Exam 4: Market Efficiency and Market Failure

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.At a price of $18 consumers are willing to buy 40 pounds of tiger shrimp.Is this an economically efficient quantity?

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 deadweight loss after the imposition of the price floor?

Willingness to pay measures

The 2005 European Union Emission Trading Scheme is an agreement among 24 European Union nations to

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 consumer surplus at a price of $18??

Consider the following methods of pollution reduction: a.the government sets a target for maximum emissions B.the government mandates the installation of specific pollution abatement equipment C.the government imposes a per unit tax on the good that creates pollution D.the government gives firms a tax rebate for every unit of pollution abated Which of the above is an example of a command and control approach to reducing pollution?

Will equilibrium in a market always result in an outcome that is economically efficient? Explain.

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 producer surplus at a price of $18??

One problem with using a command and control approach to pollution reduction is that the monitoring costs may be too high.

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 price of cowboy hats increases from $38 to $46

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 consumer surplus on the third burrito?

Which of the following statements is true?

What is a private cost of production? What is a social cost of production? When is the private cost of production equal to the social cost of production?

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 producer surplus after the imposition of the ceiling?

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?

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

________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium.

When there is a positive externality in a free market,too much of the good is produced and consumed.

Figure 4-9 Figure 4-9 shows a market with a negative externality. -Refer to Figure 4-9.The deadweight loss due to the externality is represented by the area

The area ________ the market supply curve and ________ the market price is equal to the total amount of producer surplus in a market.