Question 1

Rent control is an example of a price ceiling.

Accepted Answer

A) True 
 B)False

Question 2

The total amount of consumer surplus in a market is equal to the area below the demand curve.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Figure 5.1   Figure 5.1 shows Arnold's demand curve for burritos.
-Refer to Figure 5.1.If the market price is $2.00, what is the consumer surplus on the second burrito?

Accepted Answer

A) $0 
B) $1.00 
C) $2.00 
D) $4.50 
A) $0 
B) $1.00 
C) $2.00 
D) $4.50

Question 5

Figure 5.4  
-Refer to Figure 5.4.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?

Accepted Answer

A) The price would decrease, the quantity supplied would decrease and the quantity demanded would increase. 
B) The quantity supplied would increase, the quantity demanded would decrease and the equilibrium price would decrease. 
C) The price would decrease, the demand would increase and the supply would decrease. 
D) The price would increase, the quantity demanded would decrease and the quantity supplied would increase. 
A) The price would decrease, the quantity supplied would decrease and the quantity demanded would increase. 
B) The quantity supplied would increase, the quantity demanded would decrease and the equilibrium price would decrease. 
C) The price would decrease, the demand would increase and the supply would decrease. 
D) The price would increase, the quantity demanded would decrease and the quantity supplied would increase.

Question 6

The excess burden of a tax is also a deadweight loss.

Accepted Answer

A) True 
 B)False

Question 7

Figure 5.5   Figure 5.5 shows the market for apartments in Springfield.Recently, the government imposed a rent ceiling of $1000 per month.
-Refer to Figure 5.5.Suppose that instead of a rent ceiling, the government imposed a price floor of $2000 per month for apartments.What is the value of the deadweight loss after the imposition of the price floor?

Accepted Answer

A) $50 000 
B) $125 000 
C) $175 000 
D) $260 000 
A) $50 000 
B) $125 000 
C) $175 000 
D) $260 000

Question 8

Suppose an excise tax of $1 is imposed on every case of beer sold, and sellers are responsible for paying this tax.How would the imposition of the tax be illustrated in a graph?

Accepted Answer

A) The supply curve for cases of beer would shift to the right by $1. 
B) The supply curve for cases of beer would shift to the left by more than $1. 
C) The supply curve for cases of beer would shift to the left by less than $1. 
D) The supply curve for cases of beer would shift to the left by $1. 
A) The supply curve for cases of beer would shift to the right by $1. 
B) The supply curve for cases of beer would shift to the left by more than $1. 
C) The supply curve for cases of beer would shift to the left by less than $1. 
D) The supply curve for cases of beer would shift to the left by $1.

Question 9

The following equations represent the demand and supply for silver pendants. QD = 50 - 2P
QS = -10 + 2P
What is the equilibrium price (P)and quantity (Q - in thousands)of pendants?

Accepted Answer

A) P = $15; Q = 20 thousand 
B) P = $50; Q = 10 thousand 
C) P = $20; Q = 15 thousand 
D) P = $10; Q = 30 thousand 
A) P = $15; Q = 20 thousand 
B) P = $50; Q = 10 thousand 
C) P = $20; Q = 15 thousand 
D) P = $10; Q = 30 thousand

Question 10

Figure 5.7   Figure 5.7 shows the market for beer.The government plans to impose a unit tax in this market.
-Refer to Figure 5.7.As a result of the tax, is there a loss in consumer surplus?

Accepted Answer

A) Yes, because consumers are paying a price above the economically efficient price. 
B) No, because the producer pays the tax. 
C) No, because the market reaches a new equilibrium. 
D) No, because consumers are charged a lower price to cover their tax burden. 
A) Yes, because consumers are paying a price above the economically efficient price. 
B) No, because the producer pays the tax. 
C) No, because the market reaches a new equilibrium. 
D) No, because consumers are charged a lower price to cover their tax burden.

Question 11

In the economic sense, almost everything is scarce.________ of a good or service occurs when the quantity demanded is greater than the quantity supplied at the current market price.

