Question 1

Deadweight loss refers to a loss in revenue resulting from producers having to reduce their selling price to remain competitive.

Accepted Answer

A) True 
 B)False

Question 2

Figure 4-13  
-Refer to Figure 4-13 which shows the market for watermelons.Suppose the government imposes a price floor of Pw.How will the price floor affect the quantity supplied,quantity demanded,and quantity exchanged?

Accepted Answer

The price floor will have no effect on t

Question 3

Table 4-12
 $$\begin{array} { | l | l | } 
\hline \text { Demand } & \text { Supply } \
\hline P = 50 - 2 Q ^ { \mathrm { D } } & P = 35 + Q ^ { \mathrm { S } } \
\hline Q ^ { \mathrm { D } }= 25 - 0.5 P  & Q ^ { \mathrm { S } } = P - 35 \
\hline
\end{array}$$
-Refer to Table 4-12.The equations above describe the demand and supply for Bubba's Fried Jellybeans.The equilibrium price and quantity for Bubba's Fried Jellybeans are $40 and 5 thousand units.What is the value of economic surplus in this market?

Accepted Answer

A) $5 thousand 
B) $12.5 thousand 
C) $25 thousand 
D) $37.5 thousand 
A) $5 thousand 
B) $12.5 thousand 
C) $25 thousand 
D) $37.5 thousand

Question 4

Figure 4-4 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 4-4.What is the value of consumer surplus at the equilibrium price of $15?

Accepted Answer

A) $60 
B) $120 
C) $180 
D) $240 
A) $60 
B) $120 
C) $180 
D) $240

Question 5

Is there a difference between the "true burden" of a tax and who is legally required to pay a tax? Briefly explain.

Accepted Answer

There is a difference.The true burden of

Question 6

The difference between consumer surplus and producer surplus in a market is equal to the deadweight loss.

Accepted Answer

A) True 
 B)False

Question 7

Figure 4-16  
-Refer to Figure 4-16.Suppose the market is initially in equilibrium at price P1 and now the government imposes a tax on every unit sold.Which of the following statements best describes the impact of the tax? For demand curve D1

Accepted Answer

A) the producer bears a smaller share of the tax burden if the supply curve is S2. 
B) the producer bears a smaller share of the tax burden if the supply curve is S1. 
C) the producer's share of the tax burden is the same whether the supply curve is S1 or S2. 
D) the producer bears the entire burden of the tax if the supply curve is S2 and the consumer bears the entire burden of the tax if the supply curve is S1. 
A) the producer bears a smaller share of the tax burden if the supply curve is S2. 
B) the producer bears a smaller share of the tax burden if the supply curve is S1. 
C) the producer's share of the tax burden is the same whether the supply curve is S1 or S2. 
D) the producer bears the entire burden of the tax if the supply curve is S2 and the consumer bears the entire burden of the tax if the supply curve is S1.

Question 8

What area on a supply and demand graph represents producer surplus?

Accepted Answer

Producer surplus is

Question 9

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 10

The following equations represent the demand and supply for kumquats. QD = 60 - 3P
QS = -20 + 5P
What is the equilibrium price (P)and quantity (Q - in thousands)of kumquats?

Accepted Answer

A) P = $5;Q = 20 thousand 
B) P = $30;Q = 5 thousand 
C) P = $20;Q = 10 thousand 
D) P = $10;Q = 30 thousand 
A) P = $5;Q = 20 thousand 
B) P = $30;Q = 5 thousand 
C) P = $20;Q = 10 thousand 
D) P = $10;Q = 30 thousand

Question 11

Figure 4-18 shows the market for cigarettes.The government plans to impose a unit tax in this market.
-Refer to Figure 4-18.As a result of the tax,is there a loss in producer surplus?

Accepted Answer

A) Yes,because producers are not selling as many units now. 
B) No,because the consumer pays the tax. 
C) No,because the market reaches a new equilibrium 
D) No,because producers are able to raise the price to cover their tax burden. 
A) Yes,because producers are not selling as many units now. 
B) No,because the consumer pays the tax. 
C) No,because the market reaches a new equilibrium 
D) No,because producers are able to raise the price to cover their tax burden.

Question 12

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

Accepted Answer

A) minimum cost. 
B) total cost. 
C) opportunity cost. 
D) marginal cost. 
A) minimum cost. 
B) total cost. 
C) opportunity cost. 
D) marginal cost.

Question 13

A tax is imposed on employers and workers that are used to fund Social Security and Medicare.This tax is sometimes referred to as

Accepted Answer

A) the Income Security Tax. 
B) the federal income tax. 
C) the ACIF. 
D) the payroll tax. 
A) the Income Security Tax. 
B) the federal income tax. 
C) the ACIF. 
D) the payroll tax.

Question 14

Suppliers will be willing to supply a product only if

Accepted Answer

A) the price received is less than the additional cost of producing the product. 
B) the price received is at least equal to the additional cost of producing the product. 
C) the price is higher than the average cost of producing the product. 
D) the price received is at least double the additional cost of producing the product. 
A) the price received is less than the additional cost of producing the product. 
B) the price received is at least equal to the additional cost of producing the product. 
C) the price is higher than the average cost of producing the product. 
D) the price received is at least double the additional cost of producing the product.

Question 15

Table 4-3
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { The Waco Kid's } \
\text { Cowboy Hats }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Cost } \
\text { (dollars) }
\end{array} \
\hline \text { 1st hat } & \$ 24 \
\hline \text { 2nd hat } & 30 \
\hline \text { 3rd hat } & 38 \
\hline \text { 4th hat } & 46 \
\hline
\end{array}$$
-Refer to Table 4-3.The table above lists the marginal cost of cowboy hats by The Waco Kid,a firm that specializes in producing western wear.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 16

Tax incidence is the actual division of the

Accepted Answer

A) burden of the tax between buyers and sellers in a market. 
B) tax revenues between government agencies. 
C) tax revenues between the federal government and state governments. 
D) population into different tax brackets. 
A) burden of the tax between buyers and sellers in a market. 
B) tax revenues between government agencies. 
C) tax revenues between the federal government and state governments. 
D) population into different tax brackets.

Question 17

Compared to prices charged by Uber,traditional taxi companies charge government-regulated prices.These government-regulated prices ________ in the market for shared rides.

Accepted Answer

A) decrease consumer surplus. 
B) increase consumer surplus. 
C) decrease deadweight loss. 
D) decrease producer surplus. 
A) decrease consumer surplus. 
B) increase consumer surplus. 
C) decrease deadweight loss. 
D) decrease producer surplus.

Question 18

Figure 4-5  
-Refer to Figure 4-5.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 19

Table 4-5
 $$\begin{array} { | l | l | } 
\hline \text { Consumer } & \text { Willingness to Pay } \
\hline \text { Violet } & \$ 48 \
\hline \text { Walter } & 40 \
\hline \text { Xavier } & 30 \
\hline \text { Yolanda } & 24 \
\hline \text { Zachary } & 14 \
\hline
\end{array}$$
-Refer to Table 4-5.The table above lists the highest prices five consumers are willing to pay for a concert ticket.If the price of one of the tickets is $20

Accepted Answer

A) everyone will buy a ticket except for Zachary. 
B) only Violet and Walter will buy tickets. 
C) Xavier's consumer surplus is $50. 
D) the total consumer surplus from the purchase of tickets will be $122. 
A) everyone will buy a ticket except for Zachary. 
B) only Violet and Walter will buy tickets. 
C) Xavier's consumer surplus is $50. 
D) the total consumer surplus from the purchase of tickets will be $122.

Question 20

Marginal benefit is equal to the ________ benefit a consumer receives from consuming one more unit of a good or service.

Accepted Answer

A) total 
B) unintended 
C) additional 
D) surplus 
A) total 
B) unintended 
C) additional 
D) surplus

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

Deadweight loss refers to a loss in revenue resulting from producers having to reduce their selling price to remain competitive.

Figure 4-13 -Refer to Figure 4-13 which shows the market for watermelons.Suppose the government imposes a price floor of Pw.How will the price floor affect the quantity supplied,quantity demanded,and quantity exchanged?

Figure 4-4 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 4-4.What is the value of consumer surplus at the equilibrium price of $15?

Is there a difference between the "true burden" of a tax and who is legally required to pay a tax? Briefly explain.

The difference between consumer surplus and producer surplus in a market is equal to the deadweight loss.

Figure 4-16 -Refer to Figure 4-16.Suppose the market is initially in equilibrium at price P1 and now the government imposes a tax on every unit sold.Which of the following statements best describes the impact of the tax? For demand curve D1

What area on a supply and demand graph represents producer surplus?

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

The following equations represent the demand and supply for kumquats. QD = 60 - 3P QS = -20 + 5P What is the equilibrium price (P)and quantity (Q - in thousands)of kumquats?

Figure 4-18 shows the market for cigarettes.The government plans to impose a unit tax in this market. -Refer to Figure 4-18.As a result of the tax,is there a loss in producer surplus?

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

A tax is imposed on employers and workers that are used to fund Social Security and Medicare.This tax is sometimes referred to as

Suppliers will be willing to supply a product only if

Tax incidence is the actual division of the

Compared to prices charged by Uber,traditional taxi companies charge government-regulated prices.These government-regulated prices ________ in the market for shared rides.

Figure 4-5 -Refer to Figure 4-5.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3

Table 4-5 Consumer Willingness to Pay Violet \ 48 Walter 40 Xavier 30 Yolanda 24 Zachary 14 -Refer to Table 4-5.The table above lists the highest prices five consumers are willing to pay for a concert ticket.If the price of one of the tickets is $20

Marginal benefit is equal to the ________ benefit a consumer receives from consuming one more unit of a good or service.

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

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