Question 1

The sum of consumer surplus and producer surplus is equal to

Accepted Answer

A) the deadweight loss. 
B) the economic surplus. 
C) zero. 
D) total profit. 
A) the deadweight loss. 
B) the economic surplus. 
C) zero. 
D) total profit.

Question 2

Figure 4-17
  
-Refer to Figure 4-17.In the absence of any government intervention,the private market

Accepted Answer

A) under produces by Qₒ - Qm units. 
B) over produces by Qₒ - Qm units. 
C) over produces by Qn - Qm units. 
D) under produces by Qn - Qm units. 
A) under produces by Qₒ - Qm units. 
B) over produces by Qₒ - Qm units. 
C) over produces by Qn - Qm units. 
D) under produces by Qn - Qm units.

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 area represents the deadweight loss after the imposition of the ceiling?

Accepted Answer

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

Question 4

Which of the following activities create a negative externality?

Accepted Answer

A) cleaning up the sidewalk on your block 
B) graduating from college 
C) repainting the house you live in to improve its appearance 
D) keeping a junked car parked on your front lawn 
A) cleaning up the sidewalk on your block 
B) graduating from college 
C) repainting the house you live in to improve its appearance 
D) keeping a junked car parked on your front lawn

Question 5

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 does S₂ represent?

Accepted Answer

A) the market supply curve that reflects social cost 
B) the market supply curve that reflect private cost 
C) the market supply curve that reflects external cost 
D) the market supply curve that reflects social benefit 
A) the market supply curve that reflects social cost 
B) the market supply curve that reflect private cost 
C) the market supply curve that reflects external cost 
D) the market supply curve that reflects social benefit

Question 6

Economic incentives are designed to make individual self-interest coincide with social interest.According to economists,which of the following methods of pollution control best uses economic incentives to reduce pollution?

Accepted Answer

A) Rewarding environmental groups for monitoring the activities of private firms that produce products which generate pollution. 
B) Imposing quantitative limits on the amount of pollution and imposing a penalty for non-compliance with these limits. 
C) Requiring the installation of specific pollution control devices. 
D) Instituting a system of tradable emissions allowances. 
A) Rewarding environmental groups for monitoring the activities of private firms that produce products which generate pollution. 
B) Imposing quantitative limits on the amount of pollution and imposing a penalty for non-compliance with these limits. 
C) Requiring the installation of specific pollution control devices. 
D) Instituting a system of tradable emissions allowances.

Question 7

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.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 = $8.50; Q = 550,000 
B) W = $12.50; Q = 630,000 
C) W = $9.50; Q = 610,000 
D) W = $11.50; Q = 610,000 
A) W = $8.50; Q = 550,000 
B) W = $12.50; Q = 630,000 
C) W = $9.50; Q = 610,000 
D) W = $11.50; Q = 610,000

Question 8

What is the rationale behind a marketable emission allowance scheme?

Accepted Answer

A) to create of a market for externalities: the scheme brings together buyers and sellers of marketable permits 
B) to discipline polluting firms by specifying the maximum amount of emissions allowed and giving them permits to pollute up to their allowance 
C) to raise revenue for the government through the sale of emission permits and at the same time set an emissions target 
D) to provide firms with the incentive to consider less costly alternatives to pollution reduction by making firms pay for the right to pollute beyond their specified allowance 
A) to create of a market for externalities: the scheme brings together buyers and sellers of marketable permits 
B) to discipline polluting firms by specifying the maximum amount of emissions allowed and giving them permits to pollute up to their allowance 
C) to raise revenue for the government through the sale of emission permits and at the same time set an emissions target 
D) to provide firms with the incentive to consider less costly alternatives to pollution reduction by making firms pay for the right to pollute beyond their specified allowance

Question 9

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 P₂?

Accepted Answer

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

Question 10

If the government implements a price ceiling on insulin,this will

Accepted Answer

A) increase the price consumers will pay for insulin. 
B) decrease the quantity of insulin the manufacturers will be willing to supply. 
C) have to be set above the market equilibrium price to be effective. 
D) encourage manufacturers to produce and sell more of insulin to increase their profits. 
A) increase the price consumers will pay for insulin. 
B) decrease the quantity of insulin the manufacturers will be willing to supply. 
C) have to be set above the market equilibrium price to be effective. 
D) encourage manufacturers to produce and sell more of insulin to increase their profits.

Question 11

Marginal benefit is the total benefit to a consumer from consuming one more unit of a good or service.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following could be evidence of a market failure?

Accepted Answer

A) Resources in an economy are not fully utilized. 
B) The market price of a product is above the average cost of production. 
C) There are only a handful of firms competing against each other in an industry. 
D) Market prices do not reflect true production costs. 
A) Resources in an economy are not fully utilized. 
B) The market price of a product is above the average cost of production. 
C) There are only a handful of firms competing against each other in an industry. 
D) Market prices do not reflect true production costs.

Question 13

Economists generally favor the use of tradable emissions allowances to reduce pollution.However,the use of these allowances has been criticized by some environmentalists.Which of the following describes this criticism?

Accepted Answer

A) Some environmentalists believe the allowances give firms a license to pollute. 
B) Some environmentalists believe that the price of allowances is often too high for consumers to afford. 
C) Some environmentalists believe that Pigovian taxes are a more efficient way to reduce pollution. 
D) Some environmentalists oppose allowances on legal grounds; they believe the use of allowances is unconstitutional. 
A) Some environmentalists believe the allowances give firms a license to pollute. 
B) Some environmentalists believe that the price of allowances is often too high for consumers to afford. 
C) Some environmentalists believe that Pigovian taxes are a more efficient way to reduce pollution. 
D) Some environmentalists oppose allowances on legal grounds; they believe the use of allowances is unconstitutional.

Question 14

If you burn your trash in the back yard in spite of regulations against it,then you are

Accepted Answer

A) acting economically irrationally and creating a social cost. 
B) avoiding the private costs associated with disposing your trash some other way and creating a social cost. 
C) acting rationally and creating a positive externality. 
D) saving landfill space and creating a social benefit. 
A) acting economically irrationally and creating a social cost. 
B) avoiding the private costs associated with disposing your trash some other way and creating a social cost. 
C) acting rationally and creating a positive externality. 
D) saving landfill space and creating a social benefit.

Question 15

A market failure arises when an entire sector of the economy (for example,the airline industry)collapses because of some unforeseen event.

Accepted Answer

A) True 
 B)False

Question 16

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 10,000 units of iced tea are sold

Accepted Answer

A) the deadweight loss is equal to economic surplus. 
B) producer surplus equals consumer surplus. 
C) the marginal benefit of each of the 10,000 units of iced tea equals $3. 
D) marginal benefit is less than marginal cost. 
A) the deadweight loss is equal to economic surplus. 
B) producer surplus equals consumer surplus. 
C) the marginal benefit of each of the 10,000 units of iced tea equals $3. 
D) marginal benefit is less than marginal cost.

Question 17

A.C.Pigou argued that the government can deal with a positive externality in consumption by giving consumers a subsidy equal to the value of the externality.

Accepted Answer

A) True 
 B)False

Question 18

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 producer surplus after the imposition of the ceiling?

Accepted Answer

A) F + G 
B) F 
C) D + F + G 
D) A + B + D + F + G 
A) F + G 
B) F 
C) D + F + G 
D) A + B + D + F + G

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 $1.00,what is the consumer surplus on the third 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

Table 4-5
 $$\begin{array} { | l | l | } 
\hline \text { Consumer } & \text { Willingness to Pay } \
\hline \text { Violet } & \$ 48 \
\hline \text { Walter } & 40 \
\hline \text { Xavier } & 30 \
\hline \text { Yolarada } & 24 \
\hline \text { Zachary } & 14 \
\hline
\end{array}$$
-Refer to Table 4-5.The table above lists the highest prices five consumers are willing to pay for a concert ticket.If the price of one of the tickets is $20

Accepted Answer

A) everyone will buy a ticket except for Zachary. 
B) only Violet and Walter will buy tickets. 
C) Xavier's consumer surplus is $50. 
D) the total consumer surplus from the purchase of tickets will be $122. 
A) everyone will buy a ticket except for Zachary. 
B) only Violet and Walter will buy tickets. 
C) Xavier's consumer surplus is $50. 
D) the total consumer surplus from the purchase of tickets will be $122.

The sum of consumer surplus and producer surplus is equal to

Figure 4-17 -Refer to Figure 4-17.In the absence of any government intervention,the private market

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 area represents the deadweight loss after the imposition of the ceiling?

Which of the following activities create a negative externality?

Economic incentives are designed to make individual self-interest coincide with social interest.According to economists,which of the following methods of pollution control best uses economic incentives to reduce pollution?

What is the rationale behind a marketable emission allowance scheme?

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 P₂?

If the government implements a price ceiling on insulin,this will

Marginal benefit is the total benefit to a consumer from consuming one more unit of a good or service.

Which of the following could be evidence of a market failure?

Economists generally favor the use of tradable emissions allowances to reduce pollution.However,the use of these allowances has been criticized by some environmentalists.Which of the following describes this criticism?

If you burn your trash in the back yard in spite of regulations against it,then you are

A market failure arises when an entire sector of the economy (for example,the airline industry)collapses because of some unforeseen event.

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 10,000 units of iced tea are sold

A.C.Pigou argued that the government can deal with a positive externality in consumption by giving consumers a subsidy equal to the value of the externality.

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 producer surplus after the imposition of the ceiling?

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.If the market price is $1.00,what is the consumer surplus on the third burrito?

Table 4-5 Consumer Willingness to Pay Violet \ 48 Walter 40 Xavier 30 Yolarada 24 Zachary 14 -Refer to Table 4-5.The table above lists the highest prices five consumers are willing to pay for a concert ticket.If the price of one of the tickets is $20

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

The sum of consumer surplus and producer surplus is equal to

Figure 4-17 -Refer to Figure 4-17.In the absence of any government intervention,the private market

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 area represents the deadweight loss after the imposition of the ceiling?

Which of the following activities create a negative externality?

Economic incentives are designed to make individual self-interest coincide with social interest.According to economists,which of the following methods of pollution control best uses economic incentives to reduce pollution?

What is the rationale behind a marketable emission allowance scheme?

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 P₂?

If the government implements a price ceiling on insulin,this will

Marginal benefit is the total benefit to a consumer from consuming one more unit of a good or service.

Which of the following could be evidence of a market failure?

Economists generally favor the use of tradable emissions allowances to reduce pollution.However,the use of these allowances has been criticized by some environmentalists.Which of the following describes this criticism?

If you burn your trash in the back yard in spite of regulations against it,then you are

A market failure arises when an entire sector of the economy (for example,the airline industry)collapses because of some unforeseen event.

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 10,000 units of iced tea are sold

A.C.Pigou argued that the government can deal with a positive externality in consumption by giving consumers a subsidy equal to the value of the externality.

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 producer surplus after the imposition of the ceiling?

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.If the market price is $1.00,what is the consumer surplus on the third burrito?

Table 4-5 Consumer Willingness to Pay Violet \ 48 Walter 40 Xavier 30 Yolarada 24 Zachary 14 -Refer to Table 4-5.The table above lists the highest prices five consumers are willing to pay for a concert ticket.If the price of one of the tickets is $20

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