Question 1

Consumer surplus in a market for a product would be equal to the area under the demand curve if

Accepted Answer

A)  producer surplus was equal to zero. 
B)  marginal cost was equal to the market price. 
C)  the product was produced in a perfectly competitive market. 
D)  the market price was zero. 
A)  producer surplus was equal to zero. 
B)  marginal cost was equal to the market price. 
C)  the product was produced in a perfectly competitive market. 
D)  the market price was zero.

Question 2

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

Question 3

The demand and supply equations for the peach market are:
Demand: P = 24 - 0.5Q
Supply: P = -6 + 2.5Q
where P = price per bushel,and Q = quantity (in thousands).
a.Calculate the equilibrium price and quantity.
b.Suppose the government guaranteed producers a price of $24 per bushel.What would be the effect on quantity supplied? Provide a numerical value.
c.By how much would the $24 price change the quantity of peaches demanded? Provide
a numerical value.
d.Would there be a shortage or surplus of peaches?
e.What is the size of this shortage or surplus? Provide a numerical value.

Accepted Answer

a.Quantity = 10 thousand bushels: {24 -

Question 4

Figure 4-5
   
Figure 4-5 shows the market for apartments in Bay City. Recently, the government imposed a rent ceiling at R₀.
-Refer to Figure 4-5. 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 5

Which of the following statements best describes the concept of consumer surplus?

Accepted Answer

A)  "I paid $89 for a microwave oven last week. This week the same store is selling the same microwave oven for $69." 
B)  "I sold my hard copy of Harry Potter and the Half-Blood Prince to a used book store for $10 even though I was willing to sell it for $5." 
C)  "Target was having a sale on tube socks so I bought 5 pairs." 
D)  "I was going to pay $200 for new sunglasses that I had seen at the Oakley store but I ended up paying only $140 for the same sunglasses." 
A)  "I paid $89 for a microwave oven last week. This week the same store is selling the same microwave oven for $69." 
B)  "I sold my hard copy of Harry Potter and the Half-Blood Prince to a used book store for $10 even though I was willing to sell it for $5." 
C)  "Target was having a sale on tube socks so I bought 5 pairs." 
D)  "I was going to pay $200 for new sunglasses that I had seen at the Oakley store but I ended up paying only $140 for the same sunglasses."

Question 6

If the quantity of tacos demanded is represented by the equation QD = 20 - 0.5P then the corresponding price of tacos is represented by the equation

Accepted Answer

A)  P = 0.5QD + 10. 
B)  P = 40 - 2QD. 
C)  P = 10 - 2QD. 
D)  P = QD + 40. 
A)  P = 0.5QD + 10. 
B)  P = 40 - 2QD. 
C)  P = 10 - 2QD. 
D)  P = QD + 40.

Question 7

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.

Question 8

Figure 4-6
   
Figure 4-6 shows the demand and supply curves for the coffee market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at $7.00.
-Refer to Figure 4-6.What is the value of the portion of consumer surplus that has been transferred to producer surplus as a result of the price floor?

Accepted Answer

A)  $1,200 
B)  $1,500 
C)  $1,800 
D)  $3,000 
A)  $1,200 
B)  $1,500 
C)  $1,800 
D)  $3,000

Question 9

The area above the market supply curve and below the market price

Accepted Answer

A)  is equal to the total amount of producer surplus in a market. 
B)  is equal to the marginal cost of the last unit produced. 
C)  is equal to the total amount of economic surplus in a market. 
D)  is equal to the total cost of production. 
A)  is equal to the total amount of producer surplus in a market. 
B)  is equal to the marginal cost of the last unit produced. 
C)  is equal to the total amount of economic surplus in a market. 
D)  is equal to the total cost of production.

Question 10

Table 4-5
  
-Refer to Table 4-5. The equations above describe the demand and supply for Aunt Maud's Premium Hand Lotion. The equilibrium price and quantity for Aunt Maud's lotion are $20 and 30 thousand units. What is the value of economic surplus in this market?

Accepted Answer

A)  $600 thousand 
B)  $1,050 thousand 
C)  $1,500 thousand 
D)  $2,100 thousand 
A)  $600 thousand 
B)  $1,050 thousand 
C)  $1,500 thousand 
D)  $2,100 thousand

Question 11

Table 4-3
   
Table 4-3 shows the demand and supply schedules for the low-skilled labor market in the city of Westover.
-Refer to Table 4-3.What is the equilibrium hourly wage (W*)and the equilibrium quantity of labor (Q*)?

