Question 1

To affect the market outcome,a price ceiling

Accepted Answer

A) must be set below the black market price. 
B) must be set below the legal price. 
C) must be set below the price floor. 
D) must be set below the equilibrium price. 
A) must be set below the black market price. 
B) must be set below the legal price. 
C) must be set below the price floor. 
D) must be set below the equilibrium price. D

Question 2

The marginal cost for Java Joe's to produce its first cup of coffee is $0.75.Its marginal cost to produce its second cup of coffee is $1.25.Its marginal cost increases by $0.50 for each additional cup of coffee it produces.Suppose the market price for coffee is $2.25.Construct a graph showing the producer surplus for each cup of coffee Java Joe's will sell.How many cups of coffee will Java Joe's sell? What is the value of the producer surplus Java Joe's receives for each cup of coffee it sells?

Accepted Answer

Java Joe will sell 3 cups of coffee,the point where its marginal cost is equal to the market price.The producer surplus of the first cup of coffee is $1.50.The producer surplus of the second cup of coffee is $1.00.The producer surplus of the third cup of coffee is $0.50.

Question 3

The 2005 European Union Emission Trading Scheme is an example of a

Accepted Answer

A) positive externality. 
B) command and control system. 
C) Coasian solution to pollution control. 
D) cap-and-trade system. 
A) positive externality. 
B) command and control system. 
C) Coasian solution to pollution control. 
D) cap-and-trade system. D

Question 4

A market failure arises when an entire sector of the economy (for example,the airline industry)collapses because of some unforeseen event.

Accepted Answer

A) True 
 B)False

Question 5

Shortage means the same thing as scarcity.

Accepted Answer

A) True 
 B)False

Question 6

If there is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and consumer surplus plus producer surplus is maximized,then

Accepted Answer

A) maximum deadweight loss occurs. 
B) economic efficiency is achieved. 
C) profits are maximized. 
D) costs are minimized. 
A) maximum deadweight loss occurs. 
B) economic efficiency is achieved. 
C) profits are maximized. 
D) costs are minimized.

Question 7

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-skill 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-skill 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 8

Figure 4-6   Figure 4-6 shows the demand and supply curves for the almond market.The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf.
-Refer to Figure 4-6.What area represents the portion of consumer surplus that has been transferred to producer surplus as a result of the price floor?

Accepted Answer

A) B 
B) B + C 
C) B + E 
D) E 
A) B 
B) B + C 
C) B + E 
D) E

Question 9

Economists refer a to a market where buying and selling take place at prices that violate government price regulations as

Accepted Answer

A) a black market. 
B) an outlaw market. 
C) a noncompetitive market. 
D) a restricted market. 
A) a black market. 
B) an outlaw market. 
C) a noncompetitive market. 
D) a restricted market.

Question 10

Deadweight loss refers to the reduction in economic surplus resulting from a market not being in competitive equilibrium.

Accepted Answer

A) True 
 B)False

Question 11

Table 4-3
   Table 4-3 shows the demand and supply schedules for labor market in the city of Pixley.
-Refer to Table 4-3.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 12

The graph below represents the market for lychee nuts.The equilibrium price is $7.00 per bushel,but the market price is $5.00 per bushel.Identify the areas representing consumer surplus,producer surplus,and deadweight loss at the equilibrium price of $7.00 and at the market price of $5.00.

Accepted Answer

At the equilibrium price of $7.00:
Consu

Question 13

If,in a competitive market,marginal benefit is less than marginal cost,

Accepted Answer

A) the net benefit to consumers from participating in the market is less than the net benefit to producers. 
B) the government must force producers to raise prices in order to achieve economic efficiency. 
C) the quantity sold is greater than the equilibrium quantity. 
D) the quantity sold is less than the equilibrium quantity. 
A) the net benefit to consumers from participating in the market is less than the net benefit to producers. 
B) the government must force producers to raise prices in order to achieve economic efficiency. 
C) the quantity sold is greater than the equilibrium quantity. 
D) the quantity sold is less than the equilibrium quantity.

Question 14

Figure 4-5   Figure 4-5 shows the market for apartments in Springfield.Recently,the government imposed a rent ceiling of $1,000 per month.
-Refer to Figure 4-5.What is the value of the deadweight loss after the imposition of the ceiling?

Accepted Answer

A) $50,000 
B) $125,000 
C) $175,000 
D) $260,000 
A) $50,000 
B) $125,000 
C) $175,000 
D) $260,000

Question 15

Government imposed quantitative limits on the amount of pollution firms are allowed to produce is an example of

Accepted Answer

A) the Pigovian method of pollution control. 
B) command and control approach to pollution reduction. 
C) Coasian solution to pollution reduction. 
D) a tradable emission allowance system of pollution control. 
A) the Pigovian method of pollution control. 
B) command and control approach to pollution reduction. 
C) Coasian solution to pollution reduction. 
D) a tradable emission allowance system of pollution control.

Question 16

A minimum wage law dictates

Accepted Answer

A) the minimum quantity of labor that a firm must employ. 
B) the lowest wage that firms may pay for labor. 
C) the highest wage that firms must pay for labor. 
D) the minimum qualifications for labor. 
A) the minimum quantity of labor that a firm must employ. 
B) the lowest wage that firms may pay for labor. 
C) the highest wage that firms must pay for labor. 
D) the minimum qualifications for labor.

Question 17

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 18

What does the phrase "internalizing an external cost" mean?

Accepted Answer

A) limiting the extent to which domestic firms can outsource production 
B) prohibiting economic activities that create externalities 
C) forcing producers to factor into their production costs the cost of the externalities created in the production of their output 
D) finding a way to address cross-border pollution 
A) limiting the extent to which domestic firms can outsource production 
B) prohibiting economic activities that create externalities 
C) forcing producers to factor into their production costs the cost of the externalities created in the production of their output 
D) finding a way to address cross-border pollution

Question 19

When a negative externality exists,the private market produces

Accepted Answer

A) more than the economically efficient output level. 
B) less than the economically efficient output level. 
C) products at a low opportunity cost. 
D) products at a high opportunity cost. 
A) more than the economically efficient output level. 
B) less than the economically efficient output level. 
C) products at a low opportunity cost. 
D) products at a high opportunity cost.

Question 20

Figure 4-3   Figure 4-3 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 4-3.What is the value of the deadweight loss at a price of $18?

Accepted Answer

A) $100 
B) $180 
C) $660 
D) $1,040 
A) $100 
B) $180 
C) $660 
D) $1,040

To affect the market outcome,a price ceiling

The 2005 European Union Emission Trading Scheme is an example of a

A market failure arises when an entire sector of the economy (for example,the airline industry)collapses because of some unforeseen event.

Shortage means the same thing as scarcity.

If there is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and consumer surplus plus producer surplus is maximized,then

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

Economists refer a to a market where buying and selling take place at prices that violate government price regulations as

Deadweight loss refers to the reduction in economic surplus resulting from a market not being in competitive equilibrium.

Table 4-3 Table 4-3 shows the demand and supply schedules for labor market in the city of Pixley. -Refer to Table 4-3.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?

The graph below represents the market for lychee nuts.The equilibrium price is $7.00 per bushel,but the market price is $5.00 per bushel.Identify the areas representing consumer surplus,producer surplus,and deadweight loss at the equilibrium price of $7.00 and at the market price of $5.00.

If,in a competitive market,marginal benefit is less than marginal cost,

Figure 4-5 Figure 4-5 shows the market for apartments in Springfield.Recently,the government imposed a rent ceiling of $1,000 per month. -Refer to Figure 4-5.What is the value of the deadweight loss after the imposition of the ceiling?

Government imposed quantitative limits on the amount of pollution firms are allowed to produce is an example of

A minimum wage law dictates

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.

What does the phrase "internalizing an external cost" mean?

When a negative externality exists,the private market produces

Figure 4-3 Figure 4-3 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 4-3.What is the value of the deadweight loss at a price of $18?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage,international Trade,and Exchange Rates

Filters

Exam 4: Market Efficiency and Market Failure

To affect the market outcome,a price ceiling

The 2005 European Union Emission Trading Scheme is an example of a

A market failure arises when an entire sector of the economy (for example,the airline industry)collapses because of some unforeseen event.

Shortage means the same thing as scarcity.

If there is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and consumer surplus plus producer surplus is maximized,then

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

Economists refer a to a market where buying and selling take place at prices that violate government price regulations as

Deadweight loss refers to the reduction in economic surplus resulting from a market not being in competitive equilibrium.

Table 4-3 Table 4-3 shows the demand and supply schedules for labor market in the city of Pixley. -Refer to Table 4-3.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?

The graph below represents the market for lychee nuts.The equilibrium price is $7.00 per bushel,but the market price is $5.00 per bushel.Identify the areas representing consumer surplus,producer surplus,and deadweight loss at the equilibrium price of $7.00 and at the market price of $5.00.

If,in a competitive market,marginal benefit is less than marginal cost,

Figure 4-5 Figure 4-5 shows the market for apartments in Springfield.Recently,the government imposed a rent ceiling of $1,000 per month. -Refer to Figure 4-5.What is the value of the deadweight loss after the imposition of the ceiling?

Government imposed quantitative limits on the amount of pollution firms are allowed to produce is an example of

A minimum wage law dictates

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.

What does the phrase "internalizing an external cost" mean?

When a negative externality exists,the private market produces

Figure 4-3 Figure 4-3 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 4-3.What is the value of the deadweight loss at a price of $18?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage,international Trade,and Exchange Rates

Filters