Question 1

In cities with rent controls,the actual rents paid can be higher than the legal maximum.One explanation for this is

Accepted Answer

A) rent control laws are so complicated that landlords and tenants may not be aware of what the legal price is. 
B) landlords are allowed to charge more than the legal maximum on some apartments so long as they charge less on others. 
C) because there is a shortage of apartments,tenants often are willing to pay rents higher than the law allows. 
D) the legal penalty landlords face for charging more than the legal maximum rent is less than the revenue earned by charging their tenants more than the maximum rent. 
A) rent control laws are so complicated that landlords and tenants may not be aware of what the legal price is. 
B) landlords are allowed to charge more than the legal maximum on some apartments so long as they charge less on others. 
C) because there is a shortage of apartments,tenants often are willing to pay rents higher than the law allows. 
D) the legal penalty landlords face for charging more than the legal maximum rent is less than the revenue earned by charging their tenants more than the maximum rent.

Question 2

Assume the market price for lemon grass is $4.00 per pound,but most buyers are willing to pay more than the market price.At the market price of $4.00,the quantity of lemon grass demanded is 1,500 pounds per month,and quantity demanded does not reach zero until the price reaches $30.00 per pound.Construct a graph showing this data,calculate the total consumer surplus in the market for lemon grass,and show the consumer surplus on the graph.

Accepted Answer

@#IMG-DLM& The total consumer

Question 3

An externality is

Accepted Answer

A) a benefit realized by the purchaser of a good or service. 
B) a cost paid for by the producer of a good or service. 
C) a benefit or cost experienced by someone who is not a producer or consumer of a good or service. 
D) anything that is external or not relevant to the production of a good or service. 
A) a benefit realized by the purchaser of a good or service. 
B) a cost paid for by the producer of a good or service. 
C) a benefit or cost experienced by someone who is not a producer or consumer of a good or service. 
D) anything that is external or not relevant to the production of a good or service.

Question 4

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 5

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.If a minimum wage of $9.50 an hour is mandated,what is the quantity of labor demanded?

Accepted Answer

A) 40,000 
B) 570,000 
C) 610,000 
D) 1,180,000 
A) 40,000 
B) 570,000 
C) 610,000 
D) 1,180,000

Question 6

An advantage of imposing a tax on the producer that generates pollution is that

Accepted Answer

A) it forces the polluting producer to internalize the external cost of the pollution. 
B) the government can keep tabs on exactly what is produced in an industry. 
C) it will eliminate pollution. 
D) a producer can pass the cost of the pollution to consumers. 
A) it forces the polluting producer to internalize the external cost of the pollution. 
B) the government can keep tabs on exactly what is produced in an industry. 
C) it will eliminate pollution. 
D) a producer can pass the cost of the pollution to consumers.

Question 7

Table 4-4
   Table 4-4 above contains information about the corn market.Answer the following questions based on this table.
-Refer to Table 4-4.An agricultural price floor is a price that the government guarantees farmers will receive for a particular crop.Suppose the federal government sets a price floor for corn at $12 per bushel.
a.What is the amount of shortage or surplus in the corn market as result of the price floor?
b.If the government agrees to purchase any surplus output at $12,how much will it cost the government?
c.If the government buys all of the farmers' output at the floor price,how many bushels of corn will it have to purchase and how much will it cost the government?
d.Suppose the government buys up all of the farmers' output at the floor price and then sells the output to consumers at whatever price it can get.Under this scheme,what is the price at which the government will be able to sell off all of the output it had purchased from farmers? What is the revenue received from the government's sale?
e.In this problem we have considered two government schemes: (1)a price floor is established and the government purchases any excess output and (2)the government buys all the farmers' output at the floor price and resells at whatever price it can get.Which scheme will taxpayers prefer?
f.Consider again the two schemes.Which scheme will the farmers prefer?
g.Consider again the two schemes.Which scheme will corn buyers prefer?

