Exam 4: Market Efficiency and Market Failure

Figure 4-15 Figure 4-15 shows a market with an externality. The current market equilibrium output of Q₁ is not the economically efficient output. The economically efficient output is Q₂. -Refer to Figure 4-15.Suppose the current market equilibrium output of Q₁ is not the economically efficient output because of an externality.The economically efficient output is Q₂.In that case,the diagram shows

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 maximum number of ice cream cones that Kendra will buy?

Table 4-2 Consumer Willingness to Pay Anya \ 24 Basil 20 Celeste 15 Dralon 12 Esther 7 -Refer to Table 4-2.The table above lists the highest prices five consumers are willing to pay for a theater ticket.If the price of one of the tickets is $18

David Card and Alan Krueger conducted a study of fast-food restaurants in New Jersey and Pennsylvania.The study found that

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.If a minimum wage of $10.00 an hour is mandated,what is the quantity of labor demanded?

Figure 4-11 Figure 4-11 shows the demand and supply curves for the coffee market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at $7.00. -Refer to Figure 4-11.What is the value of the portion of consumer surplus that has been transferred to producer surplus as a result of the price floor?

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

Some policymakers have argued that products like cigarettes,alcohol,and sweetened soda generate negative externalities in consumption.If the government decided to impose a tax on soda,the government will cause

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.Suppose that the quantity of labor demanded decreases by 40,000 at each wage level.What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?

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.Suppose that instead of a price ceiling,the government imposed a price floor of R₁.What area represents the deadweight loss after the imposition of the price floor?

Which of the following is an example of a positive externality?

A black market is a market where buying and selling take place

Consumer surplus is the difference between the highest price someone is willing to pay for a product and the price he actually pays for the product.

In a competitive market when there is no deadweight loss

When production generates a negative externality,the true cost of production is the

Figure 4-5 -Refer to Figure 4-5.The figure above represents the market for pecans.Assume that this is a competitive market.If 4,000 pounds of pecans are sold

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 producer surplus after the imposition of the price floor?

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 first burrito?

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.What is the value of the net gain to society as a result of subsidizing chicken pox vaccinations?

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 market equilibrium output level is