Question 1

​Exhibit 7-10  
-Refer to Exhibit 7-10. The total welfare after the subsidy is the area

Accepted Answer

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

Question 2

Which of the following is true?​

Accepted Answer

A) ​Once the equilibrium price and output is reached, all the mutually beneficial trade opportunities between suppliers and demanders will have taken place, and the sum of consumer and producer surplus is maximized. 
B) ​The deadweight loss of a tax is the difference between the lost consumer and producer surplus and the tax revenue generated. 
C) ​Those goods that are heavily taxed often have a relatively inelastic demand curve in the short run, so that the burden falls mainly on the buyer, and the deadweight loss to society is smaller than if the demand curve was more elastic. 
D) ​All of the above are true. 
A) ​Once the equilibrium price and output is reached, all the mutually beneficial trade opportunities between suppliers and demanders will have taken place, and the sum of consumer and producer surplus is maximized. 
B) ​The deadweight loss of a tax is the difference between the lost consumer and producer surplus and the tax revenue generated. 
C) ​Those goods that are heavily taxed often have a relatively inelastic demand curve in the short run, so that the burden falls mainly on the buyer, and the deadweight loss to society is smaller than if the demand curve was more elastic. 
D) ​All of the above are true.

Question 3

Consumer surplus is always the total area below the demand curve and above the price.

Accepted Answer

A) True 
 B)False

Question 4

If the government provides a subsidy in one industry and raises the tax revenue by taxing another industry, would, other things equal, cause welfare costs in both industries.

Accepted Answer

A) True 
 B)False

Question 5

Producer surplus is always the total area below the price and above the supply curve.​

Accepted Answer

A) True 
 B)False

Question 6

​Exhibit 7-9  
-Refer to Exhibit 7-9. The total welfare after the tax is the area:

Accepted Answer

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

Question 7

A subsidy in an industry would result in:

Accepted Answer

A) ​an increase in consumer surplus. 
B) ​an increase in producer surplus 
C) ​both (a) and (b). 
D) ​none of the above. 
A) ​an increase in consumer surplus. 
B) ​an increase in producer surplus 
C) ​both (a) and (b). 
D) ​none of the above.

Question 8

​Exhibit 7-7  
-Refer to Exhibit 7-7. When the price falls from P2 to P1, consumer surplus

Accepted Answer

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

Question 9

Gains from trade are measured by:​

Accepted Answer

A) ​consumer surplus. 
B) ​producer surplus. 
C) ​the sum of consumer and producer surplus. 
D) ​producer surplus minus consumer surplus. 
A) ​consumer surplus. 
B) ​producer surplus. 
C) ​the sum of consumer and producer surplus. 
D) ​producer surplus minus consumer surplus.

Question 10

If the government wanted a tax to raise a great deal of revenue but not burden producers much, it would want to tax an industry with​

Accepted Answer

A) ​elastic supply and demand curves. 
B) ​inelastic supply and demand curves. 
C) ​inelastic supply and elastic demand. 
D) ​elastic supply and inelastic demand. 
A) ​elastic supply and demand curves. 
B) ​inelastic supply and demand curves. 
C) ​inelastic supply and elastic demand. 
D) ​elastic supply and inelastic demand.

Question 11

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

Accepted Answer

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

Question 12

The more elastic the demand curve, the ____ will be the effect of a tax on the quantity exchanged and the ____ will be the welfare cost.​

Accepted Answer

A) ​greater; greater. 
B) ​greater; smaller. 
C) ​smaller; greater. 
D) ​smaller; smaller. 
A) ​greater; greater. 
B) ​greater; smaller. 
C) ​smaller; greater. 
D) ​smaller; smaller.

Question 13

Consumer surplus is:​

Accepted Answer

A) ​the area underneath the demand curve. 
B) ​the total utility derived from consuming a good. 
C) ​the marginal utility of the last unit consumed multiplied by the number of units consumed. 
D) ​the difference between what consumers are willing to pay and what they are required to pay for a good. 
A) ​the area underneath the demand curve. 
B) ​the total utility derived from consuming a good. 
C) ​the marginal utility of the last unit consumed multiplied by the number of units consumed. 
D) ​the difference between what consumers are willing to pay and what they are required to pay for a good.

Question 14

The more elastic the demand curve, the smaller is the deadweight loss resulting from the imposition of a tax.

Accepted Answer

A) True 
 B)False

Question 15

Fred's demand schedule for movie DVDs is as follows: At $30, he would buy 1; at $25, he would buy two; at $15, he would buy 3; and at $10, he would buy 4. If the price of movie DVDs equals $25, the consumer surplus Fred receives from purchasing movie DVDs would be:​

Accepted Answer

A) ​zero. 
B) ​$5. 
C) ​$25. 
D) ​$55. 
A) ​zero. 
B) ​$5. 
C) ​$25. 
D) ​$55.

Question 16

If the world supply of diamonds decreases, diamonds become more valuable, and therefore, the consumer surplus derived from diamonds increases.

Accepted Answer

A) True 
 B)False

Question 17

​Exhibit 7-12  
-Refer to Exhibit 7-12. Producer surplus after the price floor is area:

Accepted Answer

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

Question 18

​Exhibit 7-14  
-Refer to Exhibit 7-14. Identify the areas of consumer and producer surplus when a price ceiling equal to $10 is imposed.

Accepted Answer

Consumer surplus equ

Question 19

​Exhibit 7-11  
-Refer to Exhibit 7-11. The consumer surplus after the price ceiling is area

Accepted Answer

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

Question 20

​Exhibit 7-12  
-Refer to Exhibit 7-12. The cost to government (tax payers) after the price floor is area:

Accepted Answer

A) ​g + h + i 
B) ​d 
C) ​c + f + g + h + i 
D) ​c + d + f + g + h + i 
A) ​g + h + i 
B) ​d 
C) ​c + f + g + h + i 
D) ​c + d + f + g + h + i

Exam 7: Market Efficiency and Welfare

​Exhibit 7-10 -Refer to Exhibit 7-10. The total welfare after the subsidy is the area

Which of the following is true?​

Consumer surplus is always the total area below the demand curve and above the price.

If the government provides a subsidy in one industry and raises the tax revenue by taxing another industry, would, other things equal, cause welfare costs in both industries.

Producer surplus is always the total area below the price and above the supply curve.​

​Exhibit 7-9 -Refer to Exhibit 7-9. The total welfare after the tax is the area:

A subsidy in an industry would result in:

​Exhibit 7-7 -Refer to Exhibit 7-7. When the price falls from P2 to P1, consumer surplus

Gains from trade are measured by:​

If the government wanted a tax to raise a great deal of revenue but not burden producers much, it would want to tax an industry with​

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

The more elastic the demand curve, the ____ will be the effect of a tax on the quantity exchanged and the ____ will be the welfare cost.​

Consumer surplus is:​

The more elastic the demand curve, the smaller is the deadweight loss resulting from the imposition of a tax.

Fred's demand schedule for movie DVDs is as follows: At $30, he would buy 1; at $25, he would buy two; at $15, he would buy 3; and at $10, he would buy 4. If the price of movie DVDs equals $25, the consumer surplus Fred receives from purchasing movie DVDs would be:​

If the world supply of diamonds decreases, diamonds become more valuable, and therefore, the consumer surplus derived from diamonds increases.

​Exhibit 7-12 -Refer to Exhibit 7-12. Producer surplus after the price floor is area:

​Exhibit 7-14 -Refer to Exhibit 7-14. Identify the areas of consumer and producer surplus when a price ceiling equal to $10 is imposed.

​Exhibit 7-11 -Refer to Exhibit 7-11. The consumer surplus after the price ceiling is area

​Exhibit 7-12 -Refer to Exhibit 7-12. The cost to government (tax payers) after the price floor 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 total welfare after the subsidy is the area

Which of the following is true?

Producer surplus is always the total area below the price and above the supply curve.

Exhibit 7-9 -Refer to Exhibit 7-9. The total welfare after the tax is the area:

Exhibit 7-7 -Refer to Exhibit 7-7. When the price falls from P₂ to P₁, consumer surplus

Gains from trade are measured by:

If the government wanted a tax to raise a great deal of revenue but not burden producers much, it would want to tax an industry with

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

The more elastic the demand curve, the will be the effect of a tax on the quantity exchanged and the will be the welfare cost.

Consumer surplus is:

Fred's demand schedule for movie DVDs is as follows: At $30, he would buy 1; at $25, he would buy two; at $15, he would buy 3; and at $10, he would buy 4. If the price of movie DVDs equals $25, the consumer surplus Fred receives from purchasing movie DVDs would be:

Exhibit 7-12 -Refer to Exhibit 7-12. Producer surplus after the price floor is area:

Exhibit 7-14 -Refer to Exhibit 7-14. Identify the areas of consumer and producer surplus when a price ceiling equal to $10 is imposed.

Exhibit 7-11 -Refer to Exhibit 7-11. The consumer surplus after the price ceiling is area

Exhibit 7-12 -Refer to Exhibit 7-12. The cost to government (tax payers) after the price floor is area: