Question 1

For a given tax assessed on producers, market price changes the most if demand is perfectly inelastic and supply is perfectly elastic.

Accepted Answer

A) True 
 B)False

Question 2

Realistically speaking, complete income equality can be achieved only when

Accepted Answer

A) government taxes high incomes and redistributes the money to those with low incomes. 
B) all consumers face the same market price. 
C) individuals voluntarily give above-average income to below-average income earners to equalize incomes. 
D) individuals stop acting in their own self-interest and produce all they can for the common good. 
E) every individual receives exactly the same education. 
A) government taxes high incomes and redistributes the money to those with low incomes. 
B) all consumers face the same market price. 
C) individuals voluntarily give above-average income to below-average income earners to equalize incomes. 
D) individuals stop acting in their own self-interest and produce all they can for the common good. 
E) every individual receives exactly the same education.

Question 3

Exhibit 7-12  
-Refer to Exhibit 7-12. Calculate the total tax revenue that the government will receive if it imposes a tax of $4 per unit of output.

Accepted Answer

$12 million
Output will be 3 m

Question 4

Society achieves Pareto efficiency when individuals can achieve more utility while no one loses any utility.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 7-8  
-Refer to the Exhibit 7-8. Suppose that the government imposes a sales tax on a good such that S1 represents the supply curve without the tax and S2 represents the supply curve with the tax. The deadweight loss as a result of the tax is the combined area of

Accepted Answer

A) H and I. 
B) A and B. 
C) C, G, H, and I. 
D) C and I less the combined area of E and A. 
E) A, B, E, and F less the combined area of C and G. 
A) H and I. 
B) A and B. 
C) C, G, H, and I. 
D) C and I less the combined area of E and A. 
E) A, B, E, and F less the combined area of C and G.

Question 6

Suppose there are three buyers (A, B, and C) in a competitive market with the marginal benefit (MB) schedules like those shown in the table below. Calculate the consumer surplus using the market demand curve. Assume that the market price is $10. Show that you get the same answer by adding the consumer surplus for all three buyers. How much does consumer surplus increase for the market as a whole and for each individual when the market price falls to $8?

Accepted Answer

@#IMG-DLM& For the market demand curve, the consum

Question 7

Adam Smith wrote a book called

Accepted Answer

A) Invisible Hand. 
B) The New Testament. 
C) Market Efficiency. 
D) Wealth of Nations. 
E) Competitive Equilibrium. 
A) Invisible Hand. 
B) The New Testament. 
C) Market Efficiency. 
D) Wealth of Nations. 
E) Competitive Equilibrium.

Question 8

If a market is efficient, then it is possible that an increase in one person's consumption would not lower another person's consumption.

Accepted Answer

A) True 
 B)False

Question 9

A market system relies primarily on prices to motivate individuals and coordinate economic activity.

Accepted Answer

A) True 
 B)False

Question 10

A market

Accepted Answer

A) must be located in a single centralized place where all buyers and sellers can meet together at once. 
B) generally fails to coordinate trading activity, as evidenced by the apparent chaos on Wall Street. 
C) cannot operate without direct government intervention in the conduct of trades. 
D) requires little communication. 
E) is a group of buyers and sellers buying and selling goods and services. 
A) must be located in a single centralized place where all buyers and sellers can meet together at once. 
B) generally fails to coordinate trading activity, as evidenced by the apparent chaos on Wall Street. 
C) cannot operate without direct government intervention in the conduct of trades. 
D) requires little communication. 
E) is a group of buyers and sellers buying and selling goods and services.

Question 11

The deadweight loss from a tax on a good equals the tax revenue that goes to the government.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 7-12  
-Refer to Exhibit 7-12. Calculate the deadweight loss of a government program that establishes a minimum price of $7 per unit and requires that the government buy the resulting surplus.

Accepted Answer

$4 million
Area of t

Question 13

Market competition ensures that

Accepted Answer

A) consumer surplus equals producer surplus. 
B) consumer surplus is greater than producer surplus. 
C) consumer surplus is less than producer surplus. 
D) the sum of consumer surplus and producer surplus is maximized. 
E) the sum of consumer surplus and producer surplus equals zero. 
A) consumer surplus equals producer surplus. 
B) consumer surplus is greater than producer surplus. 
C) consumer surplus is less than producer surplus. 
D) the sum of consumer surplus and producer surplus is maximized. 
E) the sum of consumer surplus and producer surplus equals zero.

