Question 1

The area ________ the market supply curve and ________ the market price is equal to the total amount of producer surplus in a market.

Accepted Answer

A)  above; above 
B)  above; below 
C)  below; above 
D)  below; below 
A)  above; above 
B)  above; below 
C)  below; above 
D)  below; below

Question 2

The willingness of consumers to buy a product at different prices is shown on a

Accepted Answer

A)  demand curve. 
B)  supply curve. 
C)  production possibilities frontier. 
D)  marginal cost curve. 
A)  demand curve. 
B)  supply curve. 
C)  production possibilities frontier. 
D)  marginal cost curve.

Question 3

If the price of toothpaste is represented by equation P = 40 - .5QD, then the corresponding quantity of toothpaste demanded is represented by the equation

Accepted Answer

A)  QD = 20 - .5P.  
B)  QD = 40 - P.  
C)  QD = 80 - 2P.  
D)  QD = -20 + P. 
A)  QD = 20 - .5P.  
B)  QD = 40 - P.  
C)  QD = 80 - 2P.  
D)  QD = -20 + P.

Question 4

Figure 4-15   Figure 4-15 shows the market for beer. The government plans to impose a per-unit tax in this market.
-Refer to Figure 4-15. How much of the tax is paid by sellers?

Accepted Answer

A)  $2 
B)  $5 
C)  $7 
D)  $12 
A)  $2 
B)  $5 
C)  $7 
D)  $12

Question 5

The following equations represent the demand and supply for kumquats. QD = 60 - 3P
QS = -20 + 5P
What is the equilibrium price (P) and quantity (Q - in thousands) of kumquats?

Accepted Answer

A)  P = $5; Q = 20 thousand 
B)  P = $30; Q = 5 thousand 
C)  P = $20; Q = 10 thousand 
D)  P = $10; Q = 30 thousand 
A)  P = $5; Q = 20 thousand 
B)  P = $30; Q = 5 thousand 
C)  P = $20; Q = 10 thousand 
D)  P = $10; Q = 30 thousand

Question 6

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 consumer surplus after the imposition of the price floor?

Accepted Answer

A)  $25,000 
B)  $50,000 
C)  $200,000 
D)  $250,000 
A)  $25,000 
B)  $50,000 
C)  $200,000 
D)  $250,000

Question 7

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 supplied?

Accepted Answer

A)  390,000 
B)  380,000 
C)  370,000 
D)  340,000 
A)  390,000 
B)  380,000 
C)  370,000 
D)  340,000

Question 8

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 $2.50, what is Kendra's consumer surplus?

Accepted Answer

A)  $9.00 
B)  $7.50 
C)  $1.50 
D)  $0 
A)  $9.00 
B)  $7.50 
C)  $1.50 
D)  $0

Question 9

________ dictates the lowest wage that firms may pay for labor.

Accepted Answer

A)  A maximum wage requirement 
B)  A minimum wage law 
C)  The black-market wage 
D)  A price-ceiling wage 
A)  A maximum wage requirement 
B)  A minimum wage law 
C)  The black-market wage 
D)  A price-ceiling wage

Question 10

Deadweight loss refers to

Accepted Answer

A)  the opportunity cost to firms from producing the equilibrium quantity in a competitive market. 
B)  the sum of consumer and producer surplus. 
C)  the loss of economic surplus when the marginal benefit equals the marginal cost of the last unit produced. 
D)  the reduction in economic surplus resulting from not being in competitive equilibrium. 
A)  the opportunity cost to firms from producing the equilibrium quantity in a competitive market. 
B)  the sum of consumer and producer surplus. 
C)  the loss of economic surplus when the marginal benefit equals the marginal cost of the last unit produced. 
D)  the reduction in economic surplus resulting from not being in competitive equilibrium.

Question 11

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. At a price of $18 consumers are willing to buy 40 pounds of tiger shrimp. Is this an economically efficient quantity?

Accepted Answer

A)  No, the marginal benefit of the 40th unit exceeds the marginal cost of that 40th unit. 
B)  Yes, otherwise consumers would not buy 40 units. 
C)  Yes, because $18 shows what consumers are willing to pay for the product. 
D)  No, the marginal cost of the 40th unit exceeds the marginal benefit of the 40th unit. 
A)  No, the marginal benefit of the 40th unit exceeds the marginal cost of that 40th unit. 
B)  Yes, otherwise consumers would not buy 40 units. 
C)  Yes, because $18 shows what consumers are willing to pay for the product. 
D)  No, the marginal cost of the 40th unit exceeds the marginal benefit of the 40th unit.

Question 12

Figure 4-1   Figure 4-1 shows Arnold's demand curve for burritos.
-Refer to Figure 4-1. If the market price is $1.50, what is Arnold's consumer surplus?

Accepted Answer

A)  $1.50 
B)  $2.25 
C)  $3.00 
D)  $4.75 
A)  $1.50 
B)  $2.25 
C)  $3.00 
D)  $4.75

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 supplied decreases 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 = $9.00; Q = 330,000 
B)  W = $9.50; Q = 370,000 
C)  W = $10.00; Q = 350,000 
D)  W = $8.00; Q = 390,000 
A)  W = $9.00; Q = 330,000 
B)  W = $9.50; Q = 370,000 
C)  W = $10.00; Q = 350,000 
D)  W = $8.00; Q = 390,000

Question 14

Which of the following statements is true?

Accepted Answer

A)  Consumer surplus measures the total benefit from participating in a market. 
B)  When a market is in equilibrium consumer surplus equals producer surplus. 
C)  Consumer surplus measures the net benefit from participating in a market. 
D)  Producer surplus measures the total benefit received by producers from participating in a market. 
A)  Consumer surplus measures the total benefit from participating in a market. 
B)  When a market is in equilibrium consumer surplus equals producer surplus. 
C)  Consumer surplus measures the net benefit from participating in a market. 
D)  Producer surplus measures the total benefit received by producers from participating in a market.

Question 15

A minimum wage law dictates

Accepted Answer

A)  the minimum quantity of labor that a firm must employ. 
B)  the lowest wage that firms may pay for labor. 
C)  the highest wage that firms must pay for labor. 
D)  the minimum qualifications for labor. 
A)  the minimum quantity of labor that a firm must employ. 
B)  the lowest wage that firms may pay for labor. 
C)  the highest wage that firms must pay for labor. 
D)  the minimum qualifications for labor.

Question 16

Figure 4-1   Figure 4-1 shows Arnold's demand curve for burritos.
-Refer to Figure 4-1. If the market price is $2.00, what is Arnold's consumer surplus?

Accepted Answer

A)  $0.50 
B)  $1.00 
C)  $1.50 
D)  $3.00 
A)  $0.50 
B)  $1.00 
C)  $1.50 
D)  $3.00

Question 17

Figure 4-1   Figure 4-1 shows Arnold's demand curve for burritos.
-Refer to Figure 4-1. If the market price is $1.50, what is the consumer surplus on the first burrito?

Accepted Answer

A)  $0.50 
B)  $1.00 
C)  $1.50 
D)  $7.50 
A)  $0.50 
B)  $1.00 
C)  $1.50 
D)  $7.50

Question 18

Producer surplus is the difference between the lowest price a firm is willing to accept for a product and the price it actually receives for the product.

Accepted Answer

A) True 
 B)False

Question 19

When Congress passed a law that imposed a tax designed to fund its Social Security and Medicare programs it wanted employers and workers to share the burden of the tax equally. Most economists who have studied the incidence of the tax have concluded

Accepted Answer

A)  the tax is not high enough to cover the future costs of Social Security and Medicare. 
B)  the tax on employers is too high because it reduces the employment of low-skilled workers. 
C)  the burden of the tax falls almost entirely on workers. 
D)  the tax rate should be greater for high-income workers than for low-income workers. 
A)  the tax is not high enough to cover the future costs of Social Security and Medicare. 
B)  the tax on employers is too high because it reduces the employment of low-skilled workers. 
C)  the burden of the tax falls almost entirely on workers. 
D)  the tax rate should be greater for high-income workers than for low-income workers.

Question 20

Marginal cost is

Accepted Answer

A)  the total cost of producing one unit of a good or service. 
B)  the average cost of producing a good or service. 
C)  the difference between the lowest price a firm would have been willing to accept and the price it actually receives. 
D)  the additional cost to a firm of producing one more unit of a good or service. 
A)  the total cost of producing one unit of a good or service. 
B)  the average cost of producing a good or service. 
C)  the difference between the lowest price a firm would have been willing to accept and the price it actually receives. 
D)  the additional cost to a firm of producing one more unit of a good or service.

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

The area ________ the market supply curve and ________ the market price is equal to the total amount of producer surplus in a market.

The willingness of consumers to buy a product at different prices is shown on a

If the price of toothpaste is represented by equation P = 40 - .5QD, then the corresponding quantity of toothpaste demanded is represented by the equation

Figure 4-15 Figure 4-15 shows the market for beer. The government plans to impose a per-unit tax in this market. -Refer to Figure 4-15. How much of the tax is paid by sellers?

The following equations represent the demand and supply for kumquats. QD = 60 - 3P QS = -20 + 5P What is the equilibrium price (P) and quantity (Q - in thousands) of kumquats?

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 supplied?

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 $2.50, what is Kendra's consumer surplus?

________ dictates the lowest wage that firms may pay for labor.

Deadweight loss refers to

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1. If the market price is $1.50, what is Arnold's consumer surplus?

Which of the following statements is true?

A minimum wage law dictates

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1. If the market price is $2.00, what is Arnold's consumer surplus?

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1. If the market price is $1.50, what is the consumer surplus on the first burrito?

Producer surplus is the difference between the lowest price a firm is willing to accept for a product and the price it actually receives for the product.

When Congress passed a law that imposed a tax designed to fund its Social Security and Medicare programs it wanted employers and workers to share the burden of the tax equally. Most economists who have studied the incidence of the tax have concluded

Marginal cost is

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

The area the market supply curve and the market price is equal to the total amount of producer surplus in a market.

If the price of toothpaste is represented by equation P = 40 - .5Q_D, then the corresponding quantity of toothpaste demanded is represented by the equation

The following equations represent the demand and supply for kumquats. Q_D = 60 - 3P Q_S = -20 + 5P What is the equilibrium price (P) and quantity (Q - in thousands) of kumquats?