Exam 4: Market Efficiency and Market Failure

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.Why is there a deadweight loss?

What are property rights?

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 market price of Marko's polo shirts is $18

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 deadweight loss from producing at the market equilibrium?

Congress passed the Freedom to Farm Act in 1996.What was the purpose of this Act?

Consumer surplus in a market for a product would be equal to ________ if the market price was zero.

What is the difference between a price ceiling and a price floor? Compared to the competitive equilibrium price,where must price ceilings and price floors be set to have an effect on the market.

Figure 4-3 Figure 4-3 shows Kendra's demand curve for ice-cream cones. -Refer to Figure 4-3.What is the total amount that Kendra is willing to pay for 3 ice cream cones?

Table 4-9 Price per Bushel (dollars) Quantity Demanded (bushels) Quantity Supplied (bushels) \ 2 40,000 0 4 34,000 4,000 6 28,000 8,000 8 24,000 16,000 10 20,000 20,000 12 18,000 28,000 14 12,000 36,000 16 6,000 40,000 Table 4-9 above contains information about the corn market.Answer the following questions based on this table. -Refer to Table 4-9.An agricultural price floor is a price that the government guarantees farmers will receive for a particular crop.Suppose the federal government sets a price floor for corn at $12 per bushel. a.What is the amount of shortage or surplus in the corn market as result of the price floor? b.If the government agrees to purchase any surplus output at $12,how much will it cost the government? c.If the government buys all of the farmers' output at the floor price,how many bushels of corn will it have to purchase and how much will it cost the government? d.Suppose the government buys up all of the farmers' output at the floor price and then sells the output to consumers at whatever price it can get.Under this scheme,what is the price at which the government will be able to sell off all of the output it had purchased from farmers? What is the revenue received from the government's sale? e.In this problem we have considered two government schemes: (1)a price floor is established and the government purchases any excess output and (2)the government buys all the farmers' output at the floor price and resells at whatever price it can get.Which scheme will taxpayers prefer? f.Consider again the two schemes.Which scheme will the farmers prefer? g.Consider again the two schemes.Which scheme will corn buyers prefer?

A negative externality is an example of market failure.The root of the problem lies in the definition and enforcement of property rights.Explain.

Economic surplus

The social cost of cutting trees for firewood in a government forest is

Article Summary In an attempt to discourage smoking, New York City Mayor Michael Bloomberg proposed a bill which would set a $10.50 minimum price for a pack of cigarettes.The bill would also prohibit retailers from offering any discounts such as 2-for-1 offers or accepting discount coupons.New York City already has the highest cigarette tax in the country, at $5.85 per pack, and the state of New York is one of many which already require cigarettes be marked up by a specified percentage.This bill is a companion to one which would require stores to keep tobacco products hidden from sight.Although the bills are expected to be challenged in court, a precedent has been set in Rhode Island, where a court upheld a ruling allowing the city of Providence to forbid retailers from accepting coupons and offering discounts on cigarettes. Source: Vivian Yee, "Bloomberg Seeks End to Cheap Cigarettes," New York Times, March 26, 2013. -Refer to the Article Summary.The minimum price of $10.50 per pack of cigarettes being proposed by mayor Bloomberg would have which of the following effects on the market for cigarettes?

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called

One problem with using a command and control approach to pollution reduction is that the monitoring costs may be too high.

What is a "social cost" of production?

Economic surplus is maximized in a competitive market when

What is producer surplus? What does producer surplus measure?

Figure 4-5 -Refer to Figure 4-5.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3,what changes in the market would result in an economically efficient output?

Which of the following criteria should be used to evaluate if government intervention in a market for the purpose of environmental protection is justified?