Accepted Answer

A)  W* = $9.00; Q* = 370,000 
B)  W* = $8.50; Q* = 380,000 
C)  W* = $8.50; Q* = 360,000 
D)  W* = $9.00; Q* = 740,000 
A)  W* = $9.00; Q* = 370,000 
B)  W* = $8.50; Q* = 380,000 
C)  W* = $8.50; Q* = 360,000 
D)  W* = $9.00; Q* = 740,000

Question 12

Figure 4-1
   
Figure 4-1 shows Kendra's demand for ice-cream cones curve.
-Refer to Figure 4-1. If the market price is $2.50,what is Kendra's consumer surplus?

Accepted Answer

A)  $9.00 
B)  $7.50 
C)  $1.50 
D)  $0 
A)  $9.00 
B)  $7.50 
C)  $1.50 
D)  $0

Question 13

Each point on a demand curve shows

Accepted Answer

A)  the willingness of consumers to purchase a product at different prices. 
B)  the consumer surplus received from purchasing a given quantity of a product. 
C)  the economic surplus received from purchasing a given quantity of a product. 
D)  the legally determined maximum price that sellers may charge for a given quantity of a product. 
A)  the willingness of consumers to purchase a product at different prices. 
B)  the consumer surplus received from purchasing a given quantity of a product. 
C)  the economic surplus received from purchasing a given quantity of a product. 
D)  the legally determined maximum price that sellers may charge for a given quantity of a product.

Question 14

Figure 4-3
   
Figure 4-3 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 4-3. At the price P₂ consumers are willing to buy the Q₂ pounds of granola.Is this an economically efficient quantity?

Accepted Answer

A)  No, the marginal benefit of the last unit (Q₂) exceeds the marginal cost of that last unit. 
B)  Yes, otherwise consumers would not buy Q₂ units. 
C)  Yes, because the price P₂ shows what consumers are willing to pay for the product. 
D)  No, the marginal cost of the last unit (Q₂) exceeds the marginal benefit of the last unit. 
A)  No, the marginal benefit of the last unit (Q₂) exceeds the marginal cost of that last unit. 
B)  Yes, otherwise consumers would not buy Q₂ units. 
C)  Yes, because the price P₂ shows what consumers are willing to pay for the product. 
D)  No, the marginal cost of the last unit (Q₂) exceeds the marginal benefit of the last unit.

Question 15

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

Accepted Answer

A)  to encourage more people to become farmers 
B)  to grant free land to farmers in order to produce crops that were particularly scarce 
C)  to phase out the use of price ceilings in agricultural markets 
D)  to phase out price floors and return to a free market in agriculture 
A)  to encourage more people to become farmers 
B)  to grant free land to farmers in order to produce crops that were particularly scarce 
C)  to phase out the use of price ceilings in agricultural markets 
D)  to phase out price floors and return to a free market in agriculture

Question 16

Which of the following is a result of government price controls?

Accepted Answer

A)  Some people win and some people lose. 
B)  Price controls benefit poor consumers but harm producers and wealthy consumers. 
C)  Price controls increase economic efficiency. 
D)  The deadweight loss from price ceilings is greater than the deadweight loss from price floors. 
A)  Some people win and some people lose. 
B)  Price controls benefit poor consumers but harm producers and wealthy consumers. 
C)  Price controls increase economic efficiency. 
D)  The deadweight loss from price ceilings is greater than the deadweight loss from price floors.

Question 17

You are given the following market data for Venus automobiles in Saturnia.
Demand: P = 35,000 - 0.5Q
Supply: P = 8,000 + 0.25Q
where P = Price and Q = Quantity.
a.Calculate the equilibrium price and quantity.
b.Calculate the consumer surplus in this market.
c.Calculate the producer surplus in this market.

Accepted Answer

a.Quantity = 36,000: {35,000 - 0.5Q = 8,

Question 18

Figure 4-3
   
Figure 4-3 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 4-3.What area represents consumer surplus at P₂?

