Question 1

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 2

In cities with rent controls,the actual rents paid can be higher than the legal maximum.One explanation for this is

Accepted Answer

A)  rent control laws are so complicated that landlords and tenants may not be aware of what the legal price is. 
B)  landlords are allowed to charge more than the legal maximum on some apartments so long as they charge less on others. 
C)  because there is a shortage of apartments, tenants often are willing to pay rents higher than the law allows. 
D)  the legal penalty landlords face for charging more than the legal maximum rent is less than the revenue earned by charging their tenants more than the maximum rent. 
A)  rent control laws are so complicated that landlords and tenants may not be aware of what the legal price is. 
B)  landlords are allowed to charge more than the legal maximum on some apartments so long as they charge less on others. 
C)  because there is a shortage of apartments, tenants often are willing to pay rents higher than the law allows. 
D)  the legal penalty landlords face for charging more than the legal maximum rent is less than the revenue earned by charging their tenants more than the maximum rent.

Question 3

Economists are reluctant to state that price controls are desirable or undesirable because

Accepted Answer

A)  it is impossible to evaluate the impact on quantity demanded and quantity supplied as a result of price controls. 
B)  whether the gains from the winners exceed the losses from the losers is not strictly an economic question. 
C)  sometimes price controls result in increases in economic efficiency and sometimes they result in decreases in economic efficiency. 
D)  economists are reluctant to conduct positive analysis of price controls. 
A)  it is impossible to evaluate the impact on quantity demanded and quantity supplied as a result of price controls. 
B)  whether the gains from the winners exceed the losses from the losers is not strictly an economic question. 
C)  sometimes price controls result in increases in economic efficiency and sometimes they result in decreases in economic efficiency. 
D)  economists are reluctant to conduct positive analysis of price controls.

Question 4

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

Question 5

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.At a price of $18,consumers are willing to buy 40 kilograms 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 40th 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 40th 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 6

Suppose the demand curve for a product is horizontal and the supply curve is upward sloping.If a unit tax is imposed in the market for this product,

Accepted Answer

A)  sellers bear the entire burden of the tax. 
B)  the tax burden will be shared among the government, buyers and sellers. 
C)  buyers bear the entire burden of the tax. 
D)  the tax burden will be shared by buyers and sellers. 
A)  sellers bear the entire burden of the tax. 
B)  the tax burden will be shared among the government, buyers and sellers. 
C)  buyers bear the entire burden of the tax. 
D)  the tax burden will be shared by buyers and sellers.

Question 7

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 8

Table 5-5
   Table 5-5 above contains information about the corn market. Answer the following questions based on this table.
-Refer to Table 5-5.An agricultural price floor is a price that the government guarantees farmers will receive for a particular crop.Suppose the federal government sets a price floor for corn at $12 per bushel.
a.What is the amount of shortage or surplus in the corn market as result of the price floor?
b.If the government agrees to purchase any surplus output at $12,how much will it cost the government?
c.If the government buys all of the farmers' output at the floor price,how many bushels of corn will it have to purchase and how much will it cost the government?
d.Suppose the government buys up all of the farmers' output at the floor price and then sells the output to consumers at whatever price it can get.Under this scheme,what is the price at which the government will be able to sell off all of the output it had purchased from farmers? What is the revenue received from the government's sale?
e.In this problem we have considered two government schemes: (1)a price floor is established and the government purchases any excess output and (2)the government buys all the farmers' output at the floor price and resells at whatever price it can get.Which scheme will taxpayers prefer?
f.Consider again the two schemes.Which scheme will the farmers prefer?
g.Consider again the two schemes.Which scheme will corn buyers prefer?

Accepted Answer

a.10 000 surplus.
b.$12 × 10 000 = $120

Question 9

Table 5-4
   Table 5-4 shows the demand and supply schedules for the labour market in the city of Pixley.
-Refer to Table 5-4.Suppose that the quantity of labour demanded increases by 40 000 at each wage level.What are the new free market equilibrium hourly wage and the new equilibrium quantity of labour?

Accepted Answer

A)  W = $8.50; Q = 550 000 
B)  W = $12.50; Q = 630 000 
C)  W = $9.50; Q = 570 000 
D)  W = $11.50; Q = 610 000 
A)  W = $8.50; Q = 550 000 
B)  W = $12.50; Q = 630 000 
C)  W = $9.50; Q = 570 000 
D)  W = $11.50; Q = 610 000

Question 10

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 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 11

Economic efficiency in a competitive market is achieved when

Accepted Answer

A)  economic surplus is equal to consumer surplus. 
B)  consumers and producers are satisfied. 
C)  the marginal benefit equals the marginal cost from the last unit sold. 
D)  producer surplus equals the total amount firms receive from consumers minus the cost of production. 
A)  economic surplus is equal to consumer surplus. 
B)  consumers and producers are satisfied. 
C)  the marginal benefit equals the marginal cost from the last unit sold. 
D)  producer surplus equals the total amount firms receive from consumers minus the cost of production.

