Question 1

If the world supply of diamonds increases,the market price of diamonds decreases,and the consumer surplus derived by diamond consumers increases.

Accepted Answer

A) True 
 B)False  True

Question 2

Exhibit 7-9   Refer to Exhibit 7-9.The amount of tax revenue after the tax is area:

Accepted Answer

A)  a + b + d + f 
B)  b + d 
C)  c + e 
D)  d + e + f 
A)  a + b + d + f 
B)  b + d 
C)  c + e 
D)  d + e + f B

Question 3

If the government provides a subsidy in one industry and raises the tax revenue by taxing another industry,would,other things equal,cause welfare costs in both industries.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following is true?

Accepted Answer

A)  Once the equilibrium price and output is reached, all the mutually beneficial trade opportunities between suppliers and demanders will have taken place, and the sum of consumer and producer surplus is maximized. 
B)  The deadweight loss of a tax is the difference between the lost consumer and producer surplus and the tax revenue generated. 
C)  Those goods that are heavily taxed often have a relatively inelastic demand curve in the short run, so that the burden falls mainly on the buyer, and the deadweight loss to society is smaller than if the demand curve was more elastic. 
D)  All of the above are true. 
A)  Once the equilibrium price and output is reached, all the mutually beneficial trade opportunities between suppliers and demanders will have taken place, and the sum of consumer and producer surplus is maximized. 
B)  The deadweight loss of a tax is the difference between the lost consumer and producer surplus and the tax revenue generated. 
C)  Those goods that are heavily taxed often have a relatively inelastic demand curve in the short run, so that the burden falls mainly on the buyer, and the deadweight loss to society is smaller than if the demand curve was more elastic. 
D)  All of the above are true.

Question 5

If the government wanted a tax to raise a great deal of revenue but not burden producers much,it would want to tax an industry with

Accepted Answer

A)  elastic supply and demand curves. 
B)  inelastic supply and demand curves. 
C)  inelastic supply and elastic demand. 
D)  elastic supply and inelastic demand. 
A)  elastic supply and demand curves. 
B)  inelastic supply and demand curves. 
C)  inelastic supply and elastic demand. 
D)  elastic supply and inelastic demand.

Question 6

Exhibit 7-9   Refer to Exhibit 7-9.The amount of producer surplus after the tax is area:

Accepted Answer

A)  f 
B)  a 
C)  b + d 
D)  b + c + d + e 
A)  f 
B)  a 
C)  b + d 
D)  b + c + d + e

Question 7

The difference between the value of a good to consumers and its price is known as:

Accepted Answer

A)  demand. 
B)  marginal utility. 
C)  total utility. 
D)  consumer surplus. 
A)  demand. 
B)  marginal utility. 
C)  total utility. 
D)  consumer surplus.

Question 8

Exhibit 7-11   Refer to Exhibit 7-11.The producer surplus before the price ceiling is area:

Accepted Answer

A)  f 
B)  a + b + d + f 
C)  d 
D)  d + e + f 
A)  f 
B)  a + b + d + f 
C)  d 
D)  d + e + f

Question 9

Other things being equal,the more elastic demand is:

Accepted Answer

A)  the lower the deadweight loss is resulting from the imposition of a particular tax on a product. 
B)  the greater the deadweight loss is resulting from the imposition of a particular tax on a product. 
C)  the greater the fraction is of the burden of the tax borne by consumers. 
D)  the greater the tax revenue collected by the government is. 
A)  the lower the deadweight loss is resulting from the imposition of a particular tax on a product. 
B)  the greater the deadweight loss is resulting from the imposition of a particular tax on a product. 
C)  the greater the fraction is of the burden of the tax borne by consumers. 
D)  the greater the tax revenue collected by the government is.

Question 10

Total welfare gains from trade to the economy can be measured:

Accepted Answer

A)  as the sum of consumer and producer surpluses. 
B)  as the difference between producer surplus and consumer surplus. 
C)  as the sum of consumer and producer surpluses minus taxes 
D)  as the net gain in consumer surplus that results from an action that alters a market equilibrium. 
A)  as the sum of consumer and producer surpluses. 
B)  as the difference between producer surplus and consumer surplus. 
C)  as the sum of consumer and producer surpluses minus taxes 
D)  as the net gain in consumer surplus that results from an action that alters a market equilibrium.

Question 11

Exhibit 7-12   Refer to Exhibit 7-12.Consumer surplus before the price floor is area

Accepted Answer

A)  a 
B)  a + b + c 
C)  e + f 
D)  a + b + e 
A)  a 
B)  a + b + c 
C)  e + f 
D)  a + b + e

Question 12

Exhibit 7-14
   Refer to Exhibit 7-14.Identify the areas of consumer and producer surplus when a price ceiling equal to $10 is imposed.

Accepted Answer

Consumer surplus equ

Question 13

If Stephanie buys a laptop for $700 and the maximum she would have paid was $1,000,which of the following is true?

Accepted Answer

A)  Stephanie received consumer surplus of $1,000. 
B)  Stephanie received producer surplus of $700. 
C)  Stephanie received a consumer surplus of $700. 
D)  Stephanie received a consumer surplus of $300. 
A)  Stephanie received consumer surplus of $1,000. 
B)  Stephanie received producer surplus of $700. 
C)  Stephanie received a consumer surplus of $700. 
D)  Stephanie received a consumer surplus of $300.

Question 14

Exhibit 7-6   Refer to Exhibit 7-6.If the market is in equilibrium and then the government imposes a price floor equal to P1,society suffers a deadweight loss equal to area:

Accepted Answer

A) C + D + F. 
B) A + B + E. 
C) E + F. 
D) E only. 
A) C + D + F. 
B) A + B + E. 
C) E + F. 
D) E only.

Question 15

Exhibit 7-13   Refer to Exhibit 7-13.Under this deficiency payment program,the deadweight loss is:

Accepted Answer

A)  f 
B)  e 
C)  g 
D)  e + g 
A)  f 
B)  e 
C)  g 
D)  e + g

Question 16

The deadweight loss from a tax is the reduction in producer and consumer surplus minus the tax revenue transferred to the government.

Accepted Answer

A) True 
 B)False

Question 17

If the government wanted a tax to reduce the quantity exchanged a large amount but not raise much in tax revenue,it would want to tax an industry with

Accepted Answer

A)  elastic supply and demand curves. 
B)  inelastic supply and demand curves. 
C)  inelastic supply and elastic demand. 
D)  elastic supply and inelastic demand. 
A)  elastic supply and demand curves. 
B)  inelastic supply and demand curves. 
C)  inelastic supply and elastic demand. 
D)  elastic supply and inelastic demand.

Question 18

A deadweight loss occurs as a result of a per-unit tax because:

Accepted Answer

A)  the government spends tax dollars less efficiently than do private citizens. 
B)  there is a decline in output for units for which the marginal benefit exceeds the marginal cost. 
C)  taxes cause an overproduction of output relative to the socially efficient level or production. 
D)  a surplus is created. 
A)  the government spends tax dollars less efficiently than do private citizens. 
B)  there is a decline in output for units for which the marginal benefit exceeds the marginal cost. 
C)  taxes cause an overproduction of output relative to the socially efficient level or production. 
D)  a surplus is created.

Question 19

Exhibit 7-14
   Refer to Exhibit 7-14.Identify the deadweight loss in the above diagram when a price floor equal to $30 is imposed.

Accepted Answer

The deadweight loss

Question 20

The net loss to society from a tax on a product can be measured as:

Accepted Answer

A)  the loss in consumer surplus. 
B)  the loss in producer surplus. 
C)  the loss in both consumer and producer surplus. 
D)  the difference between the loss in consumer and producer surplus and the gain in tax revenue. 
A)  the loss in consumer surplus. 
B)  the loss in producer surplus. 
C)  the loss in both consumer and producer surplus. 
D)  the difference between the loss in consumer and producer surplus and the gain in tax revenue.

Exam 7: Market Efficiency and Welfare

If the world supply of diamonds increases,the market price of diamonds decreases,and the consumer surplus derived by diamond consumers increases.

Exhibit 7-9 Refer to Exhibit 7-9.The amount of tax revenue after the tax is area:

If the government provides a subsidy in one industry and raises the tax revenue by taxing another industry,would,other things equal,cause welfare costs in both industries.

Which of the following is true?

If the government wanted a tax to raise a great deal of revenue but not burden producers much,it would want to tax an industry with

Exhibit 7-9 Refer to Exhibit 7-9.The amount of producer surplus after the tax is area:

The difference between the value of a good to consumers and its price is known as:

Exhibit 7-11 Refer to Exhibit 7-11.The producer surplus before the price ceiling is area:

Other things being equal,the more elastic demand is:

Total welfare gains from trade to the economy can be measured:

Exhibit 7-12 Refer to Exhibit 7-12.Consumer surplus before the price floor is area

Exhibit 7-14 Refer to Exhibit 7-14.Identify the areas of consumer and producer surplus when a price ceiling equal to $10 is imposed.

If Stephanie buys a laptop for $700 and the maximum she would have paid was $1,000,which of the following is true?

Exhibit 7-6 Refer to Exhibit 7-6.If the market is in equilibrium and then the government imposes a price floor equal to P1,society suffers a deadweight loss equal to area:

Exhibit 7-13 Refer to Exhibit 7-13.Under this deficiency payment program,the deadweight loss is:

The deadweight loss from a tax is the reduction in producer and consumer surplus minus the tax revenue transferred to the government.

If the government wanted a tax to reduce the quantity exchanged a large amount but not raise much in tax revenue,it would want to tax an industry with

A deadweight loss occurs as a result of a per-unit tax because:

Exhibit 7-14 Refer to Exhibit 7-14.Identify the deadweight loss in the above diagram when a price floor equal to $30 is imposed.

The net loss to society from a tax on a product can be measured as:

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

Filters

Exhibit 7-6 Refer to Exhibit 7-6.If the market is in equilibrium and then the government imposes a price floor equal to P₁,society suffers a deadweight loss equal to area: