Question 1

Figure 4-3  Figure 4-3 shows the market for granola.The market is initially in equilibrium at a price of PS1U1B11S1U1B0 and a quantity of QS1U1B11S1U1B0.Now suppose producers decide to cut output to QS1U1B12 S1U1B0in order to raise the price to PS1U1B12.S1U1B0
-Refer to Figure 4-3.What area represents consumer surplus at P2?

Accepted Answer

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

Question 2

In order to be binding,a price floor

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.

Question 3

Producer surplus is the difference between the highest price someone is willing to pay and the price he actually pays.

Accepted Answer

A) True 
 B)False

Question 4

What area on a supply and demand graph represents producer surplus?

Accepted Answer

The answer of What area on a supply and demand...

Question 5

Table 4-6
 
-Refer to Table 4-6.The equations above describe the demand and supply for Aunt Maud's Premium Hand Lotion.The equilibrium price and quantity for Aunt Maud's lotion are $20 and 30 thousand units.What is the value of consumer surplus?

Accepted Answer

A) $300 thousand 
B) $450 thousand 
C) $900 thousand 
D) $1,500 thousand

Question 6

What is meant by the term "economic efficiency"?

Accepted Answer

The answer of What is meant by the term "economic...

Question 7

Figure 4-1  Figure 4-1 shows Kendra's demand curve for ice cream cones.
-Refer to Figure 4-1.If the market price is $4.00,what is the maximum number of ice cream cones that Kendra will buy?

Accepted Answer

A) 0 
B) 2 
C) 3 
D) 4

Question 8

Figure 4-9  Figure 4-9 shows the market for cigarettes.The government plans to impose a per-unit tax in this market.
-Refer to Figure 4-9.How much of the tax is paid by producers?

Accepted Answer

A) $45 
B) $8 
C) $3 
D) $2

Question 9

Figure 4-4 
-Refer to Figure 4-4.The figure above represents the market for iced tea.Assume that this is a competitive market.At an output of 30,000 units

Accepted Answer

A) the marginal cost of iced tea is greater than the marginal benefit; therefore,output is inefficiently high. 
B) producers should raise the price to $3 in order to sell the quantity demanded of 30,000. 
C) the marginal benefit of iced tea is greater than the marginal cost; therefore,output is inefficiently low. 
D) the marginal benefit of iced tea is greater than the marginal cost; therefore,output is inefficiently high.

Question 10

The following equations represent the demand and supply for kumquats. QD = 60 - 3P
QS = -20 + 5P
What is the equilibrium price (P)and quantity (Q - in thousands)of kumquats?

Accepted Answer

A) P = $5; Q = 20 thousand 
B) P = $30; Q = 5 thousand 
C) P = $20; Q = 10 thousand 
D) P = $10; Q = 30 thousand

Question 11

Table 4-5
  Table 4-5 above contains information about the wheat market.Answer the following questions based on this table.
-Refer to Table 4-5.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 wheat at $21 per bushel.
a.What is the amount of shortage or surplus in the wheat market as result of the price floor?
b.If the government agrees to purchase any surplus output at $21,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 wheat 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 wheat buyers prefer?

Accepted Answer

The answer of Table 4-5
  Table 4-5 above contains...

Question 12

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

Accepted Answer

A) The price would decrease,the quantity supplied would increase,and the quantity demanded would decrease. 
B) The quantity supplied would decrease,the quantity demanded would increase,and the equilibrium price would decrease. 
C) The price would decrease,the demand would increase,and the supply would decrease. 
D) The price would decrease,quantity demanded would increase,and quantity supplied would decrease.

Question 13

Figure 4-1  Figure 4-1 shows Kendra's demand curve for ice cream cones.
-Refer to Figure 4-1.If the market price is $2.50,what is the consumer surplus on the third ice cream cone?

Accepted Answer

A) $0 
B) $0.50 
C) $1.50 
D) $2.50

Question 14

Figure 4-1  Figure 4-1 shows Kendra's demand curve for ice cream cones.
-Refer to Figure 4-1.What is the total amount that Kendra is willing to pay for 2 ice cream cones?

Accepted Answer

A) $1.50 
B) $3.00 
C) $5.50 
D) $6.50

Question 15

In a competitive market when there is no deadweight loss

Accepted Answer

A) consumer surplus is minimized. 
B) producer surplus is minimized. 
C) consumer surplus plus producer surplus is minimized. 
D) consumer surplus plus producer surplus is maximized.

