Exam 4: Market Efficiency and Market Failure

The graph below represents the market for walnuts.Identify the values of the marginal benefit and the marginal cost at the output levels of 2,000 pounds,4,000 pounds and 6,000 pounds.At each of these output levels,state whether output is inefficiently high,inefficiently low,or economically efficient.

The total amount of producer surplus in a market is equal to

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

Figure 4-8 Figure 4-8 shows a market with an externality.The current market equilibrium output of Q₁ is not the economically efficient output.The economically efficient output is Q₂. -Refer to Figure 4-8.If,because of an externality,the economically efficient output is Q₂ and not the current equilibrium output of Q₁,what does S₂ represent?

Suppose a price floor on sparkling wine is proposed by the Health Minister of the country of Vinyardia.What will be the likely effect on the market for sparkling wine in Vinyardia?

What is a "social cost" of production?

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

The minimum wage is an example of a price ceiling.

Which of the following is not a result of imposing a rent ceiling?

Figure 4-12 Chicken pox vaccinations for toddlers benefit society by protecting young children and by preventing an epidemic of the disease.Thus,the social benefits of chicken pox vaccinations exceed the private benefit for any quantity of vaccinations as illustrated in Figure 4-12. -Refer to Figure 4-12.What is the value of the net gain to society as a result of subsidizing chicken pox vaccinations?

A demand curve shows

When a competitive equilibrium is achieved in a market

Which of the following statements best describes the concept of consumer surplus?

Rent control is an example of

Figure 4-1 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

Figure 4-1 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?

Governments can increase the consumption of a product that creates positive externalities by

Table 4-2 -Refer to Table 4-2.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 The Waco Kid's cowboy hats is $40

Explain how mandatory seat belt laws may reduce the negative externalities of risky behavior.

Figure 4-10 -Refer to Figure 4-10.At the competitive market equilibrium,for the last unit produced,