Question 1

What is marginal cost? Which curve is also referred to as the marginal cost curve?

Accepted Answer

Marginal cost is the additiona

Question 2

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. At the equilibrium price of $15 consumers are willing to buy 80 pounds of tiger shrimp. Is this an economically efficient quantity?

Accepted Answer

A)  No, the marginal benefit of the 80th unit exceeds the marginal cost of the 80th unit. 
B)  Yes, because marginal cost is zero at the 80th unit. 
C)  Yes, because $15 is the price where the marginal benefit is equal to the marginal cost. 
D)  No, the marginal cost of the 80th unit exceeds the marginal benefit of the 80th unit. 
A)  No, the marginal benefit of the 80th unit exceeds the marginal cost of the 80th unit. 
B)  Yes, because marginal cost is zero at the 80th unit. 
C)  Yes, because $15 is the price where the marginal benefit is equal to the marginal cost. 
D)  No, the marginal cost of the 80th unit exceeds the marginal benefit of the 80th unit.

Question 3

Figure 4-2  
-Juanita goes to the Hardware Emporium to buy a new circular saw. She is willing to pay $120 for a new saw, but buys one on sale for $85. Juanita's consumer surplus from the purchase is

Accepted Answer

A)  $35. 
B)  $85. 
C)  $120. 
D)  $205. 
A)  $35. 
B)  $85. 
C)  $120. 
D)  $205.

Question 4

Brett buys a new cell phone for $100. He receives consumer surplus of $80 from the purchase. How much does Brett value his cell phone?

Accepted Answer

A)  $180 
B)  $100 
C)  $80 
D)  $20 
A)  $180 
B)  $100 
C)  $80 
D)  $20

Question 5

Table 4-8
   Table 4-8 shows the demand and supply schedules for the low-skilled labor market in the city of Westover.
-Which of the following is a consequence of minimum wage laws?

Accepted Answer

A)  Low skilled workers benefit because minimum wage increases the number of jobs providing low skilled workers with training. 
B)  Employers will be reluctant to offer low-skill workers jobs with training. 
C)  Producers have an incentive to offer workers non-wage benefits such as health care benefits and convenient working hours rather than a higher wage. 
D)  All workers benefit when the minimum wage is increased. 
A)  Low skilled workers benefit because minimum wage increases the number of jobs providing low skilled workers with training. 
B)  Employers will be reluctant to offer low-skill workers jobs with training. 
C)  Producers have an incentive to offer workers non-wage benefits such as health care benefits and convenient working hours rather than a higher wage. 
D)  All workers benefit when the minimum wage is increased.

Question 6

In order to be binding, a price ceiling

Accepted Answer

A)  must lie above the free market equilibrium price. 
B)  must lie below the free market equilibrium price. 
C)  must coincide with the free market equilibrium price. 
D)  must be high enough for firms to earn a profit. 
A)  must lie above the free market equilibrium price. 
B)  must lie below the free market equilibrium price. 
C)  must coincide with the free market equilibrium price. 
D)  must be high enough for firms to earn a profit.

Question 7

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 the deadweight loss at the equilibrium price of $15?

Accepted Answer

A)  $0 
B)  $40 
C)  $60 
D)  $100 
A)  $0 
B)  $40 
C)  $60 
D)  $100

Question 8

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 consumer surplus at a price of $18?

Accepted Answer

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

Question 9

Figure 4-15   Figure 4-15 shows the market for beer. The government plans to impose a unit tax in this market.
-Refer to Figure 4-15. What is the size of the unit tax?

Accepted Answer

A)  $2 
B)  $5 
C)  $7 
D)  $12 
A)  $2 
B)  $5 
C)  $7 
D)  $12

Question 10

What is the difference between a price ceiling and a price floor? Compared to the competitive equilibrium price, where must price ceilings and price floors be set to have an effect on the market?

Accepted Answer

A price ceiling is a legally determined

Question 11

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 12

Shortage means the same thing as scarcity.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)  the deadweight loss is equal to $12,000. 
B)  consumer surplus equals zero. 
C)  the marginal benefit of each of the 4,000 pounds of pecans equals $3. 
D)  marginal benefit is equal to marginal cost. 
A)  the deadweight loss is equal to $12,000. 
B)  consumer surplus equals zero. 
C)  the marginal benefit of each of the 4,000 pounds of pecans equals $3. 
D)  marginal benefit is equal to marginal cost.

Question 14

Figure 4-1   Figure 4-1 shows Arnold's demand curve for burritos.
-Refer to Figure 4-1. If the market price is $3.00, what is the maximum number of burritos that Arnold will buy?

Accepted Answer

A)  0 
B)  2 
C)  3 
D)  4 
A)  0 
B)  2 
C)  3 
D)  4

Question 15

Table 4-13
  
-Refer to Table 4-13. The equations above describe the demand and supply for Aunt Maud's Premium Hand Lotion. The equilibrium price and quantity for Aunt Maud's lotion are $20 and 30 thousand units. What is the value of economic surplus in this market?

Accepted Answer

A)  $600 thousand 
B)  $1,050 thousand 
C)  $1,500 thousand 
D)  $2,100 thousand 
A)  $600 thousand 
B)  $1,050 thousand 
C)  $1,500 thousand 
D)  $2,100 thousand

Question 16

Figure 4-7  
-Refer to Figure 4-7. The figure above represents the market for iced tea. Assume that this is a competitive market. At a price of $3,

Accepted Answer

A)  the marginal cost of iced tea is greater than the marginal benefit; therefore, output is inefficiently low. 
B)  producers should lower the price to $1 in order to sell the quantity demanded of 10,000. 
C)  the marginal benefit of iced tea is greater than the marginal cost; therefore, output is inefficiently low. 
D)  the marginal benefit of iced tea is greater than the marginal cost; therefore, output is inefficiently high. 
A)  the marginal cost of iced tea is greater than the marginal benefit; therefore, output is inefficiently low. 
B)  producers should lower the price to $1 in order to sell the quantity demanded of 10,000. 
C)  the marginal benefit of iced tea is greater than the marginal cost; therefore, output is inefficiently low. 
D)  the marginal benefit of iced tea is greater than the marginal cost; therefore, output is inefficiently high.

Question 17

Assume the market price for tangerines is $18.00 per bushel. At the market price, tangerine growers are willing to supply a quantity of 12,000 bushels per week. The quantity supplied drops to zero when the price falls to $5.00 per bushel. Construct a graph showing this data, calculate the total producer surplus in the market for tangerines, and show the total producer surplus on the graph.

Accepted Answer

@#IMG-DLM& The total producer

Question 18

Figure 4-3   Figure 4-3 shows Kendra's demand curve for ice-cream cones.
-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 19

If the market price is at equilibrium, the producer surplus is minimized.

Accepted Answer

A) True 
 B)False

Question 20

A ________ curve shows the marginal cost of producing one more unit of a good or service.

Accepted Answer

A)  demand 
B)  supply 
C)  production possibilities 
D)  marginal benefit 
A)  demand 
B)  supply 
C)  production possibilities 
D)  marginal benefit

Exam 4: Economic Efficiency, Government Price Setting, and Taxes

What is marginal cost? Which curve is also referred to as the marginal cost curve?

Figure 4-2 -Juanita goes to the Hardware Emporium to buy a new circular saw. She is willing to pay $120 for a new saw, but buys one on sale for $85. Juanita's consumer surplus from the purchase is

Brett buys a new cell phone for $100. He receives consumer surplus of $80 from the purchase. How much does Brett value his cell phone?

Table 4-8 Table 4-8 shows the demand and supply schedules for the low-skilled labor market in the city of Westover. -Which of the following is a consequence of minimum wage laws?

In order to be binding, a price ceiling

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 consumer surplus at a price of $18?

Figure 4-15 Figure 4-15 shows the market for beer. The government plans to impose a unit tax in this market. -Refer to Figure 4-15. What is the size of the unit tax?

What is the difference between a price ceiling and a price floor? Compared to the competitive equilibrium price, where must price ceilings and price floors be set to have an effect on the market?

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?

Shortage means the same thing as scarcity.

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

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1. If the market price is $3.00, what is the maximum number of burritos that Arnold will buy?

Table 4-13 -Refer to Table 4-13. The equations above describe the demand and supply for Aunt Maud's Premium Hand Lotion. The equilibrium price and quantity for Aunt Maud's lotion are $20 and 30 thousand units. What is the value of economic surplus in this market?

Figure 4-7 -Refer to Figure 4-7. The figure above represents the market for iced tea. Assume that this is a competitive market. At a price of $3,

Figure 4-3 Figure 4-3 shows Kendra's demand curve for ice-cream cones. -Marginal cost is the additional cost to a firm of producing one more unit of a good or service.

If the market price is at equilibrium, the producer surplus is minimized.

A ________ curve shows the marginal cost of producing one more unit of a good or service.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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