Accepted Answer

a.10,000 surplus.
b.$12 × 10,000 = $120,

Question 8

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 9

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 consumer surplus after the imposition of the price floor?

Accepted Answer

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

Question 10

Suppose a tax equal to the value of the marginal external cost at the optimal output is imposed on a pollution generating good.All of the following will result from the tax except

Accepted Answer

A) an increase in the equilibrium market price. 
B) a decrease in the equilibrium quantity produced and consumed. 
C) a decrease in market supply of the good. 
D) an increase in the demand for the good. 
A) an increase in the equilibrium market price. 
B) a decrease in the equilibrium quantity produced and consumed. 
C) a decrease in market supply of the good. 
D) an increase in the demand for the good.

Question 11

Private costs

Accepted Answer

A) are borne by producers of a good while social costs are borne by government. 
B) are borne by consumers of a good while social costs are borne by government. 
C) are borne by producers of a good while social costs are borne by society at large. 
D) are borne by producers of a good while social costs are borne by those who cannot afford to purchase the good. 
A) are borne by producers of a good while social costs are borne by government. 
B) are borne by consumers of a good while social costs are borne by government. 
C) are borne by producers of a good while social costs are borne by society at large. 
D) are borne by producers of a good while social costs are borne by those who cannot afford to purchase the good.

Question 12

Two economists from Northwestern University estimated the benefit households received from subscribing to broadband Internet service.The economists found that

Accepted Answer

A) the consumer surplus from dial-up Internet service exceeded the consumer surplus from broadband Internet service. 
B) the average consumer of broadband Internet service received a marginal benefit equal to $36. 
C) most consumers of broadband Internet service were not willing to pay more than $36 per month. 
D) one month's benefit to consumers who subscribe to broadband Internet service is about $890 million. 
A) the consumer surplus from dial-up Internet service exceeded the consumer surplus from broadband Internet service. 
B) the average consumer of broadband Internet service received a marginal benefit equal to $36. 
C) most consumers of broadband Internet service were not willing to pay more than $36 per month. 
D) one month's benefit to consumers who subscribe to broadband Internet service is about $890 million.

Question 13

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 is the area that represents producer surplus after the imposition of the price floor?

Accepted Answer

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

Question 14

Figure 4-10  
-Refer to Figure 4-10.The size of marginal external benefits can be determined by

Accepted Answer

A) the demand curve D2. 
B) D2 + D1 at each output level 
C) D2 - D1 at each output level. 
D) the demand curve D1. 
A) the demand curve D2. 
B) D2 + D1 at each output level 
C) D2 - D1 at each output level. 
D) the demand curve D1.

Question 15

The sum of consumer surplus and producer surplus is called economic surplus.

Accepted Answer

A) True 
 B)False

Question 16

Mandatory motorcycle helmet laws are designed to reduce the severity of injuries resulting from motorcycle involvement in traffic accidents.In this sense,these mandatory helmet laws are reducing ________ of risky behavior.

Accepted Answer

A) positive externalities 
B) negative externalities 
C) the private benefit 
D) the social benefit 
A) positive externalities 
B) negative externalities 
C) the private benefit 
D) the social benefit

Question 17

Figure 4-8   Figure 4-8 shows a market with an externality.The current market equilibrium output of QS1U1B11S1U1B0 is not the economically efficient output.The economically efficient output is QS1U1B12S1U1B0.
-Refer to Figure 4-8.Suppose the current market equilibrium output of Q1 is not the economically efficient output because of an externality.The economically efficient output is Q2.In that case,the diagram shows

Accepted Answer

A) the effect of a positive externality in the production of a good. 
B) the effect of a negative externality in the production of a good. 
C) the effect of an external cost imposed on a producer. 
D) the effect of an external benefit such as a subsidy granted to consumers of a good. 
A) the effect of a positive externality in the production of a good. 
B) the effect of a negative externality in the production of a good. 
C) the effect of an external cost imposed on a producer. 
D) the effect of an external benefit such as a subsidy granted to consumers of a good.

Question 18

Figure 4-11   Companies producing toilet paper bleach the paper to make it white.The bleach is discharged into rivers and lakes and causes substantial environmental damage.Figure 4-11 illustrates the situation in the toilet paper market.
-Refer to Figure 4-11.Suppose the government wants to use a Pigovian tax to bring about the efficient level of production.What should the value of the tax be?

Accepted Answer

A) (P2- P1)per ton of output 
B) (P2- P0)per ton of output 
C) (P1- P0)per ton of output 
D) P1 per ton of output 
A) (P2- P1)per ton of output 
B) (P2- P0)per ton of output 
C) (P1- P0)per ton of output 
D) P1 per ton of output

Question 19

Which of the following criteria should be used to evaluate if government intervention in a market for the purpose of environmental protection is justified?

Accepted Answer

A) Does the intervention program reduce pollution to zero using the least costly method? 
B) Is the intervention program economically efficient? 
C) Does the intervention program make the amount of economic surplus as large as possible? 
D) Is the damage to the environment from government intervention as small as possible? 
A) Does the intervention program reduce pollution to zero using the least costly method? 
B) Is the intervention program economically efficient? 
C) Does the intervention program make the amount of economic surplus as large as possible? 
D) Is the damage to the environment from government intervention as small as possible?

Question 20

In a competitive market equilibrium

Accepted Answer

A) total consumer surplus equals total producer surplus. 
B) marginal benefit and marginal cost are maximized. 
C) consumers and producers benefit equally. 
D) the marginal benefit equals the marginal cost of the last unit sold. 
A) total consumer surplus equals total producer surplus. 
B) marginal benefit and marginal cost are maximized. 
C) consumers and producers benefit equally. 
D) the marginal benefit equals the marginal cost of the last unit sold.

In cities with rent controls,the actual rents paid can be higher than the legal maximum.One explanation for this is

An externality is

In order to be binding,a price ceiling

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.If a minimum wage of $9.50 an hour is mandated,what is the quantity of labor demanded?

An advantage of imposing a tax on the producer that generates pollution is that

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

Suppose a tax equal to the value of the marginal external cost at the optimal output is imposed on a pollution generating good.All of the following will result from the tax except

Private costs

Two economists from Northwestern University estimated the benefit households received from subscribing to broadband Internet service.The economists found that

Figure 4-10 -Refer to Figure 4-10.The size of marginal external benefits can be determined by

The sum of consumer surplus and producer surplus is called economic surplus.

Mandatory motorcycle helmet laws are designed to reduce the severity of injuries resulting from motorcycle involvement in traffic accidents.In this sense,these mandatory helmet laws are reducing ________ of risky behavior.

Which of the following criteria should be used to evaluate if government intervention in a market for the purpose of environmental protection is justified?

In a competitive market equilibrium

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

In cities with rent controls,the actual rents paid can be higher than the legal maximum.One explanation for this is

An externality is

In order to be binding,a price ceiling

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.If a minimum wage of $9.50 an hour is mandated,what is the quantity of labor demanded?

An advantage of imposing a tax on the producer that generates pollution is that

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

Suppose a tax equal to the value of the marginal external cost at the optimal output is imposed on a pollution generating good.All of the following will result from the tax except

Private costs

Two economists from Northwestern University estimated the benefit households received from subscribing to broadband Internet service.The economists found that

Figure 4-10 -Refer to Figure 4-10.The size of marginal external benefits can be determined by

The sum of consumer surplus and producer surplus is called economic surplus.

Mandatory motorcycle helmet laws are designed to reduce the severity of injuries resulting from motorcycle involvement in traffic accidents.In this sense,these mandatory helmet laws are reducing ________ of risky behavior.

Which of the following criteria should be used to evaluate if government intervention in a market for the purpose of environmental protection is justified?

In a competitive market equilibrium

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