Exam 4: Market Efficiency and Market Failure

Figure 4-7 -Refer to Figure 4-7 which shows the market for vitamins.Suppose the government imposes a price ceiling of Pv.How will the price ceiling affect the quantity supplied,quantity demanded and quantity exchanged?

Consumer surplus is the difference between the highest price someone is willing to pay for a product and the price he actually pays for the product.

In New York City,about 1 million apartments are subject to rent control by the local government.Rent control

Marginal benefit is equal to the ________ benefit to a consumer receives from consuming one more unit of a good or service

The private cost of a good or service is the cost borne by the producer.

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.With rent control,the quantity supplied is 200 apartments.Suppose apartment owners ignore the law and rent this quantity for the highest rent they can get.What is the highest rent they can get per month?

Anyone can purchase sulfur dioxide emissions allowances on the Chicago Mercantile Exchange.Several environmental groups have raised money to buy allowances (which they subsequently destroy).As part of their fund-raising,these groups have urged contributors to buy the allowances as gifts.As one newspaper story put it,"For the environmentalist in your life,here's a gift that is sold by the ton,fits in an envelope and will last forever." Source for quote: Randall Edwards,"Dear Santa: Please Bring Me Sulfur Dioxide for Christmas," Columbus Dispatch,December 19,1999. What would be the impact on the price of the emission allowances in the market?

In a competitive market the demand curve shows the ________ received by consumers and the supply curve shows the ________.

Economic surplus

If policymakers use a pollution tax to control pollution,the tax per unit of pollution should be set

A positive externality causes

Rent control is an example of a price ceiling.

A negative externality exists if

Figure 4-9 Figure 4-9 shows a market with a negative externality. -Refer to Figure 4-9.The marginal benefit of the last unit produced is represented by the price

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called

How does a negative externality in production reduce economic efficiency?

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

Which of the following is not a result of government price controls?

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?

Figure 4-4 -Refer to Figure 4-4.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3,what changes in the market would result in an economically efficient output?