Question 1

How do taxes distort the incentives of buyers and sellers in a market?

Accepted Answer

A tax drives a "wedge" between the price

Question 2

​Exhibit 7-10  
-Refer to Exhibit 7-10. The consumer surplus after the subsidy is area

Accepted Answer

A) ​a + b + c 
B) ​a + b + c + g 
C) ​a + b + c + d 
D) ​c + g 
A) ​a + b + c 
B) ​a + b + c + g 
C) ​a + b + c + d 
D) ​c + g

Question 3

Consumer surplus increases whenever the price of a good decreases.

Accepted Answer

A) True 
 B)False

Question 4

As a result of a per-unit tax on output in a market:

Accepted Answer

A) ​the quantity traded increases. 
B) ​the quantity traded does not change. 
C) ​the quantity traded decreases. 
D) ​a surplus is created at the new equilibrium price. 
A) ​the quantity traded increases. 
B) ​the quantity traded does not change. 
C) ​the quantity traded decreases. 
D) ​a surplus is created at the new equilibrium price.

Question 5

​Exhibit 7-8  
-Refer to Exhibit 7-8. When the price rises from P1 to P2, producer surplus:

Accepted Answer

A) ​increases by area A + B 
B) ​increases by area B 
C) ​increases by area A 
D) ​decreases by area A + B + C 
A) ​increases by area A + B 
B) ​increases by area B 
C) ​increases by area A 
D) ​decreases by area A + B + C

Question 6

The area between the market price and the demand curve provides a measure of:

Accepted Answer

A) ​consumer surplus. 
B) ​producer surplus. 
C) ​consumer surplus plus producer surplus. 
D) ​marginal utility. 
A) ​consumer surplus. 
B) ​producer surplus. 
C) ​consumer surplus plus producer surplus. 
D) ​marginal utility.

Question 7

Welfare effects are the gains and losses associated with ____ in markets.​

Accepted Answer

A) ​supply shocks 
B) ​government intervention 
C) ​excess production 
D) ​demand supply gap 
A) ​supply shocks 
B) ​government intervention 
C) ​excess production 
D) ​demand supply gap

Question 8

The difference between the value of a good to sellers and its price is known as:​

Accepted Answer

A) ​consumer surplus. 
B) ​producer surplus. 
C) ​demand. 
D) ​supply. 
A) ​consumer surplus. 
B) ​producer surplus. 
C) ​demand. 
D) ​supply.

Question 9

The area between the market price and the supply curve provides a measure of:​

Accepted Answer

A) ​consumer surplus. 
B) ​producer surplus. 
C) ​consumer surplus plus producer surplus. 
D) ​marginal utility. 
A) ​consumer surplus. 
B) ​producer surplus. 
C) ​consumer surplus plus producer surplus. 
D) ​marginal utility.

Question 10

A tax on a product causes a deadweight loss because:

Accepted Answer

A) ​some consumer surplus is transferred from buyers to producers. 
B) ​some producer surplus is transferred from producers to consumers. 
C) ​some consumer and producer surplus is transferred to the government. 
D) ​it distorts the incentives of producers and consumers so that the efficient level of output is not produced. 
A) ​some consumer surplus is transferred from buyers to producers. 
B) ​some producer surplus is transferred from producers to consumers. 
C) ​some consumer and producer surplus is transferred to the government. 
D) ​it distorts the incentives of producers and consumers so that the efficient level of output is not produced.

Question 11

Which of the following is true about producer surplus?

Accepted Answer

A) ​Producer surplus is how much more it costs sellers than they are paid. 
B) ​Producer surplus is shown graphically as the area under the demand curve but above the supply curve. 
C) ​An increase in the market price due to an increase in demand will increase producer surplus. 
D) ​All of the above are true about producer surplus. 
A) ​Producer surplus is how much more it costs sellers than they are paid. 
B) ​Producer surplus is shown graphically as the area under the demand curve but above the supply curve. 
C) ​An increase in the market price due to an increase in demand will increase producer surplus. 
D) ​All of the above are true about producer surplus.

Question 12

As the market price of a good falls, consumer surplus:​

Accepted Answer

A) ​falls. 
B) ​rises. 
C) ​does not change. 
D) ​can either fall, rise, or stay the same. 
A) ​falls. 
B) ​rises. 
C) ​does not change. 
D) ​can either fall, rise, or stay the same.

Question 13

If a tax is increased,

Accepted Answer

A) ​consumers will pay a higher price. 
B) ​consumers will lose consumer surplus. 
C) ​producers will receive a lower price after taxes. 
D) ​all of the above are true. 
A) ​consumers will pay a higher price. 
B) ​consumers will lose consumer surplus. 
C) ​producers will receive a lower price after taxes. 
D) ​all of the above are true.

Question 14

​Exhibit 7-13  
-Refer to Exhibit 7-13. Under this deficiency payment program, the deadweight loss is:

Accepted Answer

A) ​f 
B) ​e 
C) ​g 
D) ​e + g 
A) ​f 
B) ​e 
C) ​g 
D) ​e + g

Question 15

Could a price ceiling decrease consumer surplus?

Accepted Answer

Yes, a price ceiling could decrease cons

Question 16

If Ming is willing to pay $75 to attend the Broadway production of The Lion King but actually pays $40, she receives a consumer surplus of $35.

Accepted Answer

A) True 
 B)False

Question 17

​Exhibit 7-8  
-Refer to Exhibit 7-8. When the price is P1, the producer surplus is equal to area:

Accepted Answer

A) ​A 
B) ​B 
C) ​A + B 
D) ​A + B + C 
A) ​A 
B) ​B 
C) ​A + B 
D) ​A + B + C

Question 18

Consumer surplus measures:

Accepted Answer

A) ​the total benefits received from consuming a given quantity of a good. 
B) ​the marginal benefit received from consuming the last unit of a good. 
C) ​the net benefits received by consumers after deducting the cost of purchasing a good. 
D) ​the dollar amount spent on units of a particular good. 
A) ​the total benefits received from consuming a given quantity of a good. 
B) ​the marginal benefit received from consuming the last unit of a good. 
C) ​the net benefits received by consumers after deducting the cost of purchasing a good. 
D) ​the dollar amount spent on units of a particular good.

Question 19

​Exhibit 7-10  
-Refer to Exhibit 7-10. The cost to government (tax payers) after the subsidy is area​

Accepted Answer

A) ​b + e 
B) ​b + e + f 
C) ​b + e + f + c + g 
D) ​zero 
A) ​b + e 
B) ​b + e + f 
C) ​b + e + f + c + g 
D) ​zero

Question 20

​Exhibit 7-10  
-Refer to Exhibit 7-10. The producer surplus after the subsidy is area​

Accepted Answer

A) ​c + d + b + g 
B) ​a + b + c + d 
C) ​c + g 
D) ​c + d + b + e 
A) ​c + d + b + g 
B) ​a + b + c + d 
C) ​c + g 
D) ​c + d + b + e

Exam 7: Market Efficiency and Welfare

How do taxes distort the incentives of buyers and sellers in a market?

​Exhibit 7-10 -Refer to Exhibit 7-10. The consumer surplus after the subsidy is area

Consumer surplus increases whenever the price of a good decreases.

As a result of a per-unit tax on output in a market:

​Exhibit 7-8 -Refer to Exhibit 7-8. When the price rises from P1 to P2, producer surplus:

The area between the market price and the demand curve provides a measure of:

Welfare effects are the gains and losses associated with ____ in markets.​

The difference between the value of a good to sellers and its price is known as:​

The area between the market price and the supply curve provides a measure of:​

A tax on a product causes a deadweight loss because:

Which of the following is true about producer surplus?

As the market price of a good falls, consumer surplus:​

If a tax is increased,

​Exhibit 7-13 -Refer to Exhibit 7-13. Under this deficiency payment program, the deadweight loss is:

Could a price ceiling decrease consumer surplus?

If Ming is willing to pay $75 to attend the Broadway production of The Lion King but actually pays $40, she receives a consumer surplus of $35.

​Exhibit 7-8 -Refer to Exhibit 7-8. When the price is P1, the producer surplus is equal to area:

Consumer surplus measures:

​Exhibit 7-10 -Refer to Exhibit 7-10. The cost to government (tax payers) after the subsidy is area​

​Exhibit 7-10 -Refer to Exhibit 7-10. The producer surplus after the subsidy is area​

The Role and Method of Economics

Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Market in Motion and Price Controls

Elasticities

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Filters

Exhibit 7-10 -Refer to Exhibit 7-10. The consumer surplus after the subsidy is area

Exhibit 7-8 -Refer to Exhibit 7-8. When the price rises from P₁ to P₂, producer surplus:

Welfare effects are the gains and losses associated with ____ in markets.

The difference between the value of a good to sellers and its price is known as:

The area between the market price and the supply curve provides a measure of:

As the market price of a good falls, consumer surplus:

Exhibit 7-13 -Refer to Exhibit 7-13. Under this deficiency payment program, the deadweight loss is:

Exhibit 7-8 -Refer to Exhibit 7-8. When the price is P₁, the producer surplus is equal to area:

Exhibit 7-10 -Refer to Exhibit 7-10. The cost to government (tax payers) after the subsidy is area

Exhibit 7-10 -Refer to Exhibit 7-10. The producer surplus after the subsidy is area