Exam 4: Market Efficiency and Market Failure

Figure 4-9 Figure 4-9 shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf. -Refer to Figure 4-9.What area represents the deadweight loss after the imposition of the price floor?

Suppose there are two cities that have rent controlled apartments.In one city (Albany)all apartments are subject to rent control; in the other city (Halftrack)one-half of the apartments are rent controlled.Which of the following is most likely to be true?

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.What is the total amount that Arnold is willing to pay for 4 burritos?

Table 4-8 Hourly Wage (dollars) Quantity of Labor Supplied Quantity of Labor Demanded \ 8.00 350,000 390,000 8.50 360,000 380,000 9.00 370,000 370,000 9.50 380,000 360,000 10.00 390,000 350,000 10.50 400,000 340,000 Table 4-8 shows the demand and supply schedules for the low-skilled labor market in the city of Westover. -Refer to Table 4-8.What is the equilibrium hourly wage (W*)and the equilibrium quantity of labor (Q*)?

If the market price is at equilibrium,the deadweight loss is zero.

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 the price of iced tea is $1,what changes in the market would result in an economically efficient output?

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 $2.50,what is the consumer surplus on the third ice cream cone?

When the marginal benefit equals the marginal cost of the last unit sold in a competitive market

A ________ curve shows the marginal cost of producing one more unit of a good or service.

Figure 4-7 -Refer to Figure 4-7.The figure above represents the market for iced tea.Assume that this is a competitive market.At an output of 30,000 units

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 $3.50,what is Kendra's consumer surplus?

Which of the following is a result of imposing a rent ceiling?

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?

To affect the market outcome,a price ceiling

The minimum wage is an example of

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

An externality refers to economic events outside a market.

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

Figure 4-25 Figure 4-25 illustrates the market for gasoline before the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 4-25.If the government wanted to bring about the efficient level of gasoline production by imposing a tax,the tax would raise the price paid by consumers by ________ per gallon.

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.If the market price is $2.00,what is the consumer surplus on the second burrito?