Question 1

Why is the market equilibrium efficient?

Accepted Answer

The market equilibrium is effi

Question 2

Figure 6.1
  
-Refer to Figure 6.1.If the price of a donut is $1.25,consumer surplus is

Accepted Answer

A)  $1.75. 
B)  $1.25. 
C)  $0.75. 
D)  $0.50. 
A)  $1.75. 
B)  $1.25. 
C)  $0.75. 
D)  $0.50.

Question 3

A tax on a good or service ________ the price that buyers pay and ________ the price that sellers receive.

Accepted Answer

A)  raises; lowers 
B)  raises; raises 
C)  lowers; lowers 
D)  lowers; raises 
A)  raises; lowers 
B)  raises; raises 
C)  lowers; lowers 
D)  lowers; raises

Question 4

Explain the difference between forward and backward shifting of a tax.

Accepted Answer

Forward shifting occurs when the price o

Question 5

Comment on the following statement: "Individual consumers and producers acting in their own self-interest will lead a perfectly competitive market to the efficient level of output."

Accepted Answer

The statement is true.When individuals a

Question 6

Rent controls are always efficient in helping the poor but they negatively impact the wealthy.

Accepted Answer

A) True 
 B)False

Question 7

Assume that production costs rise and demand remains constant.The equilibrium price will ________ and the producer surplus will ________.

Accepted Answer

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

Question 8

-Figure 6.8 shows the market for taxicab services in a small town.If the government limits taxicab services to 20 per day,then the deadweight loss is equal to

Accepted Answer

A)  $3.75. 
B)  $7.50. 
C)  $15.00. 
D)  $20.00. 
A)  $3.75. 
B)  $7.50. 
C)  $15.00. 
D)  $20.00.

Question 9

You would be willing to pay a maximum of $1,000 for an airplane ticket to London during the summer,and you can buy an airplane ticket for $890.Your consumer surplus is

Accepted Answer

A)  $90. 
B)  $100. 
C)  $110. 
D)  $190. 
A)  $90. 
B)  $100. 
C)  $110. 
D)  $190.

Question 10

Suppose you receive a consumer surplus of $50.The $50 represents

Accepted Answer

A)  a monetary payment from the store. 
B)  a monetary payment from the government. 
C)  a reduction in the original price of the good. 
D)  the fact that you paid $50 less than you were willing to pay for the good. 
A)  a monetary payment from the store. 
B)  a monetary payment from the government. 
C)  a reduction in the original price of the good. 
D)  the fact that you paid $50 less than you were willing to pay for the good.

Question 11

If the supply of land was perfectly inelastic,a tax on land would be paid

Accepted Answer

A)  partly by sellers and partly by buyers. 
B)  entirely by sellers. 
C)  entirely by buyers. 
D)  It is impossible to determine given this information. 
A)  partly by sellers and partly by buyers. 
B)  entirely by sellers. 
C)  entirely by buyers. 
D)  It is impossible to determine given this information.

Question 12

What is the deadweight loss of a tax?

Accepted Answer

The deadweight loss of a tax i

Question 13

A supply curve reflects buyers' willingness to pay.

Accepted Answer

A) True 
 B)False

Question 14

6.3 Controlling Prices-Maximum and Minimum Prices
   
Figure 6.6
-Refer to Figure 6.6.If the government will not allow landlords to charge more than $400 for an apartment,the deadweight loss will be equal to

Accepted Answer

A)  $2,000. 
B)  $2,500. 
C)  $5,000. 
D)  $7,500. 
A)  $2,000. 
B)  $2,500. 
C)  $5,000. 
D)  $7,500.

Question 15

Suppose a tax is imposed on energy drinks that have a price elasticity of demand equal to 2,and a price elasticity of supply equal to 1.We would expect that

Accepted Answer

A)  the producers of energy drinks containing sugar would pay a larger portion of the tax. 
B)  the consumer would pay a larger portion of the tax. 
C)  the consumer would pay the entire tax. 
D)  the producers of energy drinks containing sugar would pay the entire tax. 
A)  the producers of energy drinks containing sugar would pay a larger portion of the tax. 
B)  the consumer would pay a larger portion of the tax. 
C)  the consumer would pay the entire tax. 
D)  the producers of energy drinks containing sugar would pay the entire tax.

Question 16

Recall the Application about Japanese and American consumers' willingness to pay for Internet service to answer the following question(s). In the United States, the average willingness to pay for Internet service is $85 per month, and the average monthly price of Internet service is $40 per month.
-According to the Application,the average consumer surplus in Japan from Internet service is about ________ percent of the price.

Accepted Answer

A)  11 
B)  40 
C)  85 
D)  162 
A)  11 
B)  40 
C)  85 
D)  162

Question 17

Market equilibrium maximizes the total surplus in a market and therefore it is efficient.

