Question 1

________ is maximized in a competitive market when marginal benefit equals marginal cost.

Accepted Answer

A)  Deadweight loss 
B)  Marginal profit 
C)  Economic surplus 
D)  Selling price 
A)  Deadweight loss 
B)  Marginal profit 
C)  Economic surplus 
D)  Selling price

Question 2

Suppose there are two cities that have rent controlled apartments. In one city (Albany) all apartments are subject to rent control; in the other city (Halftrack) one-half of the apartments are rent controlled. Which of the following is most likely to be true?

Accepted Answer

A)  It will be difficult to find a rent-controlled apartment in Albany or Halftrack; rents for the Halftrack apartments not subject to controls will be higher than they would be without rent control. 
B)  It will be easier to find an affordable apartment in Albany since rents will be low across the board. 
C)  It will be easier to find an affordable apartment in Halftrack, either a rent-controlled apartment or another apartment, at a reasonable price. 
D)  It will be impossible to rent an apartment in either city at any price. 
A)  It will be difficult to find a rent-controlled apartment in Albany or Halftrack; rents for the Halftrack apartments not subject to controls will be higher than they would be without rent control. 
B)  It will be easier to find an affordable apartment in Albany since rents will be low across the board. 
C)  It will be easier to find an affordable apartment in Halftrack, either a rent-controlled apartment or another apartment, at a reasonable price. 
D)  It will be impossible to rent an apartment in either city at any price.

Question 3

Table 4-11
  
-Refer to Table 4-11. The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick. The equilibrium price and quantity for Chef Ernie's sushi are $60 and 20 thousand units. What is the value of consumer surplus?

Accepted Answer

A)  $100 thousand 
B)  $200 thousand 
C)  $600 thousand 
D)  $800 thousand 
A)  $100 thousand 
B)  $200 thousand 
C)  $600 thousand 
D)  $800 thousand

Question 4

Consumers are willing to purchase a product up to the point where

Accepted Answer

A)  the marginal benefit of consuming the product is equal to the marginal cost of consuming it. 
B)  the consumer surplus is equal to the producer surplus. 
C)  the marginal benefit of consuming the product equals the area below the supply curve and above the market price. 
D)  the marginal benefit of consuming a product is equal to its price. 
A)  the marginal benefit of consuming the product is equal to the marginal cost of consuming it. 
B)  the consumer surplus is equal to the producer surplus. 
C)  the marginal benefit of consuming the product equals the area below the supply curve and above the market price. 
D)  the marginal benefit of consuming a product is equal to its price.

Question 5

Willingness to pay measures

Accepted Answer

A)  the maximum price a buyer is willing to pay for a product minus the amount the buyer actually pays for it. 
B)  the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept for the good. 
C)  the maximum price that a buyer is willing to pay for a good or service. 
D)  the maximum price a buyer is willing to pay minus the minimum price a seller is willing to accept. 
A)  the maximum price a buyer is willing to pay for a product minus the amount the buyer actually pays for it. 
B)  the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept for the good. 
C)  the maximum price that a buyer is willing to pay for a good or service. 
D)  the maximum price a buyer is willing to pay minus the minimum price a seller is willing to accept.

Question 6

Which term refers to a legally established maximum 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 7

Deadweight loss refers to a loss in revenue resulting from producers having to reduce their selling price to remain competitive.

Accepted Answer

A) True 
 B)False

Question 8

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 second ice cream cone is

Accepted Answer

A)  $6.50. 
B)  $6.00. 
C)  $3.00. 
D)  $2.25. 
A)  $6.50. 
B)  $6.00. 
C)  $3.00. 
D)  $2.25.

Question 9

If the government implements a binding price ceiling on insulin, this will

Accepted Answer

A)  increase the price consumers will pay for insulin. 
B)  decrease the quantity of insulin the manufacturers will be willing to supply. 
C)  have to be set above the market equilibrium price to be effective. 
D)  encourage manufacturers to produce and sell more insulin to increase their profits. 
A)  increase the price consumers will pay for insulin. 
B)  decrease the quantity of insulin the manufacturers will be willing to supply. 
C)  have to be set above the market equilibrium price to be effective. 
D)  encourage manufacturers to produce and sell more insulin to increase their profits.

Question 10

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. What is the equilibrium hourly wage (W*) and the equilibrium quantity of labor (Q*)?

Accepted Answer

A)  W* = $9.00; Q* = 370,000 
B)  W* = $8.50; Q* = 380,000 
C)  W* = $8.50; Q* = 360,000 
D)  W* = $9.00; Q* = 740,000 
A)  W* = $9.00; Q* = 370,000 
B)  W* = $8.50; Q* = 380,000 
C)  W* = $8.50; Q* = 360,000 
D)  W* = $9.00; Q* = 740,000

Question 11

If the market price is at equilibrium, the producer surplus is minimized.

Accepted Answer

A) True 
 B)False

Question 12

Table 4-4
  
-Refer to Table 4-4. The table above lists the highest prices three consumers, Curly, Moe, and Larry, are willing to pay for a bottle of champagne. If the price of the champagne falls from $24 to $14,

Accepted Answer

A)  consumer surplus increases from $32 to $53. 
B)  Curly will buy four bottles; Moe will buy two bottles, and Larry will buy one bottle. 
C)  consumer surplus will increase from $80 to $95. 
D)  Larry and Moe will receive more consumer surplus than Curly. 
A)  consumer surplus increases from $32 to $53. 
B)  Curly will buy four bottles; Moe will buy two bottles, and Larry will buy one bottle. 
C)  consumer surplus will increase from $80 to $95. 
D)  Larry and Moe will receive more consumer surplus than Curly.

Question 13

FICA is a payroll tax imposed on employers and workers that is used to fund Social Security and Medicare. Which of the following statements regarding the tax is true?

Accepted Answer

A)  Employers are required to pay a greater share of the tax than workers but most economists believe the burden of the tax is shared equally. 
B)  Congress wanted the burden of the tax to be greater for employers than for workers. 
C)  Most economists believe the burden of the tax falls almost entirely on workers. 
D)  Most economists believe the burden of the tax falls mostly on employers. 
A)  Employers are required to pay a greater share of the tax than workers but most economists believe the burden of the tax is shared equally. 
B)  Congress wanted the burden of the tax to be greater for employers than for workers. 
C)  Most economists believe the burden of the tax falls almost entirely on workers. 
D)  Most economists believe the burden of the tax falls mostly on employers.

Question 14

Figure 4-6   Figure 4-6 shows the market for granola. The market is initially in equilibrium at a price of PS1U1B11S1U1B0 and a quantity of QS1U1B11S1U1B0. Now suppose producers decide to cut output to QS1U1B12 S1U1B0in order to raise the price to PS1U1B12.S1U1B0
-Refer to Figure 4-6. What area represents consumer surplus at the equilibrium price of P1?

Accepted Answer

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

Question 15

Figure 4-3   Figure 4-3 shows Kendra's demand curve for ice cream cones.
-Refer to Figure 4-3. If the market price is $3.50, what is Kendra's consumer surplus?

Accepted Answer

A)  $9.00 
B)  $7.50 
C)  $3.50 
D)  $0 
A)  $9.00 
B)  $7.50 
C)  $3.50 
D)  $0

Question 16

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 is the area that represents producer surplus after the imposition of the price floor?

Accepted Answer

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

Question 17

Which of the following is a result of government price controls?

Accepted Answer

A)  Some people win and some people lose. 
B)  Price controls benefit poor consumers but harm producers and wealthy consumers. 
C)  Price controls increase economic efficiency. 
D)  The deadweight loss from price ceilings is greater than the deadweight loss from price floors. 
A)  Some people win and some people lose. 
B)  Price controls benefit poor consumers but harm producers and wealthy consumers. 
C)  Price controls increase economic efficiency. 
D)  The deadweight loss from price ceilings is greater than the deadweight loss from price floors.

Question 18

Figure 4-3   Figure 4-3 shows Kendra's demand curve for ice cream cones.
-Refer to Figure 4-3. If the market price is $3.00, what is Kendra's consumer surplus?

Accepted Answer

A)  $6.50 
B)  $5.50 
C)  $2.50 
D)  $0.50 
A)  $6.50 
B)  $5.50 
C)  $2.50 
D)  $0.50

Question 19

Table 4-2
  
-Refer to Table 4-2. The table above lists the highest prices five consumers are willing to pay for a theater ticket. If the price of one ticket rises from $10 to $19,

Accepted Answer

A)  only three tickets will be sold. 
B)  consumer surplus decreases from $31 to $6. 
C)  consumer surplus increases from $44 to $71. 
D)  no one will buy a ticket. 
A)  only three tickets will be sold. 
B)  consumer surplus decreases from $31 to $6. 
C)  consumer surplus increases from $44 to $71. 
D)  no one will buy a ticket.

Question 20

The payroll tax is a tax imposed on ________ that is used to fund Social Security and Medicare.

Accepted Answer

A)  employers only 
B)  workers only 
C)  employers and workers 
D)  the unemployed 
A)  employers only 
B)  workers only 
C)  employers and workers 
D)  the unemployed

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

________ is maximized in a competitive market when marginal benefit equals marginal cost.

Suppose there are two cities that have rent controlled apartments. In one city (Albany) all apartments are subject to rent control; in the other city (Halftrack) one-half of the apartments are rent controlled. Which of the following is most likely to be true?

Table 4-11 -Refer to Table 4-11. The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick. The equilibrium price and quantity for Chef Ernie's sushi are $60 and 20 thousand units. What is the value of consumer surplus?

Consumers are willing to purchase a product up to the point where

Willingness to pay measures

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

Deadweight loss refers to a loss in revenue resulting from producers having to reduce their selling price to remain competitive.

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 second ice cream cone is

If the government implements a binding price ceiling on insulin, this will

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. What is the equilibrium hourly wage (W*) and the equilibrium quantity of labor (Q*)?

If the market price is at equilibrium, the producer surplus is minimized.

Table 4-4 -Refer to Table 4-4. The table above lists the highest prices three consumers, Curly, Moe, and Larry, are willing to pay for a bottle of champagne. If the price of the champagne falls from $24 to $14,

FICA is a payroll tax imposed on employers and workers that is used to fund Social Security and Medicare. Which of the following statements regarding the tax is true?

Figure 4-3 Figure 4-3 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-3. If the market price is $3.50, what is Kendra's consumer surplus?

Which of the following is a result of government price controls?

Figure 4-3 Figure 4-3 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-3. If the market price is $3.00, what is Kendra's consumer surplus?

Table 4-2 -Refer to Table 4-2. The table above lists the highest prices five consumers are willing to pay for a theater ticket. If the price of one ticket rises from $10 to $19,

The payroll tax is a tax imposed on ________ that is used to fund Social Security and Medicare.

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

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. What is the equilibrium hourly wage (W) and the equilibrium quantity of labor (Q)?