Question 1

When a negative externality exists,the private market produces

Accepted Answer

A) more than the economically efficient output level. 
B) less than the economically efficient output level. 
C) products at a low opportunity cost. 
D) products at a high opportunity cost. 
A) more than the economically efficient output level. 
B) less than the economically efficient output level. 
C) products at a low opportunity cost. 
D) products at a high opportunity cost.

Question 2

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 the equilibrium price of P₁?

Accepted Answer

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

Question 3

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.

Question 4

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.What is the equilibrium hourly wage (W*)and the equilibrium quantity of labor (Q*)?

Accepted Answer

A) W* = $10.50; Q* = 590,000 
B) W* = $11.50; Q* = 570,000 
C) W* = $9.50; Q* = 570,000 
D) W* = $10.50; Q* = 1,200,000 
A) W* = $10.50; Q* = 590,000 
B) W* = $11.50; Q* = 570,000 
C) W* = $9.50; Q* = 570,000 
D) W* = $10.50; Q* = 1,200,000

Question 5

Figure 4-17
  
-Refer to Figure 4-17.The size of marginal external benefits can be determined by

Accepted Answer

A) the demand curve D₂. 
B) D₂ + D₁ at each output level 
C) D₂ - D₁ at each output level. 
D) the demand curve D₁. 
A) the demand curve D₂. 
B) D₂ + D₁ at each output level 
C) D₂ - D₁ at each output level. 
D) the demand curve D₁.

Question 6

Consumer surplus is the difference between the highest price someone is willing to pay for a product and the price he actually pays for the product.

Accepted Answer

A) True 
 B)False

Question 7

Figure 4-16
   
Figure 4-16 shows a market with a negative externality.
-Refer to Figure 4-16.The true marginal cost of the last unit produced is represented by the price

Accepted Answer

A) Pₐ. 
B) Pb. 
C) Pc. 
D) Pf. 
A) Pₐ. 
B) Pb. 
C) Pc. 
D) Pf.

Question 8

Figure 4-18
   
Suppose there are several paper mills producing paper for a market.These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river.The waste material affects the number of fish in the river, and the use of the river for recreation and as a public water supply source.Figure 4-18 shows the paper market.Use this Figure to answer the following question(s).
-Refer to Figure 4-18.What is the economically efficient output level?

Accepted Answer

A) Q₁ 
B) Q₂ minus Q₁ 
C) Q₂ 
D) Q₁ plus Q₂ 
A) Q₁ 
B) Q₂ minus Q₁ 
C) Q₂ 
D) Q₁ plus Q₂

Question 9

When there is a negative externality,the competitive output is more than the economically efficient output level.

Accepted Answer

A) True 
 B)False

Question 10

Table 4-6
 $$\begin{array} { | l | c | } 
\hline  { \begin{array} { c } 
\text { Marko's } \
\text { Polos }
\end{array} } & \begin{array} { c } 
\text { Marginal } \
\text { Cost } \
\text { (dollars) }
\end{array} \
\hline 1 \text { st shirt } & \$ 7 \
\hline \text { 2nd shirt } & 10 \
\hline \text { 3rd shirt } & 15 \
\hline \text { 4th shirt } & 20 \
\hline
\end{array}$$
-Refer to Table 4-6.The table above lists the marginal cost of polo shirts by Marko's,a firm that specializes in producing men's clothing.If the price of polo shirts decreases from $15 to $10

Accepted Answer

A) consumers will buy no polo shirts. 
B) the marginal cost of producing the third polo shirt will increase to $25. 
C) producer surplus will fall from $13 to $3. 
D) there will be a shortage of polo shirts. 
A) consumers will buy no polo shirts. 
B) the marginal cost of producing the third polo shirt will increase to $25. 
C) producer surplus will fall from $13 to $3. 
D) there will be a shortage of polo shirts.

Question 11

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 12

If the social benefit of consuming a good or a service exceeds the private benefit

Accepted Answer

A) a negative externality exists. 
B) the market achieves economic efficiency. 
C) a positive externality exists. 
D) the sum of consumer surplus and producer surplus is maximized. 
A) a negative externality exists. 
B) the market achieves economic efficiency. 
C) a positive externality exists. 
D) the sum of consumer surplus and producer surplus is maximized.

Question 13

Table 4-1
 $$\begin{array} { | l | c | } 
\hline \text { Consumer } & \text { Willingness to Pay } \
\hline \text { Tom } & \$ 40 \
\hline \text { Dick } & 30 \
\hline \text { Harriet } & 25 \
\hline
\end{array}$$
-Refer to Table 4-1.The table above lists the highest prices three consumers,Tom,Dick and Harriet,are willing to pay for a short-sleeved polo shirt.If the price of the shirts falls from $28 to $20

Accepted Answer

A) consumer surplus increases from $14 to $35. 
B) Tom will buy two shirts; Dick and Harriet will each buy one shirt. 
C) consumer surplus will increase from $70 to $95. 
D) Harriet will receive more consumer surplus than Tom or Dick. 
A) consumer surplus increases from $14 to $35. 
B) Tom will buy two shirts; Dick and Harriet will each buy one shirt. 
C) consumer surplus will increase from $70 to $95. 
D) Harriet will receive more consumer surplus than Tom or Dick.

Question 14

Figure 4-2
  
-Refer to Figure 4-2.What area represents producer surplus at a price of P₁?

Accepted Answer

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

Question 15

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 $3.50,what is the maximum number of ice cream cones that Kendra will buy?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 16

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.The private profit-maximizing output level is

Accepted Answer

A) Q₁. 
B) Q₂. 
C) Q₃. 
D) Q₄. 
A) Q₁. 
B) Q₂. 
C) Q₃. 
D) Q₄.

Question 17

Table 4-2
 $$\begin{array} { | l | c | } 
\hline \text { Bonsumer } & \text { Willingness to Pay } \
\hline \text { Arlya } & \$ 24 \
\hline \text { Basil } & 20 \
\hline \text { Celeste } & 15 \
\hline \text { Dralor } & 12 \
\hline \text { Esther } & 7 \
\hline
\end{array}$$
-Refer to Table 4-2.The table above lists the highest prices five consumers are willing to pay for a theater ticket.If the price of one of the tickets is $18

Accepted Answer

A) Anya and Basil will each buy two tickets. 
B) Basil will receive $2 of consumer surplus from buying one ticket. 
C) Anya and Basil receive a total of $26 of consumer surplus from buying one ticket each.No one else will buy a ticket. 
D) Celeste, Dralon, and Esther will receive a total of $34 of consumer surplus since they will buy no tickets. 
A) Anya and Basil will each buy two tickets. 
B) Basil will receive $2 of consumer surplus from buying one ticket. 
C) Anya and Basil receive a total of $26 of consumer surplus from buying one ticket each.No one else will buy a ticket. 
D) Celeste, Dralon, and Esther will receive a total of $34 of consumer surplus since they will buy no tickets.

Question 18

Some policymakers have argue that products like cigarettes,alcohol,and sweetened soda generate negative externalities in consumption.All else equal,if the government decided to impose a tax on soda,the equilibrium quantity of soda would ________ and the equilibrium price of soda would ________.

Accepted Answer

A) increase; increase 
B) increase; decrease 
C) decrease; increase 
D) decrease; decrease 
A) increase; increase 
B) increase; decrease 
C) decrease; increase 
D) decrease; decrease

Question 19

Table 4-4
 $$\begin{array} { | l | c | } 
\hline \text { Consumer } & \text { Willingness to Pay } \
\hline \text { Curly } & \$ 50 \
\hline \text { Moe } & 30 \
\hline \text { Larry } & 15 \
\hline
\end{array}$$
-Refer to Table 4-4.The table above lists the highest prices three consumers,Curly,Moe,and Larry,are willing to pay for a bottle of champagne.If the price of the champagne falls from $24 to $14

Accepted Answer

A) consumer surplus increases from $32 to $53. 
B) Curly will buy four bottles; Moe will buy two bottles, and Larry will buy one bottle. 
C) consumer surplus will increase from $80 to $95. 
D) Larry and Moe will receive more consumer surplus than Curly. 
A) consumer surplus increases from $32 to $53. 
B) Curly will buy four bottles; Moe will buy two bottles, and Larry will buy one bottle. 
C) consumer surplus will increase from $80 to $95. 
D) Larry and Moe will receive more consumer surplus than Curly.

Question 20

A black market is a market where buying and selling take place

Accepted Answer

A) at prices that violate government price regulations. 
B) in non-licensed shops and warehouses. 
C) after regular office hours. 
D) on foreign soil. 
A) at prices that violate government price regulations. 
B) in non-licensed shops and warehouses. 
C) after regular office hours. 
D) on foreign soil.