Accepted Answer

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

Question 19

Table 4-1
  
-Refer to Table 4-1. 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 one of the bottles is $24 dollars

Accepted Answer

A)  Curly will buy two bottles, Moe will buy one bottle and Larry will buy no bottles. 
B)  Curly will receive $26 of consumer surplus from buying one bottle. 
C)  Curly and Moe receive a total of $80 of consumer surplus from buying one bottle each. Larry will buy no bottles. 
D)  Larry will receive $15 of consumer surplus since he will buy no bottles. 
A)  Curly will buy two bottles, Moe will buy one bottle and Larry will buy no bottles. 
B)  Curly will receive $26 of consumer surplus from buying one bottle. 
C)  Curly and Moe receive a total of $80 of consumer surplus from buying one bottle each. Larry will buy no bottles. 
D)  Larry will receive $15 of consumer surplus since he will buy no bottles.

Question 20

Buyers will bear the entire burden of a unit tax if the demand curve for a product is

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  downward sloping. 
D)  upward sloping. 
A)  horizontal. 
B)  vertical. 
C)  downward sloping. 
D)  upward sloping.

Consumer surplus in a market for a product would be equal to the area under the demand curve if

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

Figure 4-5 Figure 4-5 shows the market for apartments in Bay City. Recently, the government imposed a rent ceiling at R₀. -Refer to Figure 4-5. What is the area that represents the producer surplus after the imposition of the ceiling?

Which of the following statements best describes the concept of consumer surplus?

If the quantity of tacos demanded is represented by the equation QD = 20 - 0.5P then the corresponding price of tacos is represented by the equation

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

The area above the market supply curve and below the market price

Table 4-5 -Refer to Table 4-5. The equations above describe the demand and supply for Aunt Maud's Premium Hand Lotion. The equilibrium price and quantity for Aunt Maud's lotion are $20 and 30 thousand units. What is the value of economic surplus in this market?

Table 4-3 Table 4-3 shows the demand and supply schedules for the low-skilled labor market in the city of Westover. -Refer to Table 4-3.What is the equilibrium hourly wage (W)and the equilibrium quantity of labor (Q)?

Figure 4-1 Figure 4-1 shows Kendra's demand for ice-cream cones curve. -Refer to Figure 4-1. If the market price is $2.50,what is Kendra's consumer surplus?

Each point on a demand curve shows

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

Which of the following is a result of government price controls?

Figure 4-3 Figure 4-3 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 4-3.What area represents consumer surplus at P₂?

Table 4-1 -Refer to Table 4-1. 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 one of the bottles is $24 dollars

Buyers will bear the entire burden of a unit tax if the demand curve for a product is

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

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Exam 4: Economic Efficiency, government Price Setting, and Taxes

Consumer surplus in a market for a product would be equal to the area under the demand curve if

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

Figure 4-5 Figure 4-5 shows the market for apartments in Bay City. Recently, the government imposed a rent ceiling at R₀. -Refer to Figure 4-5. What is the area that represents the producer surplus after the imposition of the ceiling?

Which of the following statements best describes the concept of consumer surplus?

If the quantity of tacos demanded is represented by the equation QD = 20 - 0.5P then the corresponding price of tacos is represented by the equation

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

The area above the market supply curve and below the market price

Table 4-5 -Refer to Table 4-5. The equations above describe the demand and supply for Aunt Maud's Premium Hand Lotion. The equilibrium price and quantity for Aunt Maud's lotion are $20 and 30 thousand units. What is the value of economic surplus in this market?

Table 4-3 Table 4-3 shows the demand and supply schedules for the low-skilled labor market in the city of Westover. -Refer to Table 4-3.What is the equilibrium hourly wage (W*)and the equilibrium quantity of labor (Q*)?

Figure 4-1 Figure 4-1 shows Kendra's demand for ice-cream cones curve. -Refer to Figure 4-1. If the market price is $2.50,what is Kendra's consumer surplus?

Each point on a demand curve shows

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

Which of the following is a result of government price controls?

Figure 4-3 Figure 4-3 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 4-3.What area represents consumer surplus at P₂?

Table 4-1 -Refer to Table 4-1. 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 one of the bottles is $24 dollars

Buyers will bear the entire burden of a unit tax if the demand curve for a product is

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

Comparative Advantage and the Gains From International Trade

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

Table 4-3 Table 4-3 shows the demand and supply schedules for the low-skilled labor market in the city of Westover. -Refer to Table 4-3.What is the equilibrium hourly wage (W)and the equilibrium quantity of labor (Q)?