Question 1

Which of the following is true in a competitive market equilibrium?

Accepted Answer

A)  Total consumer surplus equals total producer surplus. 
B)  Marginal benefit and marginal cost are maximised. 
C)  Consumers and producers benefit equally. 
D)  The marginal benefit equals the marginal cost of the last unit sold. 
A)  Total consumer surplus equals total producer surplus. 
B)  Marginal benefit and marginal cost are maximised. 
C)  Consumers and producers benefit equally. 
D)  The marginal benefit equals the marginal cost of the last unit sold. D

Question 2

Economic efficiency is a market outcome in which the marginal benefit of consumers is equal to the marginal cost of production,and the sum of consumer surplus and producer surplus is maximised.

Accepted Answer

A) True 
 B)False  True

Question 3

The area ________ the market supply curve and ________ the market price is equal to the total amount of producer surplus in a market.

Accepted Answer

A)  above; above 
B)  above; below 
C)  below; above 
D)  below; below 
A)  above; above 
B)  above; below 
C)  below; above 
D)  below; below B

Question 4

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.

Accepted Answer

A) True 
 B)False

Question 5

Figure 5.5   Figure 5.5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1 000 per month.
-Refer to Figure 5.5.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 the portion of consumer surplus transferred to producers as a result of the price floor?

Accepted Answer

A)  $40 000 
B)  $100 000 
C)  $125 000 
D)  $140 000 
A)  $40 000 
B)  $100 000 
C)  $125 000 
D)  $140 000

Question 6

What is marginal cost?

Accepted Answer

A)  The total cost of producing one unit of a good or service. 
B)  The average cost of producing a good or service. 
C)  The difference between the lowest price a firm would have been willing to accept and the price it actually receives. 
D)  The additional cost to a firm of producing one more unit of a good or service. 
A)  The total cost of producing one unit of a good or service. 
B)  The average cost of producing a good or service. 
C)  The difference between the lowest price a firm would have been willing to accept and the price it actually receives. 
D)  The additional cost to a firm of producing one more unit of a good or service.

Question 7

Table 5.1
 $$\begin{array} { | l | c | } 
\hline { \text { Consumer } } & \text { Willingness to Pay (dollars) } \
\hline \text { Tom } & 40 \
\hline \text { Dick } & 30 \
\hline \text { Harriet } & 25 \
\hline
\end{array}$$
-Refer to Table 5.1.The table above lists the highest prices three consumers,Tom,Dick,and Harriet,are willing to pay for a short-sleeved polo shirt.If the price of the shirts falls from $28 to $20,__________.

Accepted Answer

A)  consumer surplus increases from $14 to $35 
B)  Tom will buy two shirts; Dick and Harriet will each buy one shirt 
C)  consumer surplus will increase from $70 to $95 
D)  Harriet will receive more consumer surplus than Tom or Dick 
A)  consumer surplus increases from $14 to $35 
B)  Tom will buy two shirts; Dick and Harriet will each buy one shirt 
C)  consumer surplus will increase from $70 to $95 
D)  Harriet will receive more consumer surplus than Tom or Dick

Question 8

Figure 5.5   Figure 5.5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1 000 per month.
-Refer to Figure 5.5.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?

Accepted Answer

A)  $40 000 
B)  $240 000 
C)  $270 000 
D)  $290 000 
A)  $40 000 
B)  $240 000 
C)  $270 000 
D)  $290 000

Question 9

Figure 5.1   Figure 5.1 shows Arnold's demand curve for burritos.
-Refer to Figure 5.1.What is Arnold's marginal benefit from consuming the third burrito?

Accepted Answer

A)  $1.25 
B)  $1.50 
C)  $2.50 
D)  $6.00 
A)  $1.25 
B)  $1.50 
C)  $2.50 
D)  $6.00

Question 10

When the government taxes a good or service,it _________.

Accepted Answer

A)  affects the market equilibrium for that good or service 
B)  eliminates the dead-weight loss associated with the good or service 
C)  increases consumer surplus for the good or service 
D)  increases producer surplus for the good or service 
A)  affects the market equilibrium for that good or service 
B)  eliminates the dead-weight loss associated with the good or service 
C)  increases consumer surplus for the good or service 
D)  increases producer surplus for the good or service

Question 11

Table 5.2
 $$\begin{array} { | l | c | } 
\hline { \text { Consumer } } & \text { Willingness to Pay } \
\hline \text { Anya } & \$ 24 \
\hline \text { Easil } & \$ 20 \
\hline \text { Celeste } & \$ 15 \
\hline \text { Dralon } & \$ 12 \
\hline \text { Esther } & \$ 7 \
\hline
\end{array}$$
-Refer to Table 5.2.The table above lists the highest prices five consumers are willing to pay for a theatre ticket.If the price of one of the tickets is $18,________.

Accepted Answer

A)  Anya and Basil will each buy two tickets 
B)  Basil will receive $2 of consumer surplus from buying one ticket 
C)  Anya and Basil receive a total of $26 of consumer surplus from buying one ticket each. No one else will buy a ticket. 
D)  Celeste, Dralon, and Esther will receive a total of $34 of consumer surplus since they will buy no tickets 
A)  Anya and Basil will each buy two tickets 
B)  Basil will receive $2 of consumer surplus from buying one ticket 
C)  Anya and Basil receive a total of $26 of consumer surplus from buying one ticket each. No one else will buy a ticket. 
D)  Celeste, Dralon, and Esther will receive a total of $34 of consumer surplus since they will buy no tickets

Question 12

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 13

Figure 5.5   Figure 5.5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1 000 per month.
-Refer to Figure 5.5.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 the dead-weight 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 14

Refer to Figure 5.2.What area represents the increase in producer surplus when the market price rises from P1 to P2?

Accepted Answer

A)  B + D 
B)  A + C + E 
C)  C + E 
D)  A + B 
A)  B + D 
B)  A + C + E 
C)  C + E 
D)  A + B

Question 15

Which term refers to a legally established minimum price that firms may charge?

Accepted Answer

A)  A price ceiling 
B)  A subsidy 
C)  A price floor 
D)  A tariff 
A)  A price ceiling 
B)  A subsidy 
C)  A price floor 
D)  A tariff

Question 16

To affect the market outcome,a price ceiling ________.

Accepted Answer

A)  must be set below the black market price 
B)  must be set below the legal price 
C)  must be set below the price floor 
D)  must be set below the equilibrium price 
A)  must be set below the black market price 
B)  must be set below the legal price 
C)  must be set below the price floor 
D)  must be set below the equilibrium price

Question 17

Figure 5.1   Figure 5.1 shows Arnold's demand curve for burritos.
-Refer to Figure 5.1.What is the total amount that Arnold is willing to pay for 3 burritos?

Accepted Answer

A)  $1.50 
B)  $6.00 
C)  $7.00 
D)  $10.00 
A)  $1.50 
B)  $6.00 
C)  $7.00 
D)  $10.00

Question 18

Table 5.4
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Hourly Wage } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Labour } \
\text { Supplied }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Labour } \
\text { Demanded }
\end{array} \
\hline 7.50 & 530000 & 650000 \
\hline 8.50 & 550000 & 630000 \
\hline 9.50 & 570000 & 610000 \
\hline 10.50 & 590000 & 590000 \
\hline 11.50 & 610000 & 570000 \
\hline 12.50 & 630000 & 550000 \
\hline
\end{array}$$ Table 5-4 shows the demand and supply schedules for labour market in the city of Pixley.
-Refer to Table 5.4.If a minimum wage of $11.50 an hour is mandated,the quantity of labour supplied is ________.

Accepted Answer

A)  40 000 
B)  570 000 
C)  610 000 
D)  1 180 000 
A)  40 000 
B)  570 000 
C)  610 000 
D)  1 180 000

Question 19

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 20

Rent control is an example of a price ceiling.

Accepted Answer

A) True 
 B)False

Which of the following is true in a competitive market equilibrium?

Economic efficiency is a market outcome in which the marginal benefit of consumers is equal to the marginal cost of production,and the sum of consumer surplus and producer surplus is maximised.

The area the market supply curve and the market price is equal to the total amount of producer surplus in a market.

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.

What is marginal cost?

Table 5.1 Consumer Willingness to Pay (dollars) Tom 40 Dick 30 Harriet 25 -Refer to Table 5.1.The table above lists the highest prices three consumers,Tom,Dick,and Harriet,are willing to pay for a short-sleeved polo shirt.If the price of the shirts falls from $28 to $20,__________.

Figure 5.1 Figure 5.1 shows Arnold's demand curve for burritos. -Refer to Figure 5.1.What is Arnold's marginal benefit from consuming the third burrito?

When the government taxes a good or service,it _________.

Table 5.2 Consumer Willingness to Pay Anya \ 24 Easil \ 20 Celeste \ 15 Dralon \ 12 Esther \ 7 -Refer to Table 5.2.The table above lists the highest prices five consumers are willing to pay for a theatre ticket.If the price of one of the tickets is $18,________.

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

Refer to Figure 5.2.What area represents the increase in producer surplus when the market price rises from P₁ to P₂?

Which term refers to a legally established minimum price that firms may charge?

To affect the market outcome,a price ceiling ________.

Figure 5.1 Figure 5.1 shows Arnold's demand curve for burritos. -Refer to Figure 5.1.What is the total amount that Arnold is willing to pay for 3 burritos?

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?

Rent control is an example of a price ceiling.

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

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Exam 5: Economic Efficiency,government Price Setting and Taxes

Which of the following is true in a competitive market equilibrium?

Economic efficiency is a market outcome in which the marginal benefit of consumers is equal to the marginal cost of production,and the sum of consumer surplus and producer surplus is maximised.

The area ________ the market supply curve and ________ the market price is equal to the total amount of producer surplus in a market.

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.

What is marginal cost?

Table 5.1 Consumer Willingness to Pay (dollars) Tom 40 Dick 30 Harriet 25 -Refer to Table 5.1.The table above lists the highest prices three consumers,Tom,Dick,and Harriet,are willing to pay for a short-sleeved polo shirt.If the price of the shirts falls from $28 to $20,__________.

Figure 5.1 Figure 5.1 shows Arnold's demand curve for burritos. -Refer to Figure 5.1.What is Arnold's marginal benefit from consuming the third burrito?

When the government taxes a good or service,it _________.

Table 5.2 Consumer Willingness to Pay Anya \ 24 Easil \ 20 Celeste \ 15 Dralon \ 12 Esther \ 7 -Refer to Table 5.2.The table above lists the highest prices five consumers are willing to pay for a theatre ticket.If the price of one of the tickets is $18,________.

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

Refer to Figure 5.2.What area represents the increase in producer surplus when the market price rises from P1 to P2?

Which term refers to a legally established minimum price that firms may charge?

To affect the market outcome,a price ceiling ________.

Figure 5.1 Figure 5.1 shows Arnold's demand curve for burritos. -Refer to Figure 5.1.What is the total amount that Arnold is willing to pay for 3 burritos?

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?

Rent control is an example of a price ceiling.

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

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

The area the market supply curve and the market price is equal to the total amount of producer surplus in a market.

Refer to Figure 5.2.What area represents the increase in producer surplus when the market price rises from P₁ to P₂?