Question 1

Producer surplus is the difference between

Accepted Answer

A)  the maximum prices consumers are willing to pay for a product and the lower equilibrium price. 
B)  the quantity supplied and quantity demanded at an above equilibrium price. 
C)  the minimum prices producers are willing to accept for a product and the higher equilibrium price. 
D)  the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept. 
A)  the maximum prices consumers are willing to pay for a product and the lower equilibrium price. 
B)  the quantity supplied and quantity demanded at an above equilibrium price. 
C)  the minimum prices producers are willing to accept for a product and the higher equilibrium price. 
D)  the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept. C

Question 2

The franchising of fast-food restaurants would be an example of how a private business

Accepted Answer

A)  overcomes product information problems. 
B)  solves the moral hazard problem in insurance. 
C)  expands the limits of the Coase theorem. 
D)  corrects the problem of externalities. 
A)  overcomes product information problems. 
B)  solves the moral hazard problem in insurance. 
C)  expands the limits of the Coase theorem. 
D)  corrects the problem of externalities. A

Question 3

Refer to the diagrams for two separate product markets. Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to
S1 in diagram (a) on the left and from S to S2 in diagram (b) on the right. We can conclude that the
Government is correcting for

Accepted Answer

A)  negative externalities in diagram (a) and positive externalities in diagram (b). 
B)  positive externalities in diagram (a) and negative externalities in diagram (b). 
C)  negative externalities in both diagrams. 
D)  positive externalities in both diagrams. 
A)  negative externalities in diagram (a) and positive externalities in diagram (b). 
B)  positive externalities in diagram (a) and negative externalities in diagram (b). 
C)  negative externalities in both diagrams. 
D)  positive externalities in both diagrams. A

Question 4

Refer to the provided supply and demand graph. S1 and D1 represent the current market supply and demand, respectively. S2 and D2 represent the socially optimal supply and demand. The positions
Of the graphs indicate that there are

Accepted Answer

A)  external beneﬁts from production and external costs from consumption of the product. 
B)  external costs from production and external beneﬁts from consumption of the product. 
C)  external beneﬁts from production and consumption of the product. 
D)  external costs from production and consumption of the product. 
A)  external beneﬁts from production and external costs from consumption of the product. 
B)  external costs from production and external beneﬁts from consumption of the product. 
C)  external beneﬁts from production and consumption of the product. 
D)  external costs from production and consumption of the product.

Question 5

(Last Word) The government should choose pollution abatement for all sources of pollution where
the marginal beneﬁt exceeds the marginal cost of that action.

Accepted Answer

A) True 
 B)False

Question 6

Refer to the provided supply and demand graph. S1 and D1 represent the current market supply and demand, respectively. S2 and D2 represent the socially optimal supply and demand. One way that
The government could shift supply to its socially optimal level is to

Accepted Answer

A)  tax the sellers. 
B)  subsidize the buyers. 
C)  provide the product. 
D)  regulate the production of the good. 
A)  tax the sellers. 
B)  subsidize the buyers. 
C)  provide the product. 
D)  regulate the production of the good.

Question 7

Deﬁne the term producer surplus.

Accepted Answer

Producer surplus is the difference betwe

Question 8

Refer to the provided graph of a competitive market. If the output level increases from Q2 to Q3, then the

Accepted Answer

A)  marginal cost of the product becomes closer to its marginal beneﬁt. 
B)  marginal cost of the product increases, while its marginal beneﬁt decreases. 
C)  marginal cost of the product decreases, while its marginal beneﬁt increases. 
D)  marginal cost of the product stays constant, while its marginal beneﬁt increases. 
A)  marginal cost of the product becomes closer to its marginal beneﬁt. 
B)  marginal cost of the product increases, while its marginal beneﬁt decreases. 
C)  marginal cost of the product decreases, while its marginal beneﬁt increases. 
D)  marginal cost of the product stays constant, while its marginal beneﬁt increases.

Question 9

(Consider This) There are no external costs with being on the roadways during peak driving hours;
there are only private costs that include your gasoline and opportunity cost of time spent in traﬃc.

Accepted Answer

A) True 
 B)False

Question 10

Refer to the diagram. Assuming equilibrium price P1, producer surplus is represented by areas

Accepted Answer

A)  a + b. 
B)  a + b + c + d. 
C)  c + d. 
D)  a + c. 
A)  a + b. 
B)  a + b + c + d. 
C)  c + d. 
D)  a + c.

Question 11

It is the custom for paper mills located alongside the Layzee River to discharge waste products into the river. As a result, operators of hydroelectric power-generating plants downstream along the river
ﬁnd that they must clean up the river's water before it ﬂows through their equipment.
Refer to the above information. Which of the following policies would be most appropriate for
Dealing with this problem?

Accepted Answer

A)  levy a Pigovian tax on the consumers of paper products and use the tax revenues to conduct research on new energy sources 
B)  levy a Pigovian tax on the consumers of electricity and use the tax revenues to subsidize the consumers of paper products 
C)  levy a Pigovian tax on the producers of electricity and use the tax revenues to clean up the river 
D)  levy a Pigovian tax on the producers of paper products and use the tax revenues to clean up the river 
A)  levy a Pigovian tax on the consumers of paper products and use the tax revenues to conduct research on new energy sources 
B)  levy a Pigovian tax on the consumers of electricity and use the tax revenues to subsidize the consumers of paper products 
C)  levy a Pigovian tax on the producers of electricity and use the tax revenues to clean up the river 
D)  levy a Pigovian tax on the producers of paper products and use the tax revenues to clean up the river

Question 12

Allocative eﬃciency occurs only at that output where

Accepted Answer

A)  marginal beneﬁt exceeds marginal cost by the greatest amount. 
B)  consumer surplus exceeds producer surplus by the greatest amount. 
C)  the combined amounts of consumer surplus and producer surplus are maximized. 
D)  the areas of consumer and producer surplus are equal. 
A)  marginal beneﬁt exceeds marginal cost by the greatest amount. 
B)  consumer surplus exceeds producer surplus by the greatest amount. 
C)  the combined amounts of consumer surplus and producer surplus are maximized. 
D)  the areas of consumer and producer surplus are equal.

Question 13

In the provided graph, the equilibrium point in the market is where the S and D curves intersect. At equilibrium, the total revenues received by sellers would be represented by the area

Accepted Answer

A)  b. 
B)  b + c. 
C)  a + b. 
D)  b + c + d. 
A)  b. 
B)  b + c. 
C)  a + b. 
D)  b + c + d.

Question 14

The marginal cost to society of reducing pollution rises with increases in pollution abatement because of the law of

Accepted Answer

A)  diminishing marginal utility. 
B)  conservation of matter and energy. 
C)  demand. 
D)  diminishing returns. 
A)  diminishing marginal utility. 
B)  conservation of matter and energy. 
C)  demand. 
D)  diminishing returns.

Question 15

Refer to the competitive market diagram for product Z. Assume that the current market demand and supply curves for Z are D1 and S1. If there are substantial external beneﬁts associated with the
Production of Z, then

Accepted Answer

A)  government can improve the allocation of resources by subsidizing consumers of Z. 
B)  government can improve the allocation of resources by imposing a per-unit tax on Z. 
C)  a government subsidy for producers of Z would ensure that consumers are paying directly for all of the beneﬁts they receive from Z. 
D)  consumers are paying too much for the good. 
A)  government can improve the allocation of resources by subsidizing consumers of Z. 
B)  government can improve the allocation of resources by imposing a per-unit tax on Z. 
C)  a government subsidy for producers of Z would ensure that consumers are paying directly for all of the beneﬁts they receive from Z. 
D)  consumers are paying too much for the good.

Question 16

Graphically, producer surplus is measured as the area

Accepted Answer

A)  under the demand curve and below the actual price. 
B)  under the demand curve and above the actual price. 
C)  above the supply curve and above the actual price. 
D)  above the supply curve and below the actual price. 
A)  under the demand curve and below the actual price. 
B)  under the demand curve and above the actual price. 
C)  above the supply curve and above the actual price. 
D)  above the supply curve and below the actual price.

Question 17

In the provided graph, the equilibrium point in the market is where the S and D curves intersect. At equilibrium, the producer surplus would be represented by the area

Accepted Answer

A)  b. 
B)  b + c. 
C)  a + b. 
D)  b + c + d. 
A)  b. 
B)  b + c. 
C)  a + b. 
D)  b + c + d.

Question 18

If a person drives with less care after purchasing auto insurance, this situation would be an example of a(n)

Accepted Answer

A)  reverse wealth problem. 
B)  negative externality problem. 
C)  adverse selection problem. 
D)  moral hazard problem. 
A)  reverse wealth problem. 
B)  negative externality problem. 
C)  adverse selection problem. 
D)  moral hazard problem.

Question 19

If the unit price of a product is P, then the amount of money buyers would need to pay for a given quantity Q is equal to

Accepted Answer

A)  P × Q. 
B)  P + Q. 
C)  P - Q. 
D)  Q - P. 
A)  P × Q. 
B)  P + Q. 
C)  P - Q. 
D)  Q - P.

Question 20

The amount of revenue that sellers actually receive over and above the minimum acceptable amount that they are willing to receive for selling a product is called

Accepted Answer

A)  production costs. 
B)  producers' supply. 
C)  producer surplus. 
D)  surplus production. 
A)  production costs. 
B)  producers' supply. 
C)  producer surplus. 
D)  surplus production.

Producer surplus is the difference between

The franchising of fast-food restaurants would be an example of how a private business

Refer to the provided supply and demand graph. S1 and D1 represent the current market supply and demand, respectively. S2 and D2 represent the socially optimal supply and demand. The positions Of the graphs indicate that there are

(Last Word) The government should choose pollution abatement for all sources of pollution where the marginal beneﬁt exceeds the marginal cost of that action.

Refer to the provided supply and demand graph. S1 and D1 represent the current market supply and demand, respectively. S2 and D2 represent the socially optimal supply and demand. One way that The government could shift supply to its socially optimal level is to

Deﬁne the term producer surplus.

Refer to the provided graph of a competitive market. If the output level increases from Q2 to Q3, then the

(Consider This) There are no external costs with being on the roadways during peak driving hours; there are only private costs that include your gasoline and opportunity cost of time spent in traﬃc.

Refer to the diagram. Assuming equilibrium price P1, producer surplus is represented by areas

Allocative eﬃciency occurs only at that output where

In the provided graph, the equilibrium point in the market is where the S and D curves intersect. At equilibrium, the total revenues received by sellers would be represented by the area

The marginal cost to society of reducing pollution rises with increases in pollution abatement because of the law of

Refer to the competitive market diagram for product Z. Assume that the current market demand and supply curves for Z are D1 and S1. If there are substantial external beneﬁts associated with the Production of Z, then

Graphically, producer surplus is measured as the area

In the provided graph, the equilibrium point in the market is where the S and D curves intersect. At equilibrium, the producer surplus would be represented by the area

If a person drives with less care after purchasing auto insurance, this situation would be an example of a(n)

If the unit price of a product is P, then the amount of money buyers would need to pay for a given quantity Q is equal to

The amount of revenue that sellers actually receive over and above the minimum acceptable amount that they are willing to receive for selling a product is called

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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Exam 4: Market Failures Caused by Externalities Asymmetric Information

Producer surplus is the difference between

The franchising of fast-food restaurants would be an example of how a private business

Refer to the provided supply and demand graph. S1 and D1 represent the current market supply and demand, respectively. S2 and D2 represent the socially optimal supply and demand. The positions Of the graphs indicate that there are

(Last Word) The government should choose pollution abatement for all sources of pollution where the marginal beneﬁt exceeds the marginal cost of that action.

Refer to the provided supply and demand graph. S1 and D1 represent the current market supply and demand, respectively. S2 and D2 represent the socially optimal supply and demand. One way that The government could shift supply to its socially optimal level is to

Deﬁne the term producer surplus.

Refer to the provided graph of a competitive market. If the output level increases from Q2 to Q3, then the

(Consider This) There are no external costs with being on the roadways during peak driving hours; there are only private costs that include your gasoline and opportunity cost of time spent in traﬃc.

Refer to the diagram. Assuming equilibrium price P1, producer surplus is represented by areas

Allocative eﬃciency occurs only at that output where

In the provided graph, the equilibrium point in the market is where the S and D curves intersect. At equilibrium, the total revenues received by sellers would be represented by the area

The marginal cost to society of reducing pollution rises with increases in pollution abatement because of the law of

Refer to the competitive market diagram for product Z. Assume that the current market demand and supply curves for Z are D1 and S1. If there are substantial external beneﬁts associated with the Production of Z, then

Graphically, producer surplus is measured as the area

In the provided graph, the equilibrium point in the market is where the S and D curves intersect. At equilibrium, the producer surplus would be represented by the area

If a person drives with less care after purchasing auto insurance, this situation would be an example of a(n)

If the unit price of a product is P, then the amount of money buyers would need to pay for a given quantity Q is equal to

The amount of revenue that sellers actually receive over and above the minimum acceptable amount that they are willing to receive for selling a product is called

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters