Question 1

One result of a tax is an increase in economic efficiency.

Accepted Answer

A) True 
 B)False

Question 2

The difference between the lowest price a firm would have been willing to accept and the price it actually receives from the sale of a product is called

Accepted Answer

A)  producer surplus. 
B)  profit. 
C)  marginal revenue. 
D)  price differential. 
A)  producer surplus. 
B)  profit. 
C)  marginal revenue. 
D)  price differential.

Question 3

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 P2?

Accepted Answer

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

Question 4

Which of the following statements is not true?

Accepted Answer

A)  Consumer surplus measures the difference between the highest price a consumer is willing to pay for a product and the price she actually pays. 
B)  Marginal benefit is the additional benefit to a consumer from consuming one more unit of a product. 
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 difference between the highest price a consumer is willing to pay for a product and the price she actually pays. 
B)  Marginal benefit is the additional benefit to a consumer from consuming one more unit of a product. 
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 5

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 the deadweight loss at the equilibrium price of P1?

Accepted Answer

A)  C + E + H 
B)  G + H 
C)  C + E 
D)  There is no deadweight loss at the price of P1. 
A)  C + E + H 
B)  G + H 
C)  C + E 
D)  There is no deadweight loss at the price of P1.

Question 6

Figure 4-2  
-Refer to Figure 4-2. What area represents producer surplus at a price of P2?

Accepted Answer

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

Question 7

Suppose that in Canada the government places a $1,500 tax on the buyers of new snowmobiles. After the purchase of a new snowmobile, a buyer must pay the government $1,500. How would the imposition of the tax on buyers be illustrated in a graph?

Accepted Answer

A)  The tax will shift the supply curve up by $1,500. 
B)  The tax will shift the demand curve up by $1,500. 
C)  The tax will shift both the demand and supply curves down by $1,500. 
D)  The tax will shift the demand curve down by $1,500. 
A)  The tax will shift the supply curve up by $1,500. 
B)  The tax will shift the demand curve up by $1,500. 
C)  The tax will shift both the demand and supply curves down by $1,500. 
D)  The tax will shift the demand curve down by $1,500.

Question 8

Table 4-5
  
-Refer to Table 4-5. The table above lists the highest prices five consumers are willing to pay for a concert ticket. If the price of one ticket falls from $50 to $20,

Accepted Answer

A)  only three tickets will be sold. 
B)  consumer surplus decreases from $48 to $24. 
C)  consumer surplus increases from $0 to $62. 
D)  everyone will buy a ticket. 
A)  only three tickets will be sold. 
B)  consumer surplus decreases from $48 to $24. 
C)  consumer surplus increases from $0 to $62. 
D)  everyone will buy a ticket.

Question 9

Price ceilings result in shortages.

Accepted Answer

A) True 
 B)False

Question 10

In Singapore the government places a $5,000 tax on the buyers of new automobiles. After the purchase of a new car, a buyer must pay the government $5,000. How would the imposition of the tax on buyers be illustrated in a graph?

Accepted Answer

A)  The tax will shift the demand curve up by $5,000. 
B)  The tax will shift the demand curve down by $5,000. 
C)  The tax will shift both the demand and supply curves down by $5,000. 
D)  The tax will shift the supply curve up by $5,000. 
A)  The tax will shift the demand curve up by $5,000. 
B)  The tax will shift the demand curve down by $5,000. 
C)  The tax will shift both the demand and supply curves down by $5,000. 
D)  The tax will shift the supply curve up by $5,000.

Question 11

Juanita goes to the Hardware Emporium to buy a new circular saw. She is willing to pay $120 for a new saw, but buys one on sale for $85. Juanita's consumer surplus from the purchase is

Accepted Answer

A)  $35. 
B)  $85. 
C)  $120. 
D)  $205. 
A)  $35. 
B)  $85. 
C)  $120. 
D)  $205.

Question 12

What do economists mean by an efficient tax?

Accepted Answer

A tax is efficient i

Question 13

Explain how both renters and landlords could be either winners or losers with the imposition of rent control.

Accepted Answer

With rent control, those renters who are

Question 14

Employers withhold several taxes from employees ' paychecks, one of which is FICA. Congress requires employers to pay half of the FICA tax and workers to pay the other half. Does this mean that the burden of the FICA tax falls evenly on employers and employees? Briefly explain.

Accepted Answer

Most economists believe that even though

Question 15

Consumer surplus in a market for a product would be equal to ________ if the market price was zero.

Accepted Answer

A)  zero 
B)  the area between the supply curve and the demand curve 
C)  the area above the supply curve 
D)  the area under the demand curve 
A)  zero 
B)  the area between the supply curve and the demand curve 
C)  the area above the supply curve 
D)  the area under the demand curve

Question 16

Economic surplus

Accepted Answer

A)  does not exist when a competitive market is in equilibrium. 
B)  is equal to the sum of consumer surplus and producer surplus. 
C)  is the difference between quantity demanded and quantity supplied when the market price for a product is greater than the equilibrium price. 
D)  is equal to the difference between consumer surplus and producer surplus. 
A)  does not exist when a competitive market is in equilibrium. 
B)  is equal to the sum of consumer surplus and producer surplus. 
C)  is the difference between quantity demanded and quantity supplied when the market price for a product is greater than the equilibrium price. 
D)  is equal to the difference between consumer surplus and producer surplus.

Question 17

Economists working for Uber, along with economists from the University of Oxford and the University of Chicago, estimated the consumer surplus attributed to Uber. For the 4 largest U.S. markets, these economists estimated that the total consumer surplus from Uber in 2015 was

Accepted Answer

A)  almost $0. 
B)  $13.30 per customer. 
C)  $2.88 billion. 
D)  6.76 billion. 
A)  almost $0. 
B)  $13.30 per customer. 
C)  $2.88 billion. 
D)  6.76 billion.

Question 18

If the price of chewing gum is represented by P in equation P = 25 - 0.5 QD, then the corresponding quantity of chewing gum demanded is represented by the demand equation

Accepted Answer

A)  QD = 2P - 0.5.  
B)  QD = 0.5P + 25.  
C)  QD = 50 -2P.  
D)  QD = -5 + 10P. 
A)  QD = 2P - 0.5.  
B)  QD = 0.5P + 25.  
C)  QD = 50 -2P.  
D)  QD = -5 + 10P.

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 $10.50 an hour is mandated, what is the quantity of labor supplied?

Accepted Answer

A)  400,000 
B)  370,000 
C)  340,000 
D)  60,000 
A)  400,000 
B)  370,000 
C)  340,000 
D)  60,000

Question 20

In order to be binding, a price ceiling

Accepted Answer

A)  must lie above the free market equilibrium price. 
B)  must lie below the free market equilibrium price. 
C)  must coincide with the free market equilibrium price. 
D)  must be high enough for firms to earn a profit. 
A)  must lie above the free market equilibrium price. 
B)  must lie below the free market equilibrium price. 
C)  must coincide with the free market equilibrium price. 
D)  must be high enough for firms to earn a profit.

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

One result of a tax is an increase in economic efficiency.

The difference between the lowest price a firm would have been willing to accept and the price it actually receives from the sale of a product is called

Figure 4-6 Figure 4-6 shows the market for granola. The market is initially in equilibrium at a price of P1 and a quantity of Q1. Now suppose producers decide to cut output to Q2 in order to raise the price to P2. -Refer to Figure 4-6. What area represents consumer surplus at P2?

Which of the following statements is not true?

Figure 4-2 -Refer to Figure 4-2. What area represents producer surplus at a price of P2?

Suppose that in Canada the government places a $1,500 tax on the buyers of new snowmobiles. After the purchase of a new snowmobile, a buyer must pay the government $1,500. How would the imposition of the tax on buyers be illustrated in a graph?

Table 4-5 -Refer to Table 4-5. The table above lists the highest prices five consumers are willing to pay for a concert ticket. If the price of one ticket falls from $50 to $20,

Price ceilings result in shortages.

In Singapore the government places a $5,000 tax on the buyers of new automobiles. After the purchase of a new car, a buyer must pay the government $5,000. How would the imposition of the tax on buyers be illustrated in a graph?

Juanita goes to the Hardware Emporium to buy a new circular saw. She is willing to pay $120 for a new saw, but buys one on sale for $85. Juanita's consumer surplus from the purchase is

What do economists mean by an efficient tax?

Explain how both renters and landlords could be either winners or losers with the imposition of rent control.

Employers withhold several taxes from employees ' paychecks, one of which is FICA. Congress requires employers to pay half of the FICA tax and workers to pay the other half. Does this mean that the burden of the FICA tax falls evenly on employers and employees? Briefly explain.

Consumer surplus in a market for a product would be equal to ________ if the market price was zero.

Economic surplus

Economists working for Uber, along with economists from the University of Oxford and the University of Chicago, estimated the consumer surplus attributed to Uber. For the 4 largest U.S. markets, these economists estimated that the total consumer surplus from Uber in 2015 was

If the price of chewing gum is represented by P in equation P = 25 - 0.5 QD, then the corresponding quantity of chewing gum demanded is represented by the demand equation

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 $10.50 an hour is mandated, what is the quantity of labor supplied?

In order to be binding, a price ceiling

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

Figure 4-6 Figure 4-6 shows the market for granola. The market is initially in equilibrium at a price of P₁ and a quantity of Q₁. Now suppose producers decide to cut output to Q₂in order to raise the price to P_2. -Refer to Figure 4-6. What area represents consumer surplus at P₂?

Figure 4-2 -Refer to Figure 4-2. What area represents producer surplus at a price of P₂?

If the price of chewing gum is represented by P in equation P = 25 - 0.5 Q^D, then the corresponding quantity of chewing gum demanded is represented by the demand equation