Exam 4: Market Efficiency and Market Failure

The maximum price that a buyer is willing to pay for a good measures his

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

Figure 4-13 -Refer to Figure 4-13 which shows the market for watermelons.Suppose the government imposes a price floor of Pw.How will the price floor affect the quantity supplied,quantity demanded,and quantity exchanged?

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.Arnold's marginal benefit from consuming the fourth burrito is

Figure 4-16 Figure 4-16 shows a market with a negative externality. -Refer to Figure 4-16.The true marginal cost of the last unit produced is represented by the price

Figure 4-21 Companies producing toilet paper bleach the paper to make it white. The bleach is discharged into rivers and lakes and causes substantial environmental damage. Figure 4-21 illustrates the situation in the toilet paper market. -Refer to Figure 4-21.Suppose the government wants to use a Pigovian tax to bring about the efficient level of production.What should the value of the tax be?

In New York City,government limits on the supply of taxis resulted in a price ________ the competitive market level,which would typically ________ economic efficiency.

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 $4.00,what is the maximum number of ice cream cones that Kendra will buy?

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

Economist A.C.Pigou argued that to deal with a negative externality in production,the government should impose a tax equal to the cost of the externality.What did Pigou believe should be done in the case of a positive externality in consumption? How would his recommendation impact the demand and market equilibrium for the product which is generating the positive externality?

If the social cost of producing a good or service exceeds the private cost

Congress passed the ________ in 1996,the purpose of which was to phase out price floors and return to a free market in agriculture.

Some policymakers have argued that products like cigarettes,alcohol,and sweetened soda generate negative externalities in consumption.All else equal,if the government decided to impose a tax on soda,the equilibrium quantity of soda would ________ and the equilibrium price of soda would ________.

Figure 4-21 Companies producing toilet paper bleach the paper to make it white. The bleach is discharged into rivers and lakes and causes substantial environmental damage. Figure 4-21 illustrates the situation in the toilet paper market. -Refer to Figure 4-21.The efficient output is

Which of the following is an example of a Pigovian tax?

Figure 4-17 -Refer to Figure 4-17.At the competitive market equilibrium,

A price ceiling is a legally determined maximum price that sellers may charge.

Which of the following statements best describes the concept of consumer surplus?

In a competitive market,the demand curve shows the ________ received by consumers and the supply curve shows the ________.

A positive externality results when