Question 1

Price floors are illegal in the United States.

Accepted Answer

A) True 
 B)False

Question 2

What is economic surplus? When is economic surplus at a maximum?

Accepted Answer

Economic surplus is sum of con

Question 3

In the economic sense,almost everything is scarce.________ of a good or service occurs when the quantity demanded is greater than the quantity supplied at the current market price.

Accepted Answer

A) Scarcity 
B) A shortage 
C) A surplus 
D) An overstock 
A) Scarcity 
B) A shortage 
C) A surplus 
D) An overstock

Question 4

Figure 4-7  
-Refer to Figure 4-7.The figure above represents the market for iced tea.Assume that this is a competitive market.If the price of iced tea is $3

Accepted Answer

A) the quantity supplied is greater than the economically efficient quantity. 
B) the quantity demanded is economically efficient but the quantity supplied is economically inefficient. 
C) economic surplus is maximized. 
D) too many consumers want to buy iced tea. 
A) the quantity supplied is greater than the economically efficient quantity. 
B) the quantity demanded is economically efficient but the quantity supplied is economically inefficient. 
C) economic surplus is maximized. 
D) too many consumers want to buy iced tea.

Question 5

Which term refers to a legally established minimum price that firms may charge?

Accepted Answer

A) a price ceiling 
B) a subsidy 
C) a price floor 
D) a tariff 
A) a price ceiling 
B) a subsidy 
C) a price floor 
D) a tariff

Question 6

In a city with rent-controlled apartments,all of the following are true except

Accepted Answer

A) apartments usually rent for rates lower than the market rate. 
B) apartments are often in shorter supply than they would be without rent control. 
C) it usually takes more time to find an apartment than it would without rent control. 
D) landlords have an incentive to rent more apartments than they would without rent control. 
A) apartments usually rent for rates lower than the market rate. 
B) apartments are often in shorter supply than they would be without rent control. 
C) it usually takes more time to find an apartment than it would without rent control. 
D) landlords have an incentive to rent more apartments than they would without rent control.

Question 7

$$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Hourly Wage } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Labor } \
\text { Supplied }
\end{array} & \begin{array} { c } 
\text { Quantity of } \
\text { Labor } \
\text { Demanded }
\end{array} \
\hline \$ 8.00 & 350,000 & 390,000 \
\hline 8.50 & 360,000 & 380,000 \
\hline 9.00 & 370,000 & 370,000 \
\hline 9.50 & 380,000 & 360,000 \
\hline 10.00 & 390,000 & 350,000 \
\hline 10.50 & 400,000 & 340,000 \
\hline
\end{array}$$ Table 4-8 shows the demand and supply schedules for the low-skilled labor market in the city of Westover.
-Refer to Table 4-8.Suppose that the quantity of labor supplied increases by 40,000 at each wage level.What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?

Accepted Answer

A) W = $9.00;Q = 410,000 
B) W = $9.50;Q = 420,000 
C) W = $8.50;Q = 400,000 
D) W = $8.00;Q = 390,000 
A) W = $9.00;Q = 410,000 
B) W = $9.50;Q = 420,000 
C) W = $8.50;Q = 400,000 
D) W = $8.00;Q = 390,000

Question 8

Which term refers to a legally established maximum price that firms may charge?

Accepted Answer

A) a price ceiling 
B) a subsidy 
C) a price floor 
D) a tariff 
A) a price ceiling 
B) a subsidy 
C) a price floor 
D) a tariff

Question 9

Figure 4-8 shows the market for apartments in Springfield.Recently,the government imposed a rent ceiling of $1,000 per month.
-Refer to Figure 4-8.Suppose that instead of a rent ceiling,the government imposed a price floor of $2,000 per month for apartments.What is the value of the portion of consumer surplus transferred to producers as a result of the price floor?

Accepted Answer

A) $40,000 
B) $100,000 
C) $125,000 
D) $140,000 
A) $40,000 
B) $100,000 
C) $125,000 
D) $140,000

Question 10

The difference between the ________ and the ________ from the sale of a product is called producer surplus.

Accepted Answer

A) lowest price a firm would have been willing to accept;price it actually receives 
B) highest price a firm would have been willing to accept;lowest price it was willing to accept 
C) cost to produce a product;price a firm actually receives 
D) cost to produce a product;profit received 
A) lowest price a firm would have been willing to accept;price it actually receives 
B) highest price a firm would have been willing to accept;lowest price it was willing to accept 
C) cost to produce a product;price a firm actually receives 
D) cost to produce a product;profit received

Question 11

Figure 4-1 shows Arnold's demand curve for burritos.
-Refer to Figure 4-1.If the market price is $1.50,what is the consumer surplus on the second burrito?

