Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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 producer surplus at the equilibrium price of $15 is ________.

Accepted Answer

A)  $80 
B)  $160 
C)  $240 
D)  $400 
A)  $80 
B)  $160 
C)  $240 
D)  $400

Question 3

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 the consumer surplus on the second burrito?

Accepted Answer

A)  $0.50 
B)  $1.00 
C)  $1.50 
D)  $3.50 
A)  $0.50 
B)  $1.00 
C)  $1.50 
D)  $3.50

Question 4

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 dead-weight loss. 
B)  If the price of pecans is $9, consumers will purchase more than the economically efficient output. 
C)  Both 4 000 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 dead-weight loss. 
B)  If the price of pecans is $9, consumers will purchase more than the economically efficient output. 
C)  Both 4 000 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 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,_________.

Accepted Answer

A)  economic surplus is maximised 
B)  too many consumers want to buy pecans 
C)  the quantity supplied is greater than the economically efficient quantity 
D)  the quantity demanded is economically efficient, but the quantity supplied is economically inefficient 
A)  economic surplus is maximised 
B)  too many consumers want to buy pecans 
C)  the quantity supplied is greater than the economically efficient quantity 
D)  the quantity demanded is economically efficient, but the quantity supplied is economically inefficient

Question 6

Figure 5.2  
-Refer to Figure 5.2.What area represents producer surplus at a price of P2?

Accepted Answer

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

Question 7

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 first burrito?

Accepted Answer

A)  $0.50 
B)  $1.00 
C)  $2.00 
D)  $7.50 
A)  $0.50 
B)  $1.00 
C)  $2.00 
D)  $7.50

Question 8

Figure 5.1   Figure 5.1 shows Arnold's demand curve for burritos.
-Refer to Figure 5.1.If the market price is $1.00,Arnold's consumer surplus is _________.

Accepted Answer

A)  $1.00 
B)  $2.00 
C)  $6.00 
D)  $7.00 
A)  $1.00 
B)  $2.00 
C)  $6.00 
D)  $7.00

Question 9

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.The value of the portion of producer surplus transferred to consumers as a result of the rent ceiling is _________.

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 10

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 11

On what curve does each point show the willingness of consumers to purchase a product at different prices?

Accepted Answer

A)  Demand 
B)  Supply 
C)  Production possibilities 
D)  Marginal cost 
A)  Demand 
B)  Supply 
C)  Production possibilities 
D)  Marginal cost

Question 12

One result of a tax is an increase in economic efficiency.

Accepted Answer

A) True 
 B)False

Question 13

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.What is the equilibrium hourly wage (W*)and the equilibrium quantity of labour (Q*)?

Accepted Answer

A)  W* = $10.50; Q* = 590 000 
B)  W* = $11.50; Q* = 570 000 
C)  W* = $9.50; Q* = 570 000 
D)  W* = $10.50; Q* = 1 200 000 
A)  W* = $10.50; Q* = 590 000 
B)  W* = $11.50; Q* = 570 000 
C)  W* = $9.50; Q* = 570 000 
D)  W* = $10.50; Q* = 1 200 000

Question 14

The incidence of a tax depends on whether the government collects the tax from buyers or sellers.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Table 5.3
 $$\begin{array} { | l | c | } 
\hline{ \begin{array} { c } 
\text { The Waco Kid's } \
\text { Cowboy Hats }
\end{array} } & \begin{array} { c } 
\text { Marginal Cost } \
\text { (dollars) }
\end{array} \
\hline \text { 1st hat } & 24 \
\hline \text { 2nd hat } & 30 \
\hline \text { 3rd hat } & 38 \
\hline \text { 4th hat } & 46 \
\hline
\end{array}$$
-Refer to Table 5.3.The table above lists the marginal cost of cowboy hats by The Waco Kid,a firm that specialises in producing fancy dress costumes.If the price of cowboy hats increases from $38 to $46,_________.