Question 12

Table 5-4
   Table 5-4 shows the demand and supply schedules for the labour market in the city of Pixley.
-Refer to Table 5-4.Suppose that the quantity of labour demanded decreases by 80 000 at each wage level.What are the new free market equilibrium hourly wage and the new equilibrium quantity of labour?

Accepted Answer

A)  W = $8.50; Q = 550 000 
B)  W = $12.50; Q = 630 000 
C)  W = $9.50; Q = 570 000 
D)  W = $9.50; Q = 590 000 
A)  W = $8.50; Q = 550 000 
B)  W = $12.50; Q = 630 000 
C)  W = $9.50; Q = 570 000 
D)  W = $9.50; Q = 590 000

Question 13

Table 5-3
  
-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 market price of cowboy hats is $35,The Waco Kid will produce

Accepted Answer

A)  1 hat. 
B)  2 hats. 
C)  3 hats. 
D)  4 hats. 
A)  1 hat. 
B)  2 hats. 
C)  3 hats. 
D)  4 hats.

Question 14

Table 5-4
   Table 5-4 shows the demand and supply schedules for the labour market in the city of Pixley.
-Refer to Table 5-4.Suppose that the quantity of labour supplied increases by 40 000 at each wage level.What are the new free market equilibrium hourly wage and the new equilibrium quantity of labour?

Accepted Answer

A)  W = $8.50; Q = 550 000 
B)  W = $12.50; Q = 630 000 
C)  W = $9.50; Q = 610 000 
D)  W = $11.50; Q = 610 000 
A)  W = $8.50; Q = 550 000 
B)  W = $12.50; Q = 630 000 
C)  W = $9.50; Q = 610 000 
D)  W = $11.50; Q = 610 000

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Table 5-3
  
-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 market price of The Waco Kid's cowboy hats is $40,

Accepted Answer

A)  The Waco Kid will produce four hats. 
B)  producer surplus from the first hat is $40. 
C)  producer surplus will equal $28. 
D)  there will be a surplus; as a result, the price will fall to $24. 
A)  The Waco Kid will produce four hats. 
B)  producer surplus from the first hat is $40. 
C)  producer surplus will equal $28. 
D)  there will be a surplus; as a result, the price will fall to $24.

Question 17

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 18

The total amount of producer surplus in a market is equal to

Accepted Answer

A)  the difference between quantity supplied and quantity demanded. 
B)  the area above the market supply curve and below the market price. 
C)  the area above the market supply curve. 
D)  the area between the demand curve and the supply curve below the market price. 
A)  the difference between quantity supplied and quantity demanded. 
B)  the area above the market supply curve and below the market price. 
C)  the area above the market supply curve. 
D)  the area between the demand curve and the supply curve below the market price.

Question 19

Table 5-3
  
-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 20

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.

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,

In cities with rent controls,the actual rents paid can be higher than the legal maximum.One explanation for this is

Economists are reluctant to state that price controls are desirable or undesirable because

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

Suppose the demand curve for a product is horizontal and the supply curve is upward sloping.If a unit tax is imposed in the market for this product,

To affect the market outcome,a price ceiling

Economic efficiency in a competitive market is achieved when

Table 5-3 -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 market price of cowboy hats is $35,The Waco Kid will produce

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

Table 5-3 -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 market price of The Waco Kid's cowboy hats is $40,

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

The total amount of producer surplus in a market is equal to

Table 5-3 -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,

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

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 5: The Economics of Healthcare

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,

In cities with rent controls,the actual rents paid can be higher than the legal maximum.One explanation for this is

Economists are reluctant to state that price controls are desirable or undesirable because

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

Suppose the demand curve for a product is horizontal and the supply curve is upward sloping.If a unit tax is imposed in the market for this product,

To affect the market outcome,a price ceiling

Economic efficiency in a competitive market is achieved when

Table 5-3 -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 market price of cowboy hats is $35,The Waco Kid will produce

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

Table 5-3 -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 market price of The Waco Kid's cowboy hats is $40,

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

The total amount of producer surplus in a market is equal to

Table 5-3 -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,

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

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters