Question 1

________ 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 2

Rent control is an example of

Accepted Answer

A) a subsidy for low-skilled workers. 
B) a price floor. 
C) a price ceiling. 
D) a black market. 
A) a subsidy for low-skilled workers. 
B) a price floor. 
C) a price ceiling. 
D) a black market.

Question 3

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.What is the area that represents the portion of producer surplus transferred to consumers as a result of the rent ceiling?

Accepted Answer

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

Question 4

Figure 4-21
   
Companies producing toilet paper bleach the paper to make it white. The bleach is discharged into rivers and lakes and causes substantial environmental damage.Figure 4-21 illustrates the situation in the toilet paper market.
-Refer to Figure 4-21.Let's suppose the government imposes a tax of $50 per ton of toilet paper to bring about the efficient level of production.What happens to the market price of toilet paper?

Accepted Answer

A) It rises by $50. 
B) It rises by more than $50. 
C) It rises by less than $50. 
D) It remains the same because the tax is imposed on producers who create the externality. 
A) It rises by $50. 
B) It rises by more than $50. 
C) It rises by less than $50. 
D) It remains the same because the tax is imposed on producers who create the externality.

Question 5

Explain how mandatory seat belt laws may reduce the negative externalities of risky behavior.

Accepted Answer

Mandatory seat belt laws are designed to

Question 6

What is meant by the term "internalizing an externality"? How does a Pigovian tax or subsidy internalize an externality?

Accepted Answer

Internalizing an externality refers to t

Question 7

Which of the following would result in a positive externality?

Accepted Answer

A) A local government establishes a price ceiling on rental apartments. 
B) An electric utility burns coal that causes acid rain. 
C) Medical research results in a cure for malaria. 
D) McDonald's adds new fat-free items to its menu. 
A) A local government establishes a price ceiling on rental apartments. 
B) An electric utility burns coal that causes acid rain. 
C) Medical research results in a cure for malaria. 
D) McDonald's adds new fat-free items to its menu.

Question 8

Government imposed quantitative limits on the amount of pollution firms are allowed to produce is an example of

Accepted Answer

A) the Pigovian method of pollution control. 
B) command and control approach to pollution reduction. 
C) Coasian solution to pollution reduction. 
D) a tradable emission allowance system of pollution control. 
A) the Pigovian method of pollution control. 
B) command and control approach to pollution reduction. 
C) Coasian solution to pollution reduction. 
D) a tradable emission allowance system of pollution control.

Question 9

Mandatory motorcycle helmet laws are designed to reduce the severity of injuries resulting from motorcycle involvement in traffic accidents.In this sense,these mandatory helmet laws are reducing ________ of risky behavior.

Accepted Answer

A) positive externalities 
B) negative externalities 
C) the private benefit 
D) the social benefit 
A) positive externalities 
B) negative externalities 
C) the private benefit 
D) the social benefit

Question 10

Which of the following is an example of a positive externality?

Accepted Answer

A) banning the sale of candy in elementary schools 
B) planting trees along a sidewalk which add beauty and creates shade 
C) forbidding the use of cell phones in public 
D) prohibit street parking in all residential neighborhoods 
A) banning the sale of candy in elementary schools 
B) planting trees along a sidewalk which add beauty and creates shade 
C) forbidding the use of cell phones in public 
D) prohibit street parking in all residential neighborhoods

Question 11

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 producer surplus at the equilibrium price of P₁?

Accepted Answer

A) A + B + D 
B) D + E 
C) D + E + G + H 
D) A + B + C + D + E 
A) A + B + D 
B) D + E 
C) D + E + G + H 
D) A + B + C + D + E

Question 12

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 fourth burrito is

Accepted Answer

A) $0. 
B) $1.00. 
C) $2.50. 
D) $3.00. 
A) $0. 
B) $1.00. 
C) $2.50. 
D) $3.00.

Question 13

Suppose the government mandates the installation of certain type of pollution abatement equipment for the leather tannery industry.For some firms in the industry,installing this equipment may not be the most cost effective method of reducing pollution.

Accepted Answer

A) True 
 B)False

Question 14

Table 4-8
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Hourly Wage } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Labor } \
\text { Supplied }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Labor } \
\text { Demanded }
\end{array} \
\hline \$ 8.00 & 350,000 & 390,000 \
\hline 8.50 & 360,000 & 380,000 \
\hline 9.00 & 370,000 & 370,000 \
\hline 9.50 & 380,000 & 360,000 \
\hline 10.00 & 390,000 & 350,000 \
\hline 10.50 & 400,000 & 340,000 \
\hline
\end{array}$$ 
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 increases 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 = 410,000 
B) W = $9.50; Q = 420,000 
C) W = $8.50; Q = 400,000 
D) W = $8.00; Q = 390,000 
A) W = $9.00; Q = 410,000 
B) W = $9.50; Q = 420,000 
C) W = $8.50; Q = 400,000 
D) W = $8.00; Q = 390,000

Question 15

Using a supply and demand graph,illustrate the market for rent-controlled apartments with the following data:
Equilibrium rent without rent control: $1,500
Rent with rent control: $700
Quantity of apartments demanded with rent control: 50,000
Quantity of apartments supplied with rent control: 20,000
What is the value of the initial shortage of apartments with rent control?
Now assume rent control leads to a reduction in the supply of apartments,and the new quantity supplied is now 15,000.Illustrate this on your graph.
What is the value of the shortage of apartments following the decrease in supply?

Accepted Answer

@#IMG-DLM& 
The initial shortage of apartments is

Question 16

In order to be binding a price floor

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.

Question 17

Table 4-7
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Hourly Wage } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Labor } \
\text { Supplied }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Labor } \
\text { Demanded }
\end{array} \
\hline \$ 7.50 & 530,000 & 650,000 \
\hline 8.50 & 550,000 & 630,000 \
\hline 9.50 & 570,000 & 610,000 \
\hline 10.50 & 590,000 & 590,000 \
\hline 11.50 & 610,000 & 570,000 \
\hline 12.50 & 630,000 & 550,000 \
\hline
\end{array}$$ 
Table 4-7 shows the demand and supply schedules for labor market in the city of Pixley.
-Refer to Table 4-7.If a minimum wage of $11.50 an hour is mandated,what is the quantity of labor supplied?

Accepted Answer

A) 40,000 
B) 570,000 
C) 610,000 
D) 1,180,000 
A) 40,000 
B) 570,000 
C) 610,000 
D) 1,180,000

Question 18

An external cost is created when you

Accepted Answer

A) graduate from college. 
B) buy flowers for your mother on Mother's Day. 
C) litter on the side of the road. 
D) buy a sandwich for lunch. 
A) graduate from college. 
B) buy flowers for your mother on Mother's Day. 
C) litter on the side of the road. 
D) buy a sandwich for lunch.

Question 19

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 20

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

Accepted Answer

A) True 
 B)False

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

Rent control is an example of

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.What is the area that represents the portion of producer surplus transferred to consumers as a result of the rent ceiling?

Explain how mandatory seat belt laws may reduce the negative externalities of risky behavior.

What is meant by the term "internalizing an externality"? How does a Pigovian tax or subsidy internalize an externality?

Which of the following would result in a positive externality?

Government imposed quantitative limits on the amount of pollution firms are allowed to produce is an example of

Mandatory motorcycle helmet laws are designed to reduce the severity of injuries resulting from motorcycle involvement in traffic accidents.In this sense,these mandatory helmet laws are reducing ________ of risky behavior.

Which of the following is an example of a positive externality?

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 fourth burrito is

Suppose the government mandates the installation of certain type of pollution abatement equipment for the leather tannery industry.For some firms in the industry,installing this equipment may not be the most cost effective method of reducing pollution.

In order to be binding a price floor

An external cost is created when you

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?

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

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 4: Market Efficiency and Market Failure

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

Rent control is an example of

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.What is the area that represents the portion of producer surplus transferred to consumers as a result of the rent ceiling?

Explain how mandatory seat belt laws may reduce the negative externalities of risky behavior.

What is meant by the term "internalizing an externality"? How does a Pigovian tax or subsidy internalize an externality?

Which of the following would result in a positive externality?

Government imposed quantitative limits on the amount of pollution firms are allowed to produce is an example of

Mandatory motorcycle helmet laws are designed to reduce the severity of injuries resulting from motorcycle involvement in traffic accidents.In this sense,these mandatory helmet laws are reducing ________ of risky behavior.

Which of the following is an example of a positive externality?

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 fourth burrito is

Suppose the government mandates the installation of certain type of pollution abatement equipment for the leather tannery industry.For some firms in the industry,installing this equipment may not be the most cost effective method of reducing pollution.

In order to be binding a price floor

An external cost is created when you

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?

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

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters