Question 1

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 2

Economic efficiency is a market outcome in which the marginal benefit to consumers is equal to the marginal cost of production and the sum of consumer surplus and producer surplus is maximized.

Accepted Answer

A) True 
 B)False

Question 3

In cities with rent controls,the actual rents paid can be ________ than the legal maximum.One explanation for this is because there is a ________ of apartments,tenants are ________.

Accepted Answer

A) higher;shortage;often willing to pay rents higher than the law allows 
B) higher;surplus;often forced to pay rents higher than the law allows 
C) lower;surplus;never willing to pay rents below the legal maximum 
D) lower;shortage;rarely willing to pay rents lower than the law allows 
A) higher;shortage;often willing to pay rents higher than the law allows 
B) higher;surplus;often forced to pay rents higher than the law allows 
C) lower;surplus;never willing to pay rents below the legal maximum 
D) lower;shortage;rarely willing to pay rents lower than the law allows

Question 4

The following equations represent the demand and supply for bottles of nail polish. QD = 25 - P
QS = -15 + 3P
What is the equilibrium price (P)and quantity (Q - in thousands)of bottles of nail polish?

Accepted Answer

A) P = $5;Q = 20 thousand 
B) P = $15;Q = 30 thousand 
C) P = $20;Q = 5 thousand 
D) P = $10;Q = 15 thousand 
A) P = $5;Q = 20 thousand 
B) P = $15;Q = 30 thousand 
C) P = $20;Q = 5 thousand 
D) P = $10;Q = 15 thousand

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

In Singapore the government places a $5,000 tax on the buyers of new automobiles.After the purchase of a new car,a buyer must pay the government $5,000.How would the imposition of the tax on buyers be illustrated in a graph?

Accepted Answer

A) The tax will shift the demand curve to the right by $5,000. 
B) The tax will shift the demand curve to the left by $5,000. 
C) The tax will shift both the demand and supply curves to the right by $5,000. 
D) The tax will shift the supply curve to the left by $5,000. 
A) The tax will shift the demand curve to the right by $5,000. 
B) The tax will shift the demand curve to the left by $5,000. 
C) The tax will shift both the demand and supply curves to the right by $5,000. 
D) The tax will shift the supply curve to the left by $5,000.

Question 7

$$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Hourly Wage } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Labor } \
\text { Supplied }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Labor } \
\text { Demanded }
\end{array} \
\hline \$ 7.50 & 530,000 & 650,000 \
\hline 8.50 & 550,000 & 630,000 \
\hline 9.50 & 570,000 & 610,000 \
\hline 10.50 & 590,000 & 590,000 \
\hline 11.50 & 610,000 & 570,000 \
\hline 12.50 & 630,000 & 550,000 \
\hline
\end{array}$$ Table 4-7 shows the demand and supply schedules for the labor market in the city of Pixley.
-Refer to Table 4-7.Suppose that the quantity of labor demanded decreases by 80,000 at each wage level.What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?

Accepted Answer

A) W = $8.50;Q = 550,000 
B) W = $12.50;Q = 630,000 
C) W = $9.50;Q = 570,000 
D) W = $9.50;Q = 590,000 
A) W = $8.50;Q = 550,000 
B) W = $12.50;Q = 630,000 
C) W = $9.50;Q = 570,000 
D) W = $9.50;Q = 590,000

Question 8

In order to be binding,a price ceiling

Accepted Answer

A) must lie above the free market equilibrium price. 
B) must lie below the free market equilibrium price. 
C) must coincide with the free market equilibrium price. 
D) must be high enough for firms to earn a profit. 
A) must lie above the free market equilibrium price. 
B) must lie below the free market equilibrium price. 
C) must coincide with the free market equilibrium price. 
D) must be high enough for firms to earn a profit.

Question 9

Article Summary
Among a package of anti-smoking bills designed to lower California's health care costs by reducing the use of tobacco products is a bill sponsored by Dr.Richard Pan that would increase the tax on a pack of cigarettes by $2.California currently has a tobacco tax of 87-cents-per-pack,making California's tax 33rd in the nation and well below the New York state tax of $4.35 a pack.The state taxes are in addition to a $1.01 federal tax on cigarettes.The bill stipulates that the revenue collected must be used to increase the number of physicians in California as well as support existing health care programs managed by the state.A Field Poll taken one day following the announcement of the bill found that two-thirds of California voters support the increase in the cigarette tax.
-Refer to the Article Summary.The additional tax of $2 per pack of cigarettes being proposed by Senator Pan would have which of the following effects on the market for cigarettes in California?

Accepted Answer

A) Consumer surplus will increase. 
B) Producer surplus will increase. 
C) Deadweight loss will increase. 
D) Market efficiency will increase. 
A) Consumer surplus will increase. 
B) Producer surplus will increase. 
C) Deadweight loss will increase. 
D) Market efficiency will increase.

Question 10

Brett buys a new cell phone for $100.He receives consumer surplus of $80 from the purchase.How much does Brett value his cell phone?

Accepted Answer

A) $180 
B) $100 
C) $80 
D) $20 
A) $180 
B) $100 
C) $80 
D) $20

Question 11

Using a supply and demand graph,illustrate the effect of the addition of a $10.00 per-unit unit tax on digital cameras,where the entire tax burden falls on the seller.Assume the equilibrium price before the tax is $125 and the equilibrium quantity is 50,000.What happens to the price and quantity after the tax is implemented?

Accepted Answer

@#IMG-DLM& Price doe

Question 12

Lucinda buys a new GPS system for $250.She receives consumer surplus of $75 from the purchase.What value does Lucinda place on her GPS system?

Accepted Answer

A) $75 
B) $175 
C) $250 
D) $325 
A) $75 
B) $175 
C) $250 
D) $325

Question 13

Figure 4-3 shows Kendra's demand curve for ice cream cones.
-Refer to Figure 4-3.If the market price is $3.00,what is Kendra's consumer surplus?

Accepted Answer

A) $6.50 
B) $5.50 
C) $2.50 
D) $0.50 
A) $6.50 
B) $5.50 
C) $2.50 
D) $0.50

Question 14

Suppose the demand curve for a product is downward sloping 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 15

Suppliers will be willing to supply a product in all of the following situations except when

Accepted Answer

A) the price received is greater 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 received is equal to the additional cost of producing the product. 
D) the price received is less than the additional cost of producing the product. 
A) the price received is greater 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 received is equal to the additional cost of producing the product. 
D) the price received is less than the additional cost of producing the product.

Question 16

Which of the following is not a consequence of minimum wage laws?

Accepted Answer

A) Low-skilled workers are hurt because minimum wage reduces the number of jobs providing low-skilled workers with training. 
B) Employers will be reluctant to offer low-skilled workers jobs with training. 
C) Producers have an incentive to offer workers non-wage benefits such as health care benefits and convenient working hours rather than a higher wage. 
D) Some workers benefit when the minimum wage is increased. 
A) Low-skilled workers are hurt because minimum wage reduces the number of jobs providing low-skilled workers with training. 
B) Employers will be reluctant to offer low-skilled workers jobs with training. 
C) Producers have an incentive to offer workers non-wage benefits such as health care benefits and convenient working hours rather than a higher wage. 
D) Some workers benefit when the minimum wage is increased.

Question 17

What is marginal cost? Which curve is also referred to as the marginal cost curve?

Accepted Answer

Marginal cost is the additiona

Question 18

Rent control is an example of a price floor.

Accepted Answer

A) True 
 B)False

Question 19

Figure 4-10 shows the market for apartments in Bay City.Recently,the government imposed a rent ceiling at R0.
-Refer to Figure 4-10.Suppose that instead of a price ceiling,the government imposed a price floor of R1.What area represents the deadweight loss after the imposition of the price floor?

Accepted Answer

A) G + H 
B) J + H 
C) C + E + J + H 
D) C + E 
A) G + H 
B) J + H 
C) C + E + J + H 
D) C + E

Question 20

Figure 4-1 shows Arnold's demand curve for burritos.
-Refer to Figure 4-1.Arnold's marginal benefit from consuming the third burrito is

Accepted Answer

A) $1.25. 
B) $1.50. 
C) $2.50. 
D) $6.00. 
A) $1.25. 
B) $1.50. 
C) $2.50. 
D) $6.00.

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

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?

Economic efficiency is a market outcome in which the marginal benefit to consumers is equal to the marginal cost of production and the sum of consumer surplus and producer surplus is maximized.

In cities with rent controls,the actual rents paid can be ________ than the legal maximum.One explanation for this is because there is a ________ of apartments,tenants are ________.

The following equations represent the demand and supply for bottles of nail polish. QD = 25 - P QS = -15 + 3P What is the equilibrium price (P)and quantity (Q - in thousands)of bottles of nail polish?

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

In Singapore the government places a $5,000 tax on the buyers of new automobiles.After the purchase of a new car,a buyer must pay the government $5,000.How would the imposition of the tax on buyers be illustrated in a graph?

In order to be binding,a price ceiling

Brett buys a new cell phone for $100.He receives consumer surplus of $80 from the purchase.How much does Brett value his cell phone?

Lucinda buys a new GPS system for $250.She receives consumer surplus of $75 from the purchase.What value does Lucinda place on her GPS system?

Figure 4-3 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-3.If the market price is $3.00,what is Kendra's consumer surplus?

Suppose the demand curve for a product is downward sloping and the supply curve is upward sloping.If a unit tax is imposed in the market for this product

Suppliers will be willing to supply a product in all of the following situations except when

Which of the following is not a consequence of minimum wage laws?

What is marginal cost? Which curve is also referred to as the marginal cost curve?

Rent control is an example of a price floor.

Figure 4-10 shows the market for apartments in Bay City.Recently,the government imposed a rent ceiling at R0. -Refer to Figure 4-10.Suppose that instead of a price ceiling,the government imposed a price floor of R1.What area represents the deadweight loss after the imposition of the price floor?

Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.Arnold's marginal benefit from consuming the third burrito 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

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In cities with rent controls,the actual rents paid can be than the legal maximum.One explanation for this is because there is a of apartments,tenants are .