Exam 4: Market Efficiency and Market Failure

Figure 4-4 Figure 4-4 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. -Refer to Figure 4-4.What is the value of producer surplus at the equilibrium price of $15?

Table 4-7 Hourly Wage (dollars) Quantity of Labor Supplied Quantity of Labor Demanded \ 7.50 530,000 650,000 8.50 550,000 630,000 9.50 570,000 610,000 10.50 590,000 590,000 11.50 610,000 570,000 12.50 630,000 550,000 Table 4-7 shows the demand and supply schedules for the labor market in the city of Pixley. -Refer to Table 4-7.What is the equilibrium hourly wage (W*)and the equilibrium quantity of labor (Q*)?

Figure 4-3 Figure 4-3 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-3.What is the total amount that Kendra is willing to pay for 2 ice cream cones?

Table 4-7 Hourly Wage (dollars) Quantity of Labor Supplied Quantity of Labor Demanded \ 7.50 530,000 650,000 8.50 550,000 630,000 9.50 570,000 610,000 10.50 590,000 590,000 11.50 610,000 570,000 12.50 630,000 550,000 Table 4-7 shows the demand and supply schedules for the labor market in the city of Pixley. -Refer to Table 4-7.If a minimum wage of $12.50 is mandated,there will be a

Figure 4-5 -Refer to Figure 4-5.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $9,what changes in the market would result in an economically efficient output?

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

Which of the following describes how a negative externality affects a competitive market?

The difference between consumer surplus and producer surplus in a market is equal to the deadweight loss.

What is deadweight loss? When is deadweight loss equal to zero?

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 the deadweight loss after the imposition of the ceiling?

If Uber is required to start paying the value-added tax (VAT)in Great Britain,this will have the potential to raise the equilibrium price in this market and,therefore,decrease efficiency.This would have a tendency to

Anyone can purchase sulfur dioxide emission allowances on the Chicago Mercantile Exchange.Several environmental groups have raised money to buy allowances (which they subsequently destroy).As part of their fund-raising,these groups have urged contributors to buy the allowances as gifts.As one newspaper story put it,"For the environmentalist in your life,here's a gift that is sold by the ton,fits in an envelope and will last forever." Source for quote: Randall Edwards,"Dear Santa: Please Bring Me Sulfur Dioxide for Christmas," Columbus Dispatch,December 19,1999. What would be the impact on the price of the emission allowances in the market if more people buy sulfur emission allowances and destroy them?

Assume the market price for lemon grass is $4.00 per pound,but most buyers are willing to pay more than the market price.At the market price of $4.00,the quantity of lemon grass demanded is 1,500 pounds per month,and quantity demanded does not reach zero until the price reaches $30.00 per pound.Construct a graph showing this data,calculate the total consumer surplus in the market for lemon grass,and show the consumer surplus on the graph.Your demand curve should be a straight line.

Figure 4-16 Figure 4-16 shows a market with a negative externality. -Refer to Figure 4-16.The private profit-maximizing quantity for the firm is

Economic surplus

An advantage of imposing a tax on the producer that generates pollution is that

Producer surplus is the difference between the highest price a firm is willing to accept for a product and the price it actually receives for the product.

When ________ in a market,the total net benefit to society is maximized.

Consider the following methods of pollution reduction: A.the government sets a target for maximum emissions B.the government mandates the installation of specific pollution abatement equipment C.the government imposes a per unit tax on the good that creates pollution D.the government gives firms a tax rebate for every unit of pollution abated Which of the above is an example of a command-and-control approach to reducing pollution?

What is a "social cost" of production?