Accepted Answer

A) Scarcity 
B) A shortage 
C) A surplus 
D) An overstock 
A) Scarcity 
B) A shortage 
C) A surplus 
D) An overstock

Question 12

Economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production, and in which

Accepted Answer

A) the sum of consumer surplus and producer surplus is at a maximum. 
B) economic surplus is minimised. 
C) the sum of the benefits to firms is equal to the sum of the benefits to consumers. 
D) the sum of consumer surplus and producer surplus is minimised. 
A) the sum of consumer surplus and producer surplus is at a maximum. 
B) economic surplus is minimised. 
C) the sum of the benefits to firms is equal to the sum of the benefits to consumers. 
D) the sum of consumer surplus and producer surplus is minimised.

Question 13

Figure 5.3   Figure 5.3 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 40S1U1B1 S1U1B0in order to raise the price to $18.
-Refer to Figure 5.3.The value of consumer surplus at a price of $18 is

Accepted Answer

A) $60 
B) $120 
C) $180 
D) $240 
A) $60 
B) $120 
C) $180 
D) $240

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Figure 5.1   Figure 5.1 shows Arnold's demand curve for burritos.
-Refer to Figure 5.1.If the market price is $1.50, what is Arnold's consumer surplus?

Accepted Answer

A) $1.50 
B) $2.25 
C) $3.00 
D) $4.75 
A) $1.50 
B) $2.25 
C) $3.00 
D) $4.75

Question 16

Figure 5.4  
-Refer to Figure 5.4.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following is true?

Accepted Answer

A) If the price of pecans is $3, the output will be economically efficient but there will be a deadweight loss. 
B) If the price of pecans is $9, consumers will purchase more than the economically efficient output. 
C) Both 4000 metrics and 12 000 metrics are economically inefficient rates of output. 
D) If the price of pecans is $3, producers will sell 12 000 metrics of pecans, but this output will be economically inefficient. 
A) If the price of pecans is $3, the output will be economically efficient but there will be a deadweight loss. 
B) If the price of pecans is $9, consumers will purchase more than the economically efficient output. 
C) Both 4000 metrics and 12 000 metrics are economically inefficient rates of output. 
D) If the price of pecans is $3, producers will sell 12 000 metrics of pecans, but this output will be economically inefficient.

Question 17

Lucinda buys a new GPS system for $250.She receives consumer surplus of $75 from the purchase.How much does Lucinda value her GPS system?

Accepted Answer

A) $75 
B) $175 
C) $250 
D) $325 
A) $75 
B) $175 
C) $250 
D) $325

Question 18

Figure 5.3   Figure 5.3 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 40S1U1B1 S1U1B0in order to raise the price to $18.
-Refer to Figure 5.3.At a price of $18, consumers are willing to buy 40 metrics of tiger shrimp.Is this an economically efficient quantity?

Accepted Answer

A) No, the marginal benefit of the 40th unit exceeds the marginal cost of that 80th unit. 
B) Yes, otherwise consumers would not buy 40 units. 
C) Yes, because $18 shows what consumers are willing to pay for the product. 
D) No, the marginal cost of the 40th unit exceeds the marginal benefit of the 40th unit. 
A) No, the marginal benefit of the 40th unit exceeds the marginal cost of that 80th unit. 
B) Yes, otherwise consumers would not buy 40 units. 
C) Yes, because $18 shows what consumers are willing to pay for the product. 
D) No, the marginal cost of the 40th unit exceeds the marginal benefit of the 40th unit.

Question 19

The government proposes a tax on imported champagne.Buyers will bear the entire burden of the tax if the

Accepted Answer

A) supply curve for imported champagne is vertical. 
B) demand curve for imported champagne is vertical. 
C) demand curve for imported champagne is horizontal. 
D) demand curve is downward sloping and the supply curve is upward sloping. 
A) supply curve for imported champagne is vertical. 
B) demand curve for imported champagne is vertical. 
C) demand curve for imported champagne is horizontal. 
D) demand curve is downward sloping and the supply curve is upward sloping.

Question 20

What is the reduction in economic surplus resulting from not being in competitive equilibrium?

Accepted Answer

A) Marginal cost 
B) Producer atrophy 
C) Deadweight loss 
D) Economic shortage 
A) Marginal cost 
B) Producer atrophy 
C) Deadweight loss 
D) Economic shortage

Rent control is an example of a price ceiling.

The total amount of consumer surplus in a market is equal to the area below the demand curve.

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

Figure 5.1 Figure 5.1 shows Arnold's demand curve for burritos. -Refer to Figure 5.1.If the market price is $2.00, what is the consumer surplus on the second burrito?

Figure 5.4 -Refer to Figure 5.4.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?

The excess burden of a tax is also a deadweight loss.

Suppose an excise tax of $1 is imposed on every case of beer sold, and sellers are responsible for paying this tax.How would the imposition of the tax be illustrated in a graph?

The following equations represent the demand and supply for silver pendants. Q_D = 50 - 2P Q_S = -10 + 2P What is the equilibrium price (P)and quantity (Q - in thousands)of pendants?

Figure 5.7 Figure 5.7 shows the market for beer.The government plans to impose a unit tax in this market. -Refer to Figure 5.7.As a result of the tax, is there a loss in consumer surplus?

In the economic sense, almost everything is scarce.________ of a good or service occurs when the quantity demanded is greater than the quantity supplied at the current market price.

Economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production, and in which

Figure 5.3 Figure 5.3 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 40in order to raise the price to $18. -Refer to Figure 5.3.The value of consumer surplus at a price of $18 is

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

Figure 5.1 Figure 5.1 shows Arnold's demand curve for burritos. -Refer to Figure 5.1.If the market price is $1.50, what is Arnold's consumer surplus?

Figure 5.4 -Refer to Figure 5.4.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following is true?

Lucinda buys a new GPS system for $250.She receives consumer surplus of $75 from the purchase.How much does Lucinda value her GPS system?

The government proposes a tax on imported champagne.Buyers will bear the entire burden of the tax if the

What is the reduction in economic surplus resulting from not being in competitive equilibrium?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Consumer Choice and Behavioural Economics

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 5: Economic Efficiency, Government Price Setting and Taxes

Rent control is an example of a price ceiling.

The total amount of consumer surplus in a market is equal to the area below the demand curve.

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

Figure 5.1 Figure 5.1 shows Arnold's demand curve for burritos. -Refer to Figure 5.1.If the market price is $2.00, what is the consumer surplus on the second burrito?

Figure 5.4 -Refer to Figure 5.4.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?

The excess burden of a tax is also a deadweight loss.

Suppose an excise tax of $1 is imposed on every case of beer sold, and sellers are responsible for paying this tax.How would the imposition of the tax be illustrated in a graph?

The following equations represent the demand and supply for silver pendants. QD = 50 - 2P QS = -10 + 2P What is the equilibrium price (P)and quantity (Q - in thousands)of pendants?

Figure 5.7 Figure 5.7 shows the market for beer.The government plans to impose a unit tax in this market. -Refer to Figure 5.7.As a result of the tax, is there a loss in consumer surplus?

In the economic sense, almost everything is scarce.________ of a good or service occurs when the quantity demanded is greater than the quantity supplied at the current market price.

Economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production, and in which

Figure 5.3 Figure 5.3 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 5.3.The value of consumer surplus at a price of $18 is

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

Figure 5.1 Figure 5.1 shows Arnold's demand curve for burritos. -Refer to Figure 5.1.If the market price is $1.50, what is Arnold's consumer surplus?

Figure 5.4 -Refer to Figure 5.4.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following is true?

Lucinda buys a new GPS system for $250.She receives consumer surplus of $75 from the purchase.How much does Lucinda value her GPS system?

The government proposes a tax on imported champagne.Buyers will bear the entire burden of the tax if the

What is the reduction in economic surplus resulting from not being in competitive equilibrium?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Consumer Choice and Behavioural Economics

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

The following equations represent the demand and supply for silver pendants. Q_D = 50 - 2P Q_S = -10 + 2P What is the equilibrium price (P)and quantity (Q - in thousands)of pendants?

Figure 5.3 Figure 5.3 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 40in order to raise the price to $18. -Refer to Figure 5.3.The value of consumer surplus at a price of $18 is