Accepted Answer

A) True 
 B)False

Question 18

If the government imposes a maximum price for milk that is above the equilibrium price,

Accepted Answer

A)  this maximum price for milk will have no economic impact. 
B)  quantity demanded of milk will be less than quantity supplied. 
C)  demand for milk will be greater than supply. 
D)  the available milk supply will have to be rationed. 
A)  this maximum price for milk will have no economic impact. 
B)  quantity demanded of milk will be less than quantity supplied. 
C)  demand for milk will be greater than supply. 
D)  the available milk supply will have to be rationed.

Question 19

Assuming that the demand for a product is stable,an increase in price will lead to an increase in consumer surplus.

Accepted Answer

A) True 
 B)False

Question 20

Jody's bakery makes cakes and would be willing to sell each cake for $12.50.If Jody's bakery sells 10 cakes for $13 each,the total producer surplus for Jody's bakery would be equal to

Accepted Answer

A)  $5.00. 
B)  $12.50. 
C)  $125.00. 
D)  $130.00. 
A)  $5.00. 
B)  $12.50. 
C)  $125.00. 
D)  $130.00.

Why is the market equilibrium efficient?

Figure 6.1 -Refer to Figure 6.1.If the price of a donut is $1.25,consumer surplus is

A tax on a good or service the price that buyers pay and the price that sellers receive.

Explain the difference between forward and backward shifting of a tax.

Comment on the following statement: "Individual consumers and producers acting in their own self-interest will lead a perfectly competitive market to the efficient level of output."

Rent controls are always efficient in helping the poor but they negatively impact the wealthy.

Assume that production costs rise and demand remains constant.The equilibrium price will and the producer surplus will .

-Figure 6.8 shows the market for taxicab services in a small town.If the government limits taxicab services to 20 per day,then the deadweight loss is equal to

You would be willing to pay a maximum of $1,000 for an airplane ticket to London during the summer,and you can buy an airplane ticket for $890.Your consumer surplus is

Suppose you receive a consumer surplus of $50.The $50 represents

If the supply of land was perfectly inelastic,a tax on land would be paid

What is the deadweight loss of a tax?

A supply curve reflects buyers' willingness to pay.

6.3 Controlling Prices-Maximum and Minimum Prices Figure 6.6 -Refer to Figure 6.6.If the government will not allow landlords to charge more than $400 for an apartment,the deadweight loss will be equal to

Suppose a tax is imposed on energy drinks that have a price elasticity of demand equal to 2,and a price elasticity of supply equal to 1.We would expect that

Market equilibrium maximizes the total surplus in a market and therefore it is efficient.

If the government imposes a maximum price for milk that is above the equilibrium price,

Assuming that the demand for a product is stable,an increase in price will lead to an increase in consumer surplus.

Jody's bakery makes cakes and would be willing to sell each cake for $12.50.If Jody's bakery sells 10 cakes for $13 each,the total producer surplus for Jody's bakery would be equal to

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand,supply,and Market Equilibrium

Elasticity: a Measure of Responsiveness

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters

Exam 6: Market Efficiency and Government Intervention

Why is the market equilibrium efficient?

Figure 6.1 -Refer to Figure 6.1.If the price of a donut is $1.25,consumer surplus is

A tax on a good or service ________ the price that buyers pay and ________ the price that sellers receive.

Explain the difference between forward and backward shifting of a tax.

Comment on the following statement: "Individual consumers and producers acting in their own self-interest will lead a perfectly competitive market to the efficient level of output."

Rent controls are always efficient in helping the poor but they negatively impact the wealthy.

Assume that production costs rise and demand remains constant.The equilibrium price will ________ and the producer surplus will ________.

-Figure 6.8 shows the market for taxicab services in a small town.If the government limits taxicab services to 20 per day,then the deadweight loss is equal to

You would be willing to pay a maximum of $1,000 for an airplane ticket to London during the summer,and you can buy an airplane ticket for $890.Your consumer surplus is

Suppose you receive a consumer surplus of $50.The $50 represents

If the supply of land was perfectly inelastic,a tax on land would be paid

What is the deadweight loss of a tax?

A supply curve reflects buyers' willingness to pay.

6.3 Controlling Prices-Maximum and Minimum Prices Figure 6.6 -Refer to Figure 6.6.If the government will not allow landlords to charge more than $400 for an apartment,the deadweight loss will be equal to

Suppose a tax is imposed on energy drinks that have a price elasticity of demand equal to 2,and a price elasticity of supply equal to 1.We would expect that

Market equilibrium maximizes the total surplus in a market and therefore it is efficient.

If the government imposes a maximum price for milk that is above the equilibrium price,

Assuming that the demand for a product is stable,an increase in price will lead to an increase in consumer surplus.

Jody's bakery makes cakes and would be willing to sell each cake for $12.50.If Jody's bakery sells 10 cakes for $13 each,the total producer surplus for Jody's bakery would be equal to

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand,supply,and Market Equilibrium

Elasticity: a Measure of Responsiveness

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Market Entry and Monopolistic Competition

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters

A tax on a good or service the price that buyers pay and the price that sellers receive.

Assume that production costs rise and demand remains constant.The equilibrium price will and the producer surplus will .