Question 14

What happens to the net benefit that is called a deadweight loss when such a loss occurs?

Accepted Answer

Deadweight loss goes nowhere;

Question 15

Income equality is usually defined as a state of the world in which all individuals have

Accepted Answer

A) the same abilities. 
B) ally the same income. 
C) the same amount of wealth. 
D) the same education. 
E) an equal vote in government. 
A) the same abilities. 
B) ally the same income. 
C) the same amount of wealth. 
D) the same education. 
E) an equal vote in government.

Question 16

In a market, price provides information only to sellers but not to buyers.

Accepted Answer

A) True 
 B)False

Question 17

The effects of a tax can be captured by rightward shifts of both the supply and demand curves.

Accepted Answer

A) True 
 B)False

Question 18

In a market,

Accepted Answer

A) buyers and sellers must know how the other group thinks to succeed in maximizing their own group's self-interest. 
B) information is unnecessary. 
C) trade must take place at a single location or economic coordination breaks down. 
D) each individual participant knows only a small fraction of the total information produced in the market. 
E) income equality results. 
A) buyers and sellers must know how the other group thinks to succeed in maximizing their own group's self-interest. 
B) information is unnecessary. 
C) trade must take place at a single location or economic coordination breaks down. 
D) each individual participant knows only a small fraction of the total information produced in the market. 
E) income equality results.

Question 19

Exhibit 7-4  
-Refer to Exhibit 7-4. Deadweight loss is greater than zero if price is at all of the following except

Accepted Answer

A) $0. 
B) $2.5. 
C) $5. 
D) $10. 
E) $15. 
A) $0. 
B) $2.5. 
C) $5. 
D) $10. 
E) $15.

Question 20

Exhibit 7-2  
-Refer to Exhibit 7-2. What would be the total cost of Firm A and Firm B producing 4 units of output each? Is it possible to reduce this total cost and still produce the same total output? How?

Accepted Answer

$62; yes; Firm A produces less.
Firm A's

Exam 7: The Efficiency of Markets

For a given tax assessed on producers, market price changes the most if demand is perfectly inelastic and supply is perfectly elastic.

Realistically speaking, complete income equality can be achieved only when

Exhibit 7-12 -Refer to Exhibit 7-12. Calculate the total tax revenue that the government will receive if it imposes a tax of $4 per unit of output.

Society achieves Pareto efficiency when individuals can achieve more utility while no one loses any utility.

Exhibit 7-8 -Refer to the Exhibit 7-8. Suppose that the government imposes a sales tax on a good such that S1 represents the supply curve without the tax and S2 represents the supply curve with the tax. The deadweight loss as a result of the tax is the combined area of

Adam Smith wrote a book called

If a market is efficient, then it is possible that an increase in one person's consumption would not lower another person's consumption.

A market system relies primarily on prices to motivate individuals and coordinate economic activity.

A market

The deadweight loss from a tax on a good equals the tax revenue that goes to the government.

Exhibit 7-12 -Refer to Exhibit 7-12. Calculate the deadweight loss of a government program that establishes a minimum price of $7 per unit and requires that the government buy the resulting surplus.

Market competition ensures that

What happens to the net benefit that is called a deadweight loss when such a loss occurs?

Income equality is usually defined as a state of the world in which all individuals have

In a market, price provides information only to sellers but not to buyers.

The effects of a tax can be captured by rightward shifts of both the supply and demand curves.

In a market,

Exhibit 7-4 -Refer to Exhibit 7-4. Deadweight loss is greater than zero if price is at all of the following except

Exhibit 7-2 -Refer to Exhibit 7-2. What would be the total cost of Firm A and Firm B producing 4 units of output each? Is it possible to reduce this total cost and still produce the same total output? How?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

Filters

Exhibit 7-8 -Refer to the Exhibit 7-8. Suppose that the government imposes a sales tax on a good such that S₁represents the supply curve without the tax and S₂ represents the supply curve with the tax. The deadweight loss as a result of the tax is the combined area of