Question 1

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 B

Question 2

Suppose that in Canada the government places a $1,500 tax on the buyers of new snowmobiles.After the purchase of a new snowmobile,a buyer must pay the government $1,500.How would the imposition of the tax on buyers be illustrated in a graph?

Accepted Answer

A)  The tax will shift the supply curve to the left by $1,500. 
B)  The tax will shift the demand curve to the right by $1,500. 
C)  The tax will shift both the demand and supply curve to the right by $1,500. 
D)  The tax will shift the demand curve to the left by $1,500. 
A)  The tax will shift the supply curve to the left by $1,500. 
B)  The tax will shift the demand curve to the right by $1,500. 
C)  The tax will shift both the demand and supply curve to the right by $1,500. 
D)  The tax will shift the demand curve to the left by $1,500. D

Question 3

Consumer surplus in a market for a product would be equal to ________ if the market price was zero.

Accepted Answer

A)  zero 
B)  the area between the supply curve and the demand curve 
C)  the area above the supply curve 
D)  the area under the demand curve 
A)  zero 
B)  the area between the supply curve and the demand curve 
C)  the area above the supply curve 
D)  the area under the demand curve D

Question 4

Figure 4-5  
 Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month.
-Refer to Figure 4-5.What is the value of producer surplus after the imposition of the ceiling?

Accepted Answer

A)  $40,000 
B)  $100,000 
C)  $300,000 
D)  $430,000 
A)  $40,000 
B)  $100,000 
C)  $300,000 
D)  $430,000

Question 5

Figure 4-5  
 Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month.
-Refer to Figure 4-5.What is the value of consumer surplus after the imposition of the ceiling?

Accepted Answer

A)  $120,000 
B)  $230,000 
C)  $270,000 
D)  $430,000 
A)  $120,000 
B)  $230,000 
C)  $270,000 
D)  $430,000

Question 6

The graph below represents the market for lychee nuts.The equilibrium price is $7.00 per bushel,but the market price is $5.00 per bushel.Identify the areas representing consumer surplus,producer surplus,and deadweight loss at the equilibrium price of $7.00 and at the market price of $5.00.

Accepted Answer

At the equilibrium price of $7.00:
Consu

Question 7

Figure 4-8  
 Figure 4-8 shows the market for beer. The government plans to impose a unit tax in this market.
-Refer to Figure 4-8.How much of the tax is paid by producers?

Accepted Answer

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

Question 8

Consumers are willing to purchase a product up to the point where

Accepted Answer

A)  the marginal benefit of consuming the product is equal to the marginal cost of consuming it. 
B)  the consumer surplus is equal to the producer surplus. 
C)  the marginal benefit of consuming the product equals the area below the supply curve and above the market price. 
D)  the marginal benefit of consuming a product is equal to its price. 
A)  the marginal benefit of consuming the product is equal to the marginal cost of consuming it. 
B)  the consumer surplus is equal to the producer surplus. 
C)  the marginal benefit of consuming the product equals the area below the supply curve and above the market price. 
D)  the marginal benefit of consuming a product is equal to its price.

Question 9

Figure 4-2  
-Refer to Figure 4-2.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 10

Figure 4-2  
-Refer to Figure 4-2.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 11

Suppose an excise tax of $1 is imposed on every case of beer sold and sellers are responsible for paying this tax.How would the imposition of the tax be illustrated in a graph?

Accepted Answer

A)  The supply curve for cases of beer would shift to the right by $1. 
B)  The supply curve for cases of beer would shift to the left by more than $1. 
C)  The supply curve for cases of beer would shift to the left by less than $1. 
D)  The supply curve for cases of beer would shift to the left by $1. 
A)  The supply curve for cases of beer would shift to the right by $1. 
B)  The supply curve for cases of beer would shift to the left by more than $1. 
C)  The supply curve for cases of beer would shift to the left by less than $1. 
D)  The supply curve for cases of beer would shift to the left by $1.

Question 12

Figure 4-3  
 Figure 4-3 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 4-3.What is the value of the deadweight loss at a price of $18?

Accepted Answer

A)  $100 
B)  $180 
C)  $660 
D)  $1,040 
A)  $100 
B)  $180 
C)  $660 
D)  $1,040

Question 13

Figure 4-4  
-Refer to Figure 4-4.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3

Accepted Answer

A)  economic surplus is maximized. 
B)  not enough consumers want to buy pecans. 
C)  the quantity supplied is less than the economically efficient quantity. 
D)  the quantity supplied is economically efficient but the quantity demanded is economically inefficient. 
A)  economic surplus is maximized. 
B)  not enough consumers want to buy pecans. 
C)  the quantity supplied is less than the economically efficient quantity. 
D)  the quantity supplied is economically efficient but the quantity demanded is economically inefficient.

Question 14

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 15

If there is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and consumer surplus plus producer surplus is maximized,then

Accepted Answer

A)  maximum deadweight loss occurs. 
B)  economic efficiency is achieved. 
C)  profits are maximized. 
D)  costs are minimized. 
A)  maximum deadweight loss occurs. 
B)  economic efficiency is achieved. 
C)  profits are maximized. 
D)  costs are minimized.

