in the price of automobiles and a decrease in consumer surplus.

-Refer to Figure 6.2.If the price of a DVD rental is $4.00,consumer surplus will be $ ________ each week.

Market equilibrium maximizes the total surplus in a market and therefore it is efficient.

Assume that linen pants are a normal good and consumer income rises.If the supply of linen pants remains constant,producer surplus:

A supply curve reflects buyers' willingness to pay.

-Figure 6.8 shows the market for taxicab services in a small town.If the government limits taxicab services to 20 per day,the price per mile traveled will be:

Suppose a tax is imposed on energy drinks that have a price elasticity of demand equal to 2,and a price elasticity of supply equal to 1.We would expect that:

-Figure 6.8 shows the market for taxicab services in a small town.If the government limits taxicab services to 20 per day,then producer surplus will:

Consumer surplus is the difference between the price that a buyer pays and the price a seller requires.

-Figure 6.7 shows the supply and demand curves for human kidneys.If the government allowed the market to seek equilibrium,then:

Recall the application on rent control and mismatches.Under rent control,the government sets a maximum price for housing,decreasing the quantity supplied and the total value of the market.Rent control and other maximum prices cause possibly .

Jerry has a guitar that he is willing to sell for $150.If someone offers him $175,his producer surplus is $25.

A minimum price set below the market equilibrium will lead to excess supply and to a drop in the total surplus of the market.

A burden of a tax on a good will not always be borne entirely by the seller.

At the free market equilibrium,the efficient level of output is produced because:

-Refer to Figure 6.3.If the price of one hour of tutoring falls from $30 to $20,then producer surplus will:

-Refer to Figure 6.6.If the government will not allow landlords to charge more than $400 for an apartment,the deadweight loss will be equal to:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, supply, and Market Equilibrium

Elasticity: a Measure of Responsiveness

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters

Exam 6: Market Efficiency and Government Intervention

Market equilibrium guarantees that all mutually beneficial transactions take place.

Why is the market equilibrium efficient?

A $2000 tax levied on the maker of MRIs will cause:

An import restriction on automobiles would lead to an increase in the price of automobiles and a decrease in consumer surplus.

-Refer to Figure 6.2.If the price of a DVD rental is $4.00,consumer surplus will be $ ________ each week.

Market equilibrium maximizes the total surplus in a market and therefore it is efficient.

Assume that linen pants are a normal good and consumer income rises.If the supply of linen pants remains constant,producer surplus:

A supply curve reflects buyers' willingness to pay.

-Figure 6.8 shows the market for taxicab services in a small town.If the government limits taxicab services to 20 per day,the price per mile traveled will be:

Suppose a tax is imposed on energy drinks that have a price elasticity of demand equal to 2,and a price elasticity of supply equal to 1.We would expect that:

-Figure 6.8 shows the market for taxicab services in a small town.If the government limits taxicab services to 20 per day,then producer surplus will:

Consumer surplus is the difference between the price that a buyer pays and the price a seller requires.

-Figure 6.7 shows the supply and demand curves for human kidneys.If the government allowed the market to seek equilibrium,then:

Recall the application on rent control and mismatches.Under rent control,the government sets a maximum price for housing,decreasing the quantity supplied and the total value of the market.Rent control and other maximum prices cause ________ possibly ________.

Jerry has a guitar that he is willing to sell for $150.If someone offers him $175,his producer surplus is $25.

A minimum price set below the market equilibrium will lead to excess supply and to a drop in the total surplus of the market.

A burden of a tax on a good will not always be borne entirely by the seller.

At the free market equilibrium,the efficient level of output is produced because:

-Refer to Figure 6.3.If the price of one hour of tutoring falls from $30 to $20,then producer surplus will:

-Refer to Figure 6.6.If the government will not allow landlords to charge more than $400 for an apartment,the deadweight loss will be equal to:

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand, supply, and Market Equilibrium

Elasticity: a Measure of Responsiveness

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters

Recall the application on rent control and mismatches.Under rent control,the government sets a maximum price for housing,decreasing the quantity supplied and the total value of the market.Rent control and other maximum prices cause possibly .