When a negative externality exists,the private market produces

Marginal cost is

Figure 4-17 -Refer to Figure 4-17.The size of marginal external benefits can be determined by

Consumer surplus is the difference between the highest price someone is willing to pay for a product and the price he actually pays for the product.

Figure 4-16 Figure 4-16 shows a market with a negative externality. -Refer to Figure 4-16.The true marginal cost of the last unit produced is represented by the price

When there is a negative externality,the competitive output is more than the economically efficient output level.

Table 4-6 Marko's Polos Marginal Cost (dollars) 1 st shirt \ 7 2nd shirt 10 3rd shirt 15 4th shirt 20 -Refer to Table 4-6.The table above lists the marginal cost of polo shirts by Marko's,a firm that specializes in producing men's clothing.If the price of polo shirts decreases from $15 to $10

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

If the social benefit of consuming a good or a service exceeds the private benefit

Table 4-1 Consumer Willingness to Pay Tom \ 40 Dick 30 Harriet 25 -Refer to Table 4-1.The table above lists the highest prices three consumers,Tom,Dick and Harriet,are willing to pay for a short-sleeved polo shirt.If the price of the shirts falls from $28 to $20

Figure 4-2 -Refer to Figure 4-2.What area represents producer surplus at a price of P₁?

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 $3.50,what is the maximum number of ice cream cones that Kendra will buy?

Table 4-2 Bonsumer Willingness to Pay Arlya \ 24 Basil 20 Celeste 15 Dralor 12 Esther 7 -Refer to Table 4-2.The table above lists the highest prices five consumers are willing to pay for a theater ticket.If the price of one of the tickets is $18

Some policymakers have argue that products like cigarettes,alcohol,and sweetened soda generate negative externalities in consumption.All else equal,if the government decided to impose a tax on soda,the equilibrium quantity of soda would and the equilibrium price of soda would .

Table 4-4 Consumer Willingness to Pay Curly \ 50 Moe 30 Larry 15 -Refer to Table 4-4.The table above lists the highest prices three consumers,Curly,Moe,and Larry,are willing to pay for a bottle of champagne.If the price of the champagne falls from $24 to $14

A black market is a market where buying and selling take place

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

When a negative externality exists,the private market produces

Marginal cost is

Figure 4-17 -Refer to Figure 4-17.The size of marginal external benefits can be determined by

Consumer surplus is the difference between the highest price someone is willing to pay for a product and the price he actually pays for the product.

Figure 4-16 Figure 4-16 shows a market with a negative externality. -Refer to Figure 4-16.The true marginal cost of the last unit produced is represented by the price

When there is a negative externality,the competitive output is more than the economically efficient output level.

Table 4-6 Marko's Polos Marginal Cost (dollars) 1 st shirt \ 7 2nd shirt 10 3rd shirt 15 4th shirt 20 -Refer to Table 4-6.The table above lists the marginal cost of polo shirts by Marko's,a firm that specializes in producing men's clothing.If the price of polo shirts decreases from $15 to $10

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

If the social benefit of consuming a good or a service exceeds the private benefit

Table 4-1 Consumer Willingness to Pay Tom \ 40 Dick 30 Harriet 25 -Refer to Table 4-1.The table above lists the highest prices three consumers,Tom,Dick and Harriet,are willing to pay for a short-sleeved polo shirt.If the price of the shirts falls from $28 to $20

Figure 4-2 -Refer to Figure 4-2.What area represents producer surplus at a price of P₁?

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 $3.50,what is the maximum number of ice cream cones that Kendra will buy?

Table 4-2 Bonsumer Willingness to Pay Arlya \ 24 Basil 20 Celeste 15 Dralor 12 Esther 7 -Refer to Table 4-2.The table above lists the highest prices five consumers are willing to pay for a theater ticket.If the price of one of the tickets is $18

Some policymakers have argue that products like cigarettes,alcohol,and sweetened soda generate negative externalities in consumption.All else equal,if the government decided to impose a tax on soda,the equilibrium quantity of soda would ________ and the equilibrium price of soda would ________.

Table 4-4 Consumer Willingness to Pay Curly \ 50 Moe 30 Larry 15 -Refer to Table 4-4.The table above lists the highest prices three consumers,Curly,Moe,and Larry,are willing to pay for a bottle of champagne.If the price of the champagne falls from $24 to $14

A black market is a market where buying and selling take place

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

Some policymakers have argue that products like cigarettes,alcohol,and sweetened soda generate negative externalities in consumption.All else equal,if the government decided to impose a tax on soda,the equilibrium quantity of soda would and the equilibrium price of soda would .