Accepted Answer

A)  consumers will buy no cowboy hats 
B)  the marginal cost of producing the third cowboy hat will increase to $46 
C)  producer surplus will rise from $22 to $46 
D)  there will be a surplus of cowboy hats 
A)  consumers will buy no cowboy hats 
B)  the marginal cost of producing the third cowboy hat will increase to $46 
C)  producer surplus will rise from $22 to $46 
D)  there will be a surplus of cowboy hats

Question 17

The actual division of the burden of a tax between buyers and sellers in a market is called _________.

Accepted Answer

A)  tax incidence 
B)  tax liability 
C)  tax bearer 
D)  tax parity 
A)  tax incidence 
B)  tax liability 
C)  tax bearer 
D)  tax parity

Question 18

Figure 5.4  
-Refer to Figure 5.4.The figure above represents the market for pecans.Assume that this is a competitive market.At a price of $3,________.

Accepted Answer

A)  the marginal cost of pecans is greater than the marginal benefit; therefore, output is inefficiently low. 
B)  producers should raise the price to $9 in order to sell the quantity demanded of 12 000. 
C)  the marginal benefit of pecans is greater than the marginal cost; therefore, output is inefficiently high. 
D)  the marginal benefit of pecans is greater than the marginal cost; therefore, output is inefficiently low. 
A)  the marginal cost of pecans is greater than the marginal benefit; therefore, output is inefficiently low. 
B)  producers should raise the price to $9 in order to sell the quantity demanded of 12 000. 
C)  the marginal benefit of pecans is greater than the marginal cost; therefore, output is inefficiently high. 
D)  the marginal benefit of pecans is greater than the marginal cost; therefore, output is inefficiently low.

Question 19

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.The price buyers pay after the tax is __________.

Accepted Answer

A)  $7 
B)  $20 
C)  $22 
D)  $27 
A)  $7 
B)  $20 
C)  $22 
D)  $27

Question 20

If the demand curve for a product is vertical,any tax increase on the product is paid for entirely by the consumer.

Accepted Answer

A) True 
 B)False

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

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 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.Which of the following is true?

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,_________.

Figure 5.2 -Refer to Figure 5.2.What area represents producer surplus at a price of P₂?

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 first burrito?

Figure 5.1 Figure 5.1 shows Arnold's demand curve for burritos. -Refer to Figure 5.1.If the market price is $1.00,Arnold's consumer surplus is _________.

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.The value of the portion of producer surplus transferred to consumers as a result of the rent ceiling is _________.

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 _______.

On what curve does each point show the willingness of consumers to purchase a product at different prices?

One result of a tax is an increase in economic efficiency.

The incidence of a tax depends on whether the government collects the tax from buyers or sellers.

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?

The actual division of the burden of a tax between buyers and sellers in a market is called _________.

Figure 5.4 -Refer to Figure 5.4.The figure above represents the market for pecans.Assume that this is a competitive market.At a price of $3,________.

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.The price buyers pay after the tax is __________.

If the demand curve for a product is vertical,any tax increase on the product is paid for entirely by the consumer.

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

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

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 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.Which of the following is true?

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,_________.

Figure 5.2 -Refer to Figure 5.2.What area represents producer surplus at a price of P2?

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 first burrito?

Figure 5.1 Figure 5.1 shows Arnold's demand curve for burritos. -Refer to Figure 5.1.If the market price is $1.00,Arnold's consumer surplus is _________.

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.The value of the portion of producer surplus transferred to consumers as a result of the rent ceiling is _________.

On what curve does each point show the willingness of consumers to purchase a product at different prices?

One result of a tax is an increase in economic efficiency.

The incidence of a tax depends on whether the government collects the tax from buyers or sellers.

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?

The actual division of the burden of a tax between buyers and sellers in a market is called _________.

Figure 5.4 -Refer to Figure 5.4.The figure above represents the market for pecans.Assume that this is a competitive market.At a price of $3,________.

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.The price buyers pay after the tax is __________.

If the demand curve for a product is vertical,any tax increase on the product is paid for entirely by the consumer.

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

Figure 5.2 -Refer to Figure 5.2.What area represents producer surplus at a price of P₂?