Question 1

If marginal benefit is greater than marginal cost, output is inefficiently high.

Accepted Answer

A) True 
 B)False

Question 2

Which term refers to a legally established minimum price that firms may charge?

Accepted Answer

A)  a price ceiling 
B)  a subsidy 
C)  a price floor 
D)  a tariff 
A)  a price ceiling 
B)  a subsidy 
C)  a price floor 
D)  a tariff

Question 3

Table 4-6
  
-Refer to Table 4-6. The table above lists the marginal cost of polo shirts by Marko's, a firm that specializes in producing men's clothing. If the market price of Marko's polo shirts is $30, Marko's will produce

Accepted Answer

A)  0 shirts. 
B)  1 shirt. 
C)  3 shirts. 
D)  4 shirts. 
A)  0 shirts. 
B)  1 shirt. 
C)  3 shirts. 
D)  4 shirts.

Question 4

Table 4-14
  
-Refer to Table 4-14. The equations above describe the demand and supply for Pauline's Pickled Pomegranates. The equilibrium price and quantity for Pauline's Pickled Pomegranates are $30 and 15 thousand units. What is the value of producer surplus?

Accepted Answer

A)  $50 thousand 
B)  $112.5 thousand 
C)  $225 thousand 
D)  $337.5 thousand 
A)  $50 thousand 
B)  $112.5 thousand 
C)  $225 thousand 
D)  $337.5 thousand

Question 5

Figure 4-9   Figure 4-9 shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at PS1U1B1fS1U1B0.
-Refer to Figure 4-9. What area represents consumer surplus after the imposition of the price floor?

Accepted Answer

A)  A + B + E 
B)  A + B 
C)  A + B + E + F 
D)  A 
A)  A + B + E 
B)  A + B 
C)  A + B + E + F 
D)  A

Question 6

Economists are reluctant to state that price controls are desirable or undesirable because

Accepted Answer

A)  it is impossible to evaluate the impact on quantity demanded and quantity supplied as a result of price controls. 
B)  whether the gains from the winners exceed the losses from the losers is not strictly an economic question. 
C)  sometimes price controls result in increases in economic efficiency and sometimes they result in decreases in economic efficiency. 
D)  economists are reluctant to conduct positive analysis of price controls. 
A)  it is impossible to evaluate the impact on quantity demanded and quantity supplied as a result of price controls. 
B)  whether the gains from the winners exceed the losses from the losers is not strictly an economic question. 
C)  sometimes price controls result in increases in economic efficiency and sometimes they result in decreases in economic efficiency. 
D)  economists are reluctant to conduct positive analysis of price controls.

Question 7

Suppose the demand curve for a product is horizontal and the supply curve is upward sloping. If a per-unit tax is imposed in the market for this product

Accepted Answer

A)  sellers bear the entire burden of the tax. 
B)  the tax burden will be shared among the government, buyers, and sellers. 
C)  buyers bear the entire burden of the tax. 
D)  the tax burden will be shared by buyers and sellers. 
A)  sellers bear the entire burden of the tax. 
B)  the tax burden will be shared among the government, buyers, and sellers. 
C)  buyers bear the entire burden of the tax. 
D)  the tax burden will be shared by buyers and sellers.

Question 8

Figure 4-4   Figure 4-4 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40S1U1B1 S1U1B0in order to raise the price to $18.
-Refer to Figure 4-4. What is the value of producer surplus at the equilibrium price of $15?

Accepted Answer

A)  $80 
B)  $160 
C)  $240 
D)  $400 
A)  $80 
B)  $160 
C)  $240 
D)  $400

Question 9

Figure 4-3   Figure 4-3 shows Kendra's demand curve for ice cream cones.
-Refer to Figure 4-3. Kendra's marginal benefit from consuming the first ice cream cone is

Accepted Answer

A)  $9.00. 
B)  $7.50. 
C)  $3.50. 
D)  $0.50. 
A)  $9.00. 
B)  $7.50. 
C)  $3.50. 
D)  $0.50.

Question 10

To affect the market outcome, a price ceiling

Accepted Answer

A)  must be set below the black market price. 
B)  must be set below the legal price. 
C)  must be set below the price floor. 
D)  must be set below the equilibrium price. 
A)  must be set below the black market price. 
B)  must be set below the legal price. 
C)  must be set below the price floor. 
D)  must be set below the equilibrium price.

Question 11

Figure 4-21  
-Refer to Figure 4-21. The figure above represents demand and supply in the market for cigarettes. Use the diagram to answer the following questions.
a. How much is the government tax on each pack of cigarettes?
b. What portion of the unit tax is paid by consumers?
c. What portion of the unit tax is paid by producers?
d. What is the quantity sold after the imposition of the tax?
e. What is the after-tax revenue per pack received by producers?
f. What is the total tax revenue collected by the government?
g. What is the value of the excess burden of the tax?
h. Is this cigarette tax efficient?

Accepted Answer

a. $1.25
b. Consumer burden = $1.00
c. P

Question 12

Increases in the minimum wage are intended to raise the incomes of low-income workers. Many economists favor a different policy to achieve this goal, a policy that avoids the deadweight losses that result from the minimum wage. What is this policy?

Accepted Answer

A)  distribution of food stamps to low-income consumers 
B)  distribution of vouchers that can be used for rent or mortgage payments 
C)  the Alternative Minimum Tax 
D)  the earned income tax credit 
A)  distribution of food stamps to low-income consumers 
B)  distribution of vouchers that can be used for rent or mortgage payments 
C)  the Alternative Minimum Tax 
D)  the earned income tax credit

Question 13

Table 4-8
   Table 4-8 shows the demand and supply schedules for the low-skilled labor market in the city of Westover.
-Refer to Table 4-8. Suppose that the quantity of labor demanded increases by 40,000 at each wage level. What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?

Accepted Answer

A)  W = $10.00; Q = 390,000 
B)  W = $9.50; Q = 380,000 
C)  W = $8.50; Q = 380,000 
D)  W = $8.00; Q = 390,000 
A)  W = $10.00; Q = 390,000 
B)  W = $9.50; Q = 380,000 
C)  W = $8.50; Q = 380,000 
D)  W = $8.00; Q = 390,000

Question 14

Table 4-6
  
-Refer to Table 4-6. The table above lists the marginal cost of polo shirts by Marko's, a firm that specializes in producing men's clothing. If the market price of Marko's polo shirts is $13, Marko's will produce

Accepted Answer

A)  1 shirt. 
B)  2 shirts. 
C)  3 shirts. 
D)  4 shirts. 
A)  1 shirt. 
B)  2 shirts. 
C)  3 shirts. 
D)  4 shirts.

Question 15

Marginal benefit is equal to the ________ benefit a consumer receives from consuming one more unit of a good or service.

Accepted Answer

A)  total 
B)  unintended 
C)  additional 
D)  surplus 
A)  total 
B)  unintended 
C)  additional 
D)  surplus

Question 16

Figure 4-8   Figure 4-8 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month.
-Refer to Figure 4-8. Suppose that instead of a rent ceiling, the government imposed a price floor of $2,000 per month for apartments. What is the value of producer surplus after the imposition of the price floor?

Accepted Answer

A)  $50,000 
B)  $250,000 
C)  $300,000 
D)  $350,000 
A)  $50,000 
B)  $250,000 
C)  $300,000 
D)  $350,000

Question 17

If the quantity of hearing aids demanded is represented by the equation QD = 40 - P then the corresponding price of hearing aids is represented by the equation

Accepted Answer

A)  P = 0.5QD + 20. 
B)  P = 40 - QD. 
C)  P = 0.25 - 4QD. 
D)  P = QD + 40. 
A)  P = 0.5QD + 20. 
B)  P = 40 - QD. 
C)  P = 0.25 - 4QD. 
D)  P = QD + 40.

Question 18

Figure 4-1   Figure 4-1 shows Arnold's demand curve for burritos.
-Refer to Figure 4-1. What is the total amount that Arnold is willing to pay for 4 burritos?

Accepted Answer

A)  $1.00 
B)  $4.00 
C)  $7.00 
D)  $10.00 
A)  $1.00 
B)  $4.00 
C)  $7.00 
D)  $10.00

Question 19

Table 4-8
   Table 4-8 shows the demand and supply schedules for the low-skilled labor market in the city of Westover.
-Refer to Table 4-8. If a minimum wage of $9.50 an hour is mandated, what is the quantity of labor demanded?

Accepted Answer

A)  380,000 
B)  370,000 
C)  360,000 
D)  10,000 
A)  380,000 
B)  370,000 
C)  360,000 
D)  10,000

Question 20

What is deadweight loss? When is deadweight loss equal to zero?

Accepted Answer

Deadweight loss is the reduction in econ

Exam 4: Economic Efficiency, Government Price Setting, and Taxes

If marginal benefit is greater than marginal cost, output is inefficiently high.

Which term refers to a legally established minimum price that firms may charge?

Table 4-6 -Refer to Table 4-6. The table above lists the marginal cost of polo shirts by Marko's, a firm that specializes in producing men's clothing. If the market price of Marko's polo shirts is $30, Marko's will produce

Table 4-14 -Refer to Table 4-14. The equations above describe the demand and supply for Pauline's Pickled Pomegranates. The equilibrium price and quantity for Pauline's Pickled Pomegranates are $30 and 15 thousand units. What is the value of producer surplus?

Economists are reluctant to state that price controls are desirable or undesirable because

Suppose the demand curve for a product is horizontal and the supply curve is upward sloping. If a per-unit tax is imposed in the market for this product

Figure 4-3 Figure 4-3 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-3. Kendra's marginal benefit from consuming the first ice cream cone is

To affect the market outcome, a price ceiling

Increases in the minimum wage are intended to raise the incomes of low-income workers. Many economists favor a different policy to achieve this goal, a policy that avoids the deadweight losses that result from the minimum wage. What is this policy?

Table 4-6 -Refer to Table 4-6. The table above lists the marginal cost of polo shirts by Marko's, a firm that specializes in producing men's clothing. If the market price of Marko's polo shirts is $13, Marko's will produce

Marginal benefit is equal to the ________ benefit a consumer receives from consuming one more unit of a good or service.

If the quantity of hearing aids demanded is represented by the equation QD = 40 - P then the corresponding price of hearing aids is represented by the equation

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1. What is the total amount that Arnold is willing to pay for 4 burritos?

Table 4-8 Table 4-8 shows the demand and supply schedules for the low-skilled labor market in the city of Westover. -Refer to Table 4-8. If a minimum wage of $9.50 an hour is mandated, what is the quantity of labor demanded?

What is deadweight loss? When is deadweight loss equal to zero?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

If the quantity of hearing aids demanded is represented by the equation Q_D = 40 - P then the corresponding price of hearing aids is represented by the equation