Exam 4: Market Efficiency and Market Failure

Figure 4-7 -Refer to Figure 4-7.The figure above represents the market for iced tea.Assume that this is a competitive market.If the price of iced tea is $1,what changes in the market would result in an economically efficient output?

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 efficient output is

Figure 4-22 Chicken pox vaccinations for toddlers benefit society by protecting young children and by preventing an epidemic of the disease. Thus, the social benefits of chicken pox vaccinations exceed the private benefit for any quantity of vaccinations as illustrated in Figure 4-22. -Refer to Figure 4-22.What is the value of the net gain to society as a result of subsidizing chicken pox vaccinations?

Figure 4-13 -Refer to Figure 4-13 which shows the market for vitamins.Suppose the government imposes a price ceiling of Pᵥ.How will the price ceiling affect the quantity supplied,quantity demanded and quantity exchanged?

Briefly explain the command-and-control approach in dealing with an externality such as pollution.Give an example of the U.S.government using the command-and-control approach to deal with the pollution problem.

Figure 4-8 Figure 4-8 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. -Refer to Figure 4-8.What is the value of producer surplus after the imposition of the ceiling?

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.If a minimum wage of $11.50 an hour is mandated,what is the quantity of labor demanded?

Figure 4-4 Figure 4-4 shows the market for tiger shrimp.The market is initially in equilibrium at a price of $15 and a quantity of 80.Now suppose producers decide to cut output to 40 in order to raise the price to $18. -Refer to Figure 4-4.At a price of $18 consumers are willing to buy 40 pounds of tiger shrimp.Is this an economically efficient quantity?

If the government implements a price ceiling on insulin,this will have all of the following effects on the market for insulin except

Paul goes to Sportsmart to buy a new tennis racquet.He is willing to pay $200 for a new racquet,but buys one on sale for $125.Paul's consumer surplus from the purchase is

Issuing marketable emission allowance permits to polluting firms will result in those firms polluting more than is socially desirable.

What is a black market?

What does the phrase "internalizing an external cost" mean?

Table 4-8 Hourly Wage (dollars) Quantity of Labor Supplied Quantity of Labor Demanded \ 8.00 350,000 390,000 8.50 360,000 380,000 9.00 370,000 370,000 9.50 380,000 360,000 10.00 390,000 350,000 10.50 400,000 340,000 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 $9.50 is mandated there will be a

"A competitive market achieves economic efficiency by maximizing the sum of consumer surplus and producer surplus." This statement

Figure 4-4 Figure 4-4 shows the market for tiger shrimp.The market is initially in equilibrium at a price of $15 and a quantity of 80.Now suppose producers decide to cut output to 40 in order to raise the price to $18. -Refer to Figure 4-4.What is the value of producer surplus at the equilibrium price of $15?

A demand curve shows

Economists refer a to a market where buying and selling take place at prices that violate government price regulations as

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 maximum number of ice cream cones that Kendra will buy?

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 $35,The Waco Kid will produce