Question 1

Marginal cost is

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 2

Congress passed the ________ in 1996,the purpose of which was to phase out price floors and return to a free market in agriculture

Accepted Answer

A)  Rice and Beans Act 
B)  Smoot-Hawley Act 
C)  Agribusiness Act 
D)  Freedom to Farm Act 
A)  Rice and Beans Act 
B)  Smoot-Hawley Act 
C)  Agribusiness Act 
D)  Freedom to Farm Act

Question 3

Figure 4-10  
-Refer to Figure 4-10.Suppose the market is initially in equilibrium at price P0 and then the government imposes a tax on every unit sold.Which of the following statements best describes the impact of the tax?

Accepted Answer

A)  The consumer will bear a smaller share of the tax burden if the demand curve is D0. 
B)  The consumer's share of the tax burden is the same whether the demand curve is D0 or D1. 
C)  The consumer will bear a smaller share of the tax burden if the demand curve is D1. 
D)  The consumer will bear the entire burden of the tax if the demand curve is D1 and the producer will bear the entire burden of the tax if the demand curve is D0. 
A)  The consumer will bear a smaller share of the tax burden if the demand curve is D0. 
B)  The consumer's share of the tax burden is the same whether the demand curve is D0 or D1. 
C)  The consumer will bear a smaller share of the tax burden if the demand curve is D1. 
D)  The consumer will bear the entire burden of the tax if the demand curve is D1 and the producer will bear the entire burden of the tax if the demand curve is D0.

Question 4

Figure 4-12  
-Refer to Figure 4-12.The figure above represents demand and supply in the market for gasoline.Use the diagram to answer the following questions.
a.How much is the government tax on each gallon of gasoline?
b.What portion of the unit tax is paid by consumers?
c.What portion of the unit tax is paid by producers?
d.What is the quantity sold after the imposition of the tax?
e.What is the after-tax revenue per gallon received by producers?
f.What is the total tax revenue collected by the government?
g.What is the value of the excess burden of the tax?
h.Is this gasoline tax efficient?

Accepted Answer

a.Tax = $0.60 per gallon
b.Consumer burd

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.With rent control,the quantity supplied is 200 apartments.Suppose apartment owners ignore the law and rent this quantity for the highest rent they can get.What is the highest rent they can get per month?

Accepted Answer

A)  $1,000 
B)  $1,500 
C)  $2,000 
D)  $2,300 
A)  $1,000 
B)  $1,500 
C)  $2,000 
D)  $2,300

Question 6

The government proposes a tax on imported champagne.Buyers will bear the entire burden of the tax if the

Accepted Answer

A)  supply curve for imported champagne is vertical. 
B)  demand curve for imported champagne is vertical. 
C)  demand curve for imported champagne is horizontal. 
D)  demand curve is downward sloping and the supply curve is upward sloping. 
A)  supply curve for imported champagne is vertical. 
B)  demand curve for imported champagne is vertical. 
C)  demand curve for imported champagne is horizontal. 
D)  demand curve is downward sloping and the supply curve is upward sloping.

Question 7

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 8

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.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 9

Table 4-5
  
-Refer to Table 4-5.The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick.The equilibrium price and quantity for Chef Ernie's sushi are $60 and 20 thousand units.What is the value of producer surplus?

Accepted Answer

A)  $100 thousand 
B)  $200 thousand 
C)  $600 thousand 
D)  $800 thousand 
A)  $100 thousand 
B)  $200 thousand 
C)  $600 thousand 
D)  $800 thousand

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 deadweight 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 deadweight 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

Economists refer a to a market where buying and selling take place at prices that violate government price regulations as

Accepted Answer

A)  a black market. 
B)  an outlaw market. 
C)  a noncompetitive market. 
D)  a restricted market. 
A)  a black market. 
B)  an outlaw market. 
C)  a noncompetitive market. 
D)  a restricted market.

Question 12

Which of the following statements is true?

Accepted Answer

A)  Consumer surplus measures the total benefit from participating in a market. 
B)  When a market is in equilibrium consumer surplus equals producer surplus. 
C)  Consumer surplus measures the net benefit from participating in a market. 
D)  Producer surplus measures the total benefit received by producers from participating in a market. 
A)  Consumer surplus measures the total benefit from participating in a market. 
B)  When a market is in equilibrium consumer surplus equals producer surplus. 
C)  Consumer surplus measures the net benefit from participating in a market. 
D)  Producer surplus measures the total benefit received by producers from participating in a market.

Question 13

Shortage means the same thing as scarcity.

Accepted Answer

A) True 
 B)False

Question 14

If the quantity of donuts supplied is represented by the equation QS = -15 + 5P then the corresponding price of donuts is represented by the equation

Accepted Answer

A)  P = 0.2QS + 3. 
B)  P = 5QS + 75. 
C)  P = QS - 7.5. 
D)  P = 15 - 0.5QS. 
A)  P = 0.2QS + 3. 
B)  P = 5QS + 75. 
C)  P = QS - 7.5. 
D)  P = 15 - 0.5QS.

Question 15

If equilibrium is achieved in a competitive market

Accepted Answer

A)  there is no deadweight loss. 
B)  the deadweight loss will be maximized. 
C)  the deadweight loss will equal the sum of consumer surplus and producer surplus. 
D)  the deadweight loss will be the same as the opportunity cost of the last unit of output sold. 
A)  there is no deadweight loss. 
B)  the deadweight loss will be maximized. 
C)  the deadweight loss will equal the sum of consumer surplus and producer surplus. 
D)  the deadweight loss will be the same as the opportunity cost of the last unit of output sold.

Question 16

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 17

Willingness to pay measures

Accepted Answer

A)  the maximum price a buyer is willing to pay for a product minus the amount the buyer actually pays for it. 
B)  the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept for the good. 
C)  the maximum price that a buyer is willing to pay for a good. 
D)  the maximum price a buyer is willing to pay minus the minimum price a seller is willing to accept. 
A)  the maximum price a buyer is willing to pay for a product minus the amount the buyer actually pays for it. 
B)  the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept for the good. 
C)  the maximum price that a buyer is willing to pay for a good. 
D)  the maximum price a buyer is willing to pay minus the minimum price a seller is willing to accept.

Question 18

________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium.

Accepted Answer

A)  Marginal cost 
B)  Producer atrophy 
C)  Deadweight loss 
D)  Economic shortage 
A)  Marginal cost 
B)  Producer atrophy 
C)  Deadweight loss 
D)  Economic shortage

Question 19

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 producer surplus at a price of $18??

Accepted Answer

A)  $240 
B)  $300 
C)  $340 
D)  $720 
A)  $240 
B)  $300 
C)  $340 
D)  $720

Question 20

A tax that imposes a small excess burden relative to the tax revenue that it raises is

Accepted Answer

A)  a payroll tax. 
B)  a sin tax. 
C)  an efficient tax. 
D)  a FICA tax. 
A)  a payroll tax. 
B)  a sin tax. 
C)  an efficient tax. 
D)  a FICA tax.

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

Marginal cost is

Congress passed the ________ in 1996,the purpose of which was to phase out price floors and return to a free market in agriculture

Figure 4-10 -Refer to Figure 4-10.Suppose the market is initially in equilibrium at price P0 and then the government imposes a tax on every unit sold.Which of the following statements best describes the impact of the tax?

The government proposes a tax on imported champagne.Buyers will bear the entire burden of the tax if the

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,

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.What is the size of the unit tax?

Table 4-5 -Refer to Table 4-5.The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick.The equilibrium price and quantity for Chef Ernie's sushi are $60 and 20 thousand units.What is the value of producer surplus?

When the government taxes a good or service,it

Economists refer a to a market where buying and selling take place at prices that violate government price regulations as

Which of the following statements is true?

Shortage means the same thing as scarcity.

If the quantity of donuts supplied is represented by the equation QS = -15 + 5P then the corresponding price of donuts is represented by the equation

If equilibrium is achieved in a competitive market

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

Willingness to pay measures

________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium.

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 producer surplus at a price of $18??

A tax that imposes a small excess burden relative to the tax revenue that it raises is

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 4-10 -Refer to Figure 4-10.Suppose the market is initially in equilibrium at price P₀ and then the government imposes a tax on every unit sold.Which of the following statements best describes the impact of the tax?