Question 1

The marginal private cost of a good or service is the cost borne by the producer.

Accepted Answer

A) True 
 B)False  True

Question 2

Figure 4-17
  
-Refer to Figure 4-17.The size of marginal external benefits can be determined by

Accepted Answer

A)  the demand curve D₂. 
B)  D₂ + D₁ at each output level 
C)  D₂ - D₁ at each output level. 
D)  the demand curve D₁. 
A)  the demand curve D₂. 
B)  D₂ + D₁ at each output level 
C)  D₂ - D₁ at each output level. 
D)  the demand curve D₁. C

Question 3

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 the labor market in the city of Pixley.
-Refer to Table 4-7.If a minimum wage of $11.50 is mandated,there will be a

Accepted Answer

A)  shortage of 20,000 units of labor. 
B)  surplus of 20,000 units of labor. 
C)  shortage of 40,000 units of labor. 
D)  surplus of 40,000 units of labor. 
A)  shortage of 20,000 units of labor. 
B)  surplus of 20,000 units of labor. 
C)  shortage of 40,000 units of labor. 
D)  surplus of 40,000 units of labor. D

Question 4

Deadweight loss refers to

Accepted Answer

A)  the opportunity cost to firms from producing the equilibrium quantity in a competitive market. 
B)  the sum of consumer and producer surplus. 
C)  the loss of economic surplus when the marginal benefit equals the marginal cost of the last unit produced. 
D)  the reduction in economic surplus resulting from not being in competitive equilibrium. 
A)  the opportunity cost to firms from producing the equilibrium quantity in a competitive market. 
B)  the sum of consumer and producer surplus. 
C)  the loss of economic surplus when the marginal benefit equals the marginal cost of the last unit produced. 
D)  the reduction in economic surplus resulting from not being in competitive equilibrium.

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 is the deadweight loss from producing at the market equilibrium?

Accepted Answer

A)  area C 
B)  area E 
C)  area D 
D)  area F 
A)  area C 
B)  area E 
C)  area D 
D)  area F

Question 6

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 the labor market in the city of Pixley.
-Refer to Table 4-7.If a minimum wage of $12.50 an hour is mandated,what is the quantity of labor supplied?

Accepted Answer

A)  80,000 
B)  550,000 
C)  630,000 
D)  1,180,000 
A)  80,000 
B)  550,000 
C)  630,000 
D)  1,180,000

Question 7

________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium.

Accepted Answer

A)  Marginal cost 
B)  Producer atrophy 
C)  Deadweight loss 
D)  Economic shortage 
A)  Marginal cost 
B)  Producer atrophy 
C)  Deadweight loss 
D)  Economic shortage

Question 8

If the government implements a binding 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 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 insulin to increase their profits.

Question 9

Economic efficiency in a competitive market is achieved when

Accepted Answer

A)  economic surplus is equal to consumer surplus. 
B)  consumers and producers are satisfied. 
C)  the marginal benefit equals the marginal cost from the last unit sold. 
D)  producer surplus equals the total amount firms receive from consumers minus the cost of production. 
A)  economic surplus is equal to consumer surplus. 
B)  consumers and producers are satisfied. 
C)  the marginal benefit equals the marginal cost from the last unit sold. 
D)  producer surplus equals the total amount firms receive from consumers minus the cost of production.

Question 10

Figure 4-16
   Figure 4-16 shows a market with a negative externality.
-Refer to Figure 4-16.The deadweight loss due to the externality is represented by the area

Accepted Answer

A)  abc. 
B)  abf. 
C)  abd. 
D)  ade. 
A)  abc. 
B)  abf. 
C)  abd. 
D)  ade.

Question 11

The cities of Francistown and Nalady are five miles apart.Francistown enacts a rent control
law that puts a ceiling on rents well below their equilibrium market value.Predict the short-run impact of this law on the competitive equilibrium rent in Nalady,which does not have a rent control law.
a.Illustrate your answer with one demand and supply graph for the apartment market in Francistown and another demand and supply graph for the apartment market in Nalady.
b.Make sure that your graphs clearly show (1)the initial equilibrium before the rent control in both markets and (2)what happens after the imposition of rent control.
c.Clearly show any shifts in the demand or supply curves,and the movement along the curves for each market.
d.Label your graphs fully and provide written explanation for your graphs.

Accepted Answer

See the figure below.The rent ceiling in

Question 12

The U.S.government has frequently used a "command-and-control" approach in dealing with pollution.Which of the following describes this approach?

Accepted Answer

A)  The government uses taxes in order to internalize the externalities caused by pollution. 
B)  The government uses subsidies to encourage firms to use new technology that reduces pollution. 
C)  The government imposes quantitative limits on the amount of pollution firms are allowed to generate. 
D)  The government distributes information to consumers and producers on how to reduce pollution. 
A)  The government uses taxes in order to internalize the externalities caused by pollution. 
B)  The government uses subsidies to encourage firms to use new technology that reduces pollution. 
C)  The government imposes quantitative limits on the amount of pollution firms are allowed to generate. 
D)  The government distributes information to consumers and producers on how to reduce pollution.

Question 13

What is a black market?

Accepted Answer

A black market is a market in

Question 14

Figure 4-7
  
-Refer to Figure 4-7.The figure above represents the market for iced tea.Assume that this is a competitive market.Which of the following is true?

Accepted Answer

A)  If the price of iced tea is $3, the output will be economically efficient but there will be a deadweight loss. 
B)  If the price of iced tea is $3, consumers will purchase more than the economically efficient output. 
C)  Both 10,000 and 30,000 are economically inefficient rates of output. 
D)  If the price of iced tea is $3, producers will sell 30,000 units of iced tea but this output will be economically inefficient. 
A)  If the price of iced tea is $3, the output will be economically efficient but there will be a deadweight loss. 
B)  If the price of iced tea is $3, consumers will purchase more than the economically efficient output. 
C)  Both 10,000 and 30,000 are economically inefficient rates of output. 
D)  If the price of iced tea is $3, producers will sell 30,000 units of iced tea but this output will be economically inefficient.