Question 16

Economists have shown that the burden of a tax is the same whether the tax is collected from the buyer or the seller.Why,then,are gasoline and cigarette taxes imposed on sellers?

Accepted Answer

A)  Sellers are more honest than buyers. 
B)  The demand for both gasoline and cigarettes is very elastic. 
C)  The Equal Protection Clause of the U.S. Constitution prohibits the government from imposing taxes like these on buyers. 
D)  It is more difficult for buyers to keep track of their purchases, and for the government to verify that the right of amount of tax revenue is collected. 
A)  Sellers are more honest than buyers. 
B)  The demand for both gasoline and cigarettes is very elastic. 
C)  The Equal Protection Clause of the U.S. Constitution prohibits the government from imposing taxes like these on buyers. 
D)  It is more difficult for buyers to keep track of their purchases, and for the government to verify that the right of amount of tax revenue is collected.

Question 17

The minimum wage is an example of a price ceiling.

Accepted Answer

A) True 
 B)False

Question 18

Two economists from Northwestern University estimated the benefit households received from subscribing to broadband Internet service.The economists found that

Accepted Answer

A)  the consumer surplus from dial-up Internet service exceeded the consumer surplus from broadband Internet service. 
B)  the average consumer of broadband Internet service received a marginal benefit equal to $36. 
C)  most consumers of broadband Internet service were not willing to pay more than $36 per month. 
D)  one month's benefit to consumers who subscribe to broadband Internet service is about $890 million. 
A)  the consumer surplus from dial-up Internet service exceeded the consumer surplus from broadband Internet service. 
B)  the average consumer of broadband Internet service received a marginal benefit equal to $36. 
C)  most consumers of broadband Internet service were not willing to pay more than $36 per month. 
D)  one month's benefit to consumers who subscribe to broadband Internet service is about $890 million.

Question 19

If the price of hairspray is represented by equation P = 10 - 0.2 QD,then the corresponding quantity of hairspray demanded is represented by the equation

Accepted Answer

A)  QD = 5P - 2. 
B)  QD = 0.5P + 2. 
C)  QD = 50 -5P. 
D)  QD = -10 + 0.2P. 
A)  QD = 5P - 2. 
B)  QD = 0.5P + 2. 
C)  QD = 50 -5P. 
D)  QD = -10 + 0.2P.

Question 20

Table 4-3
  
 Table 4-3 shows the demand and supply schedules for labor market in the city of Pixley.
-Refer to Table 4-3.What is the equilibrium hourly wage (W*)and the equilibrium quantity of labor (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

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

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

Suppose that in Canada the government places a $1,500 tax on the buyers of new snowmobiles.After the purchase of a new snowmobile,a buyer must pay the government $1,500.How would the imposition of the tax on buyers be illustrated in a graph?

Consumer surplus in a market for a product would be equal to ________ if the market price was zero.

Figure 4-5 Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. -Refer to Figure 4-5.What is the value of producer surplus after the imposition of the ceiling?

Figure 4-5 Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. -Refer to Figure 4-5.What is the value of consumer surplus after the imposition of the ceiling?

The graph below represents the market for lychee nuts.The equilibrium price is $7.00 per bushel,but the market price is $5.00 per bushel.Identify the areas representing consumer surplus,producer surplus,and deadweight loss at the equilibrium price of $7.00 and at the market price of $5.00.

Figure 4-8 Figure 4-8 shows the market for beer. The government plans to impose a unit tax in this market. -Refer to Figure 4-8.How much of the tax is paid by producers?

Consumers are willing to purchase a product up to the point where

Figure 4-2 -Refer to Figure 4-2.What area represents producer surplus at a price of P2?

Figure 4-2 -Refer to Figure 4-2.What area represents the increase in producer surplus when the market price rises from P1 to P2?

Suppose an excise tax of $1 is imposed on every case of beer sold and sellers are responsible for paying this tax.How would the imposition of the tax be illustrated in a graph?

Figure 4-4 -Refer to Figure 4-4.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3

To affect the market outcome,a price ceiling

If there is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and consumer surplus plus producer surplus is maximized,then

Economists have shown that the burden of a tax is the same whether the tax is collected from the buyer or the seller.Why,then,are gasoline and cigarette taxes imposed on sellers?

The minimum wage is an example of a price ceiling.

Two economists from Northwestern University estimated the benefit households received from subscribing to broadband Internet service.The economists found that

If the price of hairspray is represented by equation P = 10 - 0.2 QD,then the corresponding quantity of hairspray demanded is represented by the equation

Table 4-3 Table 4-3 shows the demand and supply schedules for labor market in the city of Pixley. -Refer to Table 4-3.What is the equilibrium hourly wage (W*)and the equilibrium quantity of labor (Q*)?

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

Filters

Figure 4-2 -Refer to Figure 4-2.What area represents producer surplus at a price of P₂?

Figure 4-2 -Refer to Figure 4-2.What area represents the increase in producer surplus when the market price rises from P₁ to P₂?

If the price of hairspray is represented by equation P = 10 - 0.2 Q_D,then the corresponding quantity of hairspray demanded is represented by the equation

Table 4-3 Table 4-3 shows the demand and supply schedules for labor market in the city of Pixley. -Refer to Table 4-3.What is the equilibrium hourly wage (W)and the equilibrium quantity of labor (Q)?