Question 1

Black markets only exist in developing nations.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A)  above; above 
B)  above; below 
C)  below; above 
D)  below; below 
A)  above; above 
B)  above; below 
C)  below; above 
D)  below; below

Question 3

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.

Accepted Answer

A price ceiling is a legally determined

Question 4

Table 4-4
 $\begin{array}{|c|c|}
\hline \text { Consumer } & \text { Willingness to Pay } \
\hline \text { Curly } & \$ 50 \
\hline \text { Moe } & 30 \
\hline \text { Larry } & 15 \
\hline
\end{array}$
-Refer to Table 4-4.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 5

When a competitive equilibrium is achieved in a market

Accepted Answer

A)  all individuals are better off than they would be if a price ceiling or price floor was imposed by government. 
B)  the total net benefit to society is maximized. 
C)  the total benefits to consumers are equal to the total benefits to producers. 
D)  economic surplus equals the deadweight loss. 
A)  all individuals are better off than they would be if a price ceiling or price floor was imposed by government. 
B)  the total net benefit to society is maximized. 
C)  the total benefits to consumers are equal to the total benefits to producers. 
D)  economic surplus equals the deadweight loss.

Question 6

Which of the following conditions holds in an economically efficient competitive market equilibrium?

Accepted Answer

A)  The deadweight loss is positive but at a minimum. 
B)  Producer and consumer surplus are exactly equal in size. 
C)  There are no positive and no negative external effects from consumption and production. 
D)  The marginal benefit of the last unit produced and consumed is maximized. 
A)  The deadweight loss is positive but at a minimum. 
B)  Producer and consumer surplus are exactly equal in size. 
C)  There are no positive and no negative external effects from consumption and production. 
D)  The marginal benefit of the last unit produced and consumed is maximized.

Question 7

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.The market equilibrium quantity of gasoline is ________ million gallons per month.

Accepted Answer

A)  20 
B)  32 
C)  48 
D)  56 
A)  20 
B)  32 
C)  48 
D)  56

Question 8

Figure 4-10
   Figure 4-10 shows the market for apartments in Bay City. Recently, the government imposed a rent ceiling at R₀.
-Refer to Figure 4-10.What area represents the deadweight loss after the imposition of the ceiling?

Accepted Answer

A)  G + H 
B)  J + H 
C)  C + E + J + H 
D)  C + E 
A)  G + H 
B)  J + H 
C)  C + E + J + H 
D)  C + E

Question 9

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

Accepted Answer

A)  producer surplus. 
B)  the substitution effect. 
C)  the income effect. 
D)  consumer surplus. 
A)  producer surplus. 
B)  the substitution effect. 
C)  the income effect. 
D)  consumer surplus.

Question 10

Figure 4-8
   Figure 4-8 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month.
-Refer to Figure 4-8.What is the value of consumer surplus after the imposition of the ceiling?

Accepted Answer

A)  $200,000 
B)  $250,000 
C)  $300,000 
D)  $400,000 
A)  $200,000 
B)  $250,000 
C)  $300,000 
D)  $400,000

Question 11

If the government implements a binding price ceiling on insulin,this will have all of the following effects on the market for insulin except

Accepted Answer

A)  a decrease in economic surplus. 
B)  a decrease in producer surplus. 
C)  an increase in deadweight loss. 
D)  a more efficient equilibrium. 
A)  a decrease in economic surplus. 
B)  a decrease in producer surplus. 
C)  an increase in deadweight loss. 
D)  a more efficient equilibrium.

Question 12

Figure 4-6
   Figure 4-6 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 4-6.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 13

Figure 4-10
   Figure 4-10 shows the market for apartments in Bay City. Recently, the government imposed a rent ceiling at R₀.
-Refer to Figure 4-10.What is the area that represents the portion of producer surplus transferred to consumers as a result of the rent ceiling?

Accepted Answer

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

Question 14

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 15

Governments can increase the consumption of a product that creates positive externalities by

Accepted Answer

A)  subsidizing the production of the product so that the supply is increased and market price is reduced. 
B)  taxing the production and consumption of the product. 
C)  convincing everyone to consume the product. 
D)  assigning property rights to the producers of the product. 
A)  subsidizing the production of the product so that the supply is increased and market price is reduced. 
B)  taxing the production and consumption of the product. 
C)  convincing everyone to consume the product. 
D)  assigning property rights to the producers of the product.

Question 16

Which of the following describes a positive externality?

Accepted Answer

A)  John Henry paints the outside of his house in order to increase its market value just before he puts the house up for sale. 
B)  People who do not attend college still benefit from others who receive a college education. 
C)  The government imposes a tax on cigarettes in order to discourage smoking among teenagers. 
D)  Mary volunteers to drive her neighbor's children to soccer practice. 
A)  John Henry paints the outside of his house in order to increase its market value just before he puts the house up for sale. 
B)  People who do not attend college still benefit from others who receive a college education. 
C)  The government imposes a tax on cigarettes in order to discourage smoking among teenagers. 
D)  Mary volunteers to drive her neighbor's children to soccer practice.

Question 17

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 2 burritos?

Accepted Answer

A)  $2.00 
B)  $4.50 
C)  $7.50 
D)  $10.00 
A)  $2.00 
B)  $4.50 
C)  $7.50 
D)  $10.00

Question 18

What is meant by the term "internalizing an externality"? How does a Pigovian tax or subsidy internalize an externality?

Accepted Answer

Internalizing an externality refers to t

Question 19

What is marginal cost? Which curve is also referred to as the marginal cost curve?

Accepted Answer

Marginal cost is the additiona

Question 20

Issuing tradable emission allowances to polluting firms will result in those firms polluting more than is socially desirable.

Accepted Answer

A) True 
 B)False

Black markets only exist in developing nations.

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

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.

Table 4-4 Consumer Willingness to Pay Curly \ 50 Moe 30 Larry 15 -Refer to Table 4-4.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

When a competitive equilibrium is achieved in a market

Which of the following conditions holds in an economically efficient competitive market equilibrium?

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.The market equilibrium quantity of gasoline is ________ million gallons per month.

Figure 4-10 Figure 4-10 shows the market for apartments in Bay City. Recently, the government imposed a rent ceiling at R₀. -Refer to Figure 4-10.What area represents the deadweight loss after the imposition of the ceiling?

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

Figure 4-8 Figure 4-8 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. -Refer to Figure 4-8.What is the value of consumer surplus after the imposition of the ceiling?

If the government implements a binding price ceiling on insulin,this will have all of the following effects on the market for insulin except

Figure 4-10 Figure 4-10 shows the market for apartments in Bay City. Recently, the government imposed a rent ceiling at R₀. -Refer to Figure 4-10.What is the area that represents the portion of producer surplus transferred to consumers as a result of the rent ceiling?

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

Governments can increase the consumption of a product that creates positive externalities by

Which of the following describes a positive externality?

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 2 burritos?

What is meant by the term "internalizing an externality"? How does a Pigovian tax or subsidy internalize an externality?

What is marginal cost? Which curve is also referred to as the marginal cost curve?

Issuing tradable emission allowances to polluting firms will result in those firms polluting more than is socially desirable.

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

Black markets only exist in developing nations.

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

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.

Table 4-4 Consumer Willingness to Pay Curly \ 50 Moe 30 Larry 15 -Refer to Table 4-4.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

When a competitive equilibrium is achieved in a market

Which of the following conditions holds in an economically efficient competitive market equilibrium?

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.The market equilibrium quantity of gasoline is ________ million gallons per month.

Figure 4-10 Figure 4-10 shows the market for apartments in Bay City. Recently, the government imposed a rent ceiling at R₀. -Refer to Figure 4-10.What area represents the deadweight loss after the imposition of the ceiling?

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

Figure 4-8 Figure 4-8 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. -Refer to Figure 4-8.What is the value of consumer surplus after the imposition of the ceiling?

If the government implements a binding price ceiling on insulin,this will have all of the following effects on the market for insulin except

Figure 4-10 Figure 4-10 shows the market for apartments in Bay City. Recently, the government imposed a rent ceiling at R₀. -Refer to Figure 4-10.What is the area that represents the portion of producer surplus transferred to consumers as a result of the rent ceiling?

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

Governments can increase the consumption of a product that creates positive externalities by

Which of the following describes a positive externality?

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 2 burritos?

What is meant by the term "internalizing an externality"? How does a Pigovian tax or subsidy internalize an externality?

What is marginal cost? Which curve is also referred to as the marginal cost curve?

Issuing tradable emission allowances to polluting firms will result in those firms polluting more than is socially desirable.

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

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