Exam 4: Market Efficiency and Market Failure

Figure 4-10 Figure 4-10 shows the market for apartments in Bay City. Recently, the government imposed a rent ceiling at R₀. -Refer to Figure 4-10.With rent control,the quantity supplied is Q₁.Suppose apartment owners ignore the law and rent this quantity for the highest rent they can get.What is the highest rent they can get?

How does a negative externality in production reduce economic efficiency?

Table 4-7 Hourly Wage (dollars) Quantity of Labor Supplied Quantity of Labor Demanded \ 7.50 530,000 650,000 8.50 550,000 630,000 9.50 570,000 610,000 10.50 590,000 590,000 11.50 610,000 570,000 12.50 630,000 550,000 Table 4-7 shows the demand and supply schedules for labor market in the city of Pixley. -Refer to Table 4-7.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?

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.Arnold's marginal benefit from consuming the third burrito is

Figure 4-16 Figure 4-16 shows a market with a negative externality. -Refer to Figure 4-16.The deadweight loss due to the externality is represented by the area

A consumer is willing to purchase a product up to the point where

Figure 4-10 Figure 4-10 shows the market for apartments in Bay City. Recently, the government imposed a rent ceiling at R₀. -Refer to Figure 4-10.Suppose that instead of a price ceiling,the government imposed a price floor of R₁.What is the quantity of apartments demanded at the new price?

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 third ice cream cone is

Pollution is an example of a

When products that create positive externalities are produced,at the market equilibrium output,the social benefit generated by consuming the product exceeds the private benefit.

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 the consumer surplus on the third ice cream cone?

Which of the following statements best describes the concept of consumer surplus?

Suppose a tax equal to the value of the marginal external cost at the optimal output is imposed on a pollution generating good.All of the following will result from the tax except

Brett buys a new cell phone for $100.He receives consumer surplus of $80 from the purchase.How much does Brett value his cell phone?

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 Pf. -Refer to Figure 4-9.What is the area that represents producer surplus after the imposition of the price floor?

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 the consumer surplus on the second ice cream cone?

Table 4-3 The Waco Kid's Cowboy Hats Marginal Cost (dollars) 1 st hat \ 24 2nd hat 30 3rd hat 38 4th hat 46 -Refer to Table 4-3.The table above lists the marginal cost of cowboy hats by The Waco Kid,a firm that specializes in producing western wear.If the market price of cowboy hats is $50,how many hats will be produced?

Consider the following methods of pollution reduction: a.the government sets a target for maximum emissions b.the government mandates the installation of specific pollution abatement equipment c.the government imposes a per unit tax on the good that creates pollution d.the government gives firms a tax rebate for every unit of pollution abated Which of the above is an example of a command and control approach to reducing pollution?

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 the deadweight loss at the equilibrium price of P₁?

Figure 4-17 -Refer to Figure 4-17.At the competitive market equilibrium,for the last unit produced,