Accepted Answer

A) $0.50 
B) $1.00 
C) $1.50 
D) $3.50 
A) $0.50 
B) $1.00 
C) $1.50 
D) $3.50

Question 12

Figure 4-18 shows the market for cigarettes.The government plans to impose a unit tax in this market.
-Refer to Figure 4-18.The price buyers pay after the tax is

Accepted Answer

A) $12. 
B) $8. 
C) $5. 
D) $3. 
A) $12. 
B) $8. 
C) $5. 
D) $3.

Question 13

Figure 4-11 shows the demand and supply curves for the coffee market.The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at $7.00.
-Refer to Figure 4-11.What is the value of producer surplus after the imposition of the price floor?

Accepted Answer

A) $3,000 
B) $3,600 
C) $4,200 
D) $4,500 
A) $3,000 
B) $3,600 
C) $4,200 
D) $4,500

Question 14

The actual division of the burden of a tax between buyers and sellers in a market is called

Accepted Answer

A) tax incidence. 
B) tax liability. 
C) tax bearer. 
D) tax parity. 
A) tax incidence. 
B) tax liability. 
C) tax bearer. 
D) tax parity.

Question 15

Economic surplus is maximized in a competitive market when

Accepted Answer

A) demand is equal to supply. 
B) the deadweight loss equals the sum of consumer surplus and producer surplus. 
C) marginal benefit equals marginal cost. 
D) producers sell the quantity that consumers are willing to buy. 
A) demand is equal to supply. 
B) the deadweight loss equals the sum of consumer surplus and producer surplus. 
C) marginal benefit equals marginal cost. 
D) producers sell the quantity that consumers are willing to buy.

Question 16

The demand and supply equations for the peach market are:
Demand: P = 24 - 0.5Q
Supply: P = -6 + 2.5Q where P = price per bushel,and Q = quantity (in thousands).
a.Calculate the equilibrium price and quantity.
b.Suppose the government guaranteed producers a price of $24 per bushel.What would be the effect on quantity supplied? Provide a numerical value.
c.By how much would the $24 price change the quantity of peaches demanded? Provide
a numerical value.
d.Would there be a shortage or surplus of peaches?
e.What is the size of this shortage or surplus? Provide a numerical value.

Accepted Answer

a.Quantity = 10 thousand bushels: {24 -

Question 17

The additional cost to a firm of producing one more unit of a good or service is equal to producer surplus.

Accepted Answer

A) True 
 B)False

Question 18

Figure 4-1 shows Arnold's demand curve for burritos.
-Refer to Figure 4-1.If the market price is $1.00,what is the maximum number of burritos that Arnold will buy?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 19

Juanita goes to the Hardware Emporium to buy a new circular saw.She is willing to pay $120 for a new saw,but buys one on sale for $85.Juanita's consumer surplus from the purchase is

Accepted Answer

A) $35. 
B) $85. 
C) $120. 
D) $205. 
A) $35. 
B) $85. 
C) $120. 
D) $205.

Question 20

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

Accepted Answer

A) True 
 B)False

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

Price floors are illegal in the United States.

What is economic surplus? When is economic surplus at a maximum?

In the economic sense,almost everything is scarce.________ of a good or service occurs when the quantity demanded is greater than the quantity supplied at the current market price.

Figure 4-7 -Refer to Figure 4-7.The figure above represents the market for iced tea.Assume that this is a competitive market.If the price of iced tea is $3

Which term refers to a legally established minimum price that firms may charge?

In a city with rent-controlled apartments,all of the following are true except

Which term refers to a legally established maximum price that firms may charge?

The difference between the ________ and the ________ from the sale of a product is called producer surplus.

Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.If the market price is $1.50,what is the consumer surplus on the second burrito?

Figure 4-18 shows the market for cigarettes.The government plans to impose a unit tax in this market. -Refer to Figure 4-18.The price buyers pay after the tax is

Figure 4-11 shows the demand and supply curves for the coffee market.The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at $7.00. -Refer to Figure 4-11.What is the value of producer surplus after the imposition of the price floor?

The actual division of the burden of a tax between buyers and sellers in a market is called

Economic surplus is maximized in a competitive market when

The additional cost to a firm of producing one more unit of a good or service is equal to producer surplus.

Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.If the market price is $1.00,what is the maximum number of burritos that Arnold will buy?

Juanita goes to the Hardware Emporium to buy a new circular saw.She is willing to pay $120 for a new saw,but buys one on sale for $85.Juanita's consumer surplus from the purchase is

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

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

The difference between the and the from the sale of a product is called producer surplus.