Exam 4: Market Efficiency and Market Failure

Figure 4-2 -Refer to Figure 4-2.What area represents the decrease in producer surplus when the market price falls from P₂ to P₁?

If marginal benefit is less than marginal cost,output is inefficiently high.

Figure 4-5 -Refer to Figure 4-5.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following is true?

How does a positive externality in consumption reduce economic efficiency?

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 $3,what changes in the market would result in an economically efficient output?

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 economically efficient output level?

The difference between the ________ for a good and the ________ is called consumer surplus.

The additional cost to a firm of producing one more unit of a good or service is equal to producer surplus.

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.Suppose that instead of a rent ceiling,the government imposed a price floor of $2,000 per month for apartments.What is the value of the portion of consumer surplus transferred to producers as a result of the price floor?

Pollution is an example of a

Which of the following describes the difference between "scarcity" and "shortage"?

If the market price is at equilibrium,the producer surplus is minimized.

Marginal cost is the additional cost to a firm of producing one more unit of a good or service.

If Uber is required to start paying the value added tax (VAT)in Great Britain,this will have the potential to ________ the equilibrium price in this market and,therefore,________ efficiency.

The sum of consumer surplus and producer surplus is equal to

Each point on a ________ curve shows the willingness of consumers to purchase a product at different prices.

Figure 4-22 Chicken pox vaccinations for toddlers benefit society by protecting young children and by preventing an epidemic of the disease. Thus, the marginal social benefits of chicken pox vaccinations exceed the marginal private benefit for any quantity of vaccinations as illustrated in Figure 4-22. -Refer to Figure 4-22.One way to obtain the economically efficient amount of chicken pox vaccinations is for governments to subsidize these vaccinations.What is the size of the per-vaccination Pigovian subsidy that the government must provide to internalize the external benefits?

Suppose the government mandates the installation of a certain type of pollution abatement equipment for the leather tannery industry.For some firms in the industry,installing this equipment may not be the most cost effective method of reducing pollution.

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 does S₂ represent?

Each point on a demand curve shows