Question 15

Figure 4-1
   Figure 4-1 shows Arnold's demand curve for burritos.
-Refer to Figure 4-1.If the market price is $1.50,what is the consumer surplus on the first 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 16

Juanita goes to the Hardware Emporium to buy a new circular saw.She is willing to pay $120 for a new saw,but buys one on sale for $85.Juanita's consumer surplus from the purchase is

Accepted Answer

A)  $35. 
B)  $85. 
C)  $120. 
D)  $205. 
A)  $35. 
B)  $85. 
C)  $120. 
D)  $205.

Question 17

Figure 4-20
   Figure 4-20 shows the market for measles vaccinations, a product whose use generates positive externalities.
-Refer to Figure 4-20.Why is there a deadweight loss?

Accepted Answer

A)  because the marginal private benefit for each additional unit between Q₁ and Q₂ exceeds the marginal cost 
B)  because the marginal private cost for each additional unit between Q₁ and Q₂ exceeds the marginal private benefit 
C)  because the marginal social cost for each additional unit between Q₁ and Q₂ exceeds the marginal social benefit 
D)  because the marginal social benefit for each additional unit between Q₁ and Q₂ exceeds the marginal cost 
A)  because the marginal private benefit for each additional unit between Q₁ and Q₂ exceeds the marginal cost 
B)  because the marginal private cost for each additional unit between Q₁ and Q₂ exceeds the marginal private benefit 
C)  because the marginal social cost for each additional unit between Q₁ and Q₂ exceeds the marginal social benefit 
D)  because the marginal social benefit for each additional unit between Q₁ and Q₂ exceeds the marginal cost

Question 18

Assume that production from an electric utility caused acid rain.If the government imposed a tax on the utility equal to the marginal external cost of the acid rain,the government's action would

Accepted Answer

A)  externalize the externality. 
B)  result in a marginal social benefit greater than the marginal cost of the electricity. 
C)  be an example of supply-side economic policy. 
D)  internalize the externality. 
A)  externalize the externality. 
B)  result in a marginal social benefit greater than the marginal cost of the electricity. 
C)  be an example of supply-side economic policy. 
D)  internalize the externality.

Question 19

Which term refers to a legally established minimum price that firms may charge?

Accepted Answer

A)  a price ceiling 
B)  a subsidy 
C)  a price floor 
D)  a tariff 
A)  a price ceiling 
B)  a subsidy 
C)  a price floor 
D)  a tariff

Question 20

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 $3.00,what is the consumer surplus on the second ice cream cone?

Accepted Answer

A)  $0 
B)  $0.50 
C)  $3.00 
D)  $5.50 
A)  $0 
B)  $0.50 
C)  $3.00 
D)  $5.50

The marginal private cost of a good or service is the cost borne by the producer.

Figure 4-17 -Refer to Figure 4-17.The size of marginal external benefits can be determined by

Deadweight loss refers to

________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium.

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

Economic efficiency in a competitive market is achieved when

Figure 4-16 Figure 4-16 shows a market with a negative externality. -Refer to Figure 4-16.The deadweight loss due to the externality is represented by the area

The U.S.government has frequently used a "command-and-control" approach in dealing with pollution.Which of the following describes this approach?

What is a black market?

Figure 4-7 -Refer to Figure 4-7.The figure above represents the market for iced tea.Assume that this is a competitive market.Which of the following is true?

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.If the market price is $1.50,what is the consumer surplus on the first burrito?

Juanita goes to the Hardware Emporium to buy a new circular saw.She is willing to pay $120 for a new saw,but buys one on sale for $85.Juanita's consumer surplus from the purchase is

Figure 4-20 Figure 4-20 shows the market for measles vaccinations, a product whose use generates positive externalities. -Refer to Figure 4-20.Why is there a deadweight loss?

Assume that production from an electric utility caused acid rain.If the government imposed a tax on the utility equal to the marginal external cost of the acid rain,the government's action would

Which term refers to a legally established minimum price that firms may charge?

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 $3.00,what is the consumer surplus on the second ice cream cone?

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 marginal private cost of a good or service is the cost borne by the producer.

Figure 4-17 -Refer to Figure 4-17.The size of marginal external benefits can be determined by

Deadweight loss refers to

________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium.

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

Economic efficiency in a competitive market is achieved when

Figure 4-16 Figure 4-16 shows a market with a negative externality. -Refer to Figure 4-16.The deadweight loss due to the externality is represented by the area

The U.S.government has frequently used a "command-and-control" approach in dealing with pollution.Which of the following describes this approach?

What is a black market?

Figure 4-7 -Refer to Figure 4-7.The figure above represents the market for iced tea.Assume that this is a competitive market.Which of the following is true?

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.If the market price is $1.50,what is the consumer surplus on the first burrito?

Juanita goes to the Hardware Emporium to buy a new circular saw.She is willing to pay $120 for a new saw,but buys one on sale for $85.Juanita's consumer surplus from the purchase is

Figure 4-20 Figure 4-20 shows the market for measles vaccinations, a product whose use generates positive externalities. -Refer to Figure 4-20.Why is there a deadweight loss?

Assume that production from an electric utility caused acid rain.If the government imposed a tax on the utility equal to the marginal external cost of the acid rain,the government's action would

Which term refers to a legally established minimum price that firms may charge?

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 $3.00,what is the consumer surplus on the second ice cream cone?

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