Question 16

Figure 4-1  Figure 4-1 shows Kendra's demand curve for ice cream cones.
-Refer to Figure 4-1.If the market price is $3.50,what is the maximum number of ice cream cones that Kendra will buy?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4

Question 17

The market price for coffee is $2.25 per cup.Austin is willing to pay $5.00 per cup,Colin is willing to pay $4.00 per cup,Lucy is willing to pay $3.00 per cup,and Ike is willing to pay $2.00 per cup.Construct a graph showing the consumer surplus for each cup of coffee purchased.How many cups of coffee will be purchased? What is the value of the consumer surplus each of the four consumers receives from their coffee purchases?

Accepted Answer

The answer of The market price for coffee is $2.25...

Question 18

Figure 4-1  Figure 4-1 shows Kendra's demand curve for ice cream cones.
-Refer to Figure 4-1.If the market price is $2.50,what is the consumer surplus on the first ice cream cone?

Accepted Answer

A) $0.50 
B) $1.00 
C) $3.50 
D) $9.00

Question 19

In a competitive market the ________ curve shows the marginal benefit received by consumers and the ________ curve shows the marginal cost to producers.

Accepted Answer

A) demand; supply 
B) supply; demand 
C) demand; market demand 
D) supply; market supply

Question 20

If the price of toothpaste is represented by equation P = 40 - .5QD,then the corresponding quantity of toothpaste demanded is represented by the equation

Accepted Answer

A) QD = 20 - .5P.  
B) QD = 40 - P.  
C) QD = 80 - 2P.  
D) QD = -20 + P.

Exam 4: Economic Efficiency, Government Price Setting, and Taxes

Figure 4-3 Figure 4-3 shows the market for granola.The market is initially in equilibrium at a price of P₁ and a quantity of Q₁.Now suppose producers decide to cut output to Q₂in order to raise the price to P_2. -Refer to Figure 4-3.What area represents consumer surplus at P₂?

In order to be binding,a price floor

Producer surplus is the difference between the highest price someone is willing to pay and the price he actually pays.

What area on a supply and demand graph represents producer surplus?

Table 4-6 -Refer to Table 4-6.The equations above describe the demand and supply for Aunt Maud's Premium Hand Lotion.The equilibrium price and quantity for Aunt Maud's lotion are $20 and 30 thousand units.What is the value of consumer surplus?

What is meant by the term "economic efficiency"?

Figure 4-1 Figure 4-1 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-1.If the market price is $4.00,what is the maximum number of ice cream cones that Kendra will buy?

Figure 4-9 Figure 4-9 shows the market for cigarettes.The government plans to impose a per-unit tax in this market. -Refer to Figure 4-9.How much of the tax is paid by producers?

Figure 4-4 -Refer to Figure 4-4.The figure above represents the market for iced tea.Assume that this is a competitive market.At an output of 30,000 units

The following equations represent the demand and supply for kumquats. Q_D = 60 - 3P Q_S = -20 + 5P What is the equilibrium price (P) and quantity (Q - in thousands) of kumquats?

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

Figure 4-1 Figure 4-1 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-1.If the market price is $2.50,what is the consumer surplus on the third ice cream cone?

Figure 4-1 Figure 4-1 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-1.What is the total amount that Kendra is willing to pay for 2 ice cream cones?

In a competitive market when there is no deadweight loss

Figure 4-1 Figure 4-1 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-1.If the market price is $3.50,what is the maximum number of ice cream cones that Kendra will buy?

Figure 4-1 Figure 4-1 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-1.If the market price is $2.50,what is the consumer surplus on the first ice cream cone?

In a competitive market the curve shows the marginal benefit received by consumers and the curve shows the marginal cost to producers.

If the price of toothpaste is represented by equation P = 40 - .5Q_D,then the corresponding quantity of toothpaste demanded is represented by the equation

Exam 4: Economic Efficiency, Government Price Setting, and Taxes

Figure 4-3 Figure 4-3 shows the market for granola.The market is initially in equilibrium at a price of P1 and a quantity of Q1.Now suppose producers decide to cut output to Q2 in order to raise the price to P2. -Refer to Figure 4-3.What area represents consumer surplus at P2?

In order to be binding,a price floor

Producer surplus is the difference between the highest price someone is willing to pay and the price he actually pays.

What area on a supply and demand graph represents producer surplus?

Table 4-6 -Refer to Table 4-6.The equations above describe the demand and supply for Aunt Maud's Premium Hand Lotion.The equilibrium price and quantity for Aunt Maud's lotion are $20 and 30 thousand units.What is the value of consumer surplus?

What is meant by the term "economic efficiency"?

Figure 4-1 Figure 4-1 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-1.If the market price is $4.00,what is the maximum number of ice cream cones that Kendra will buy?

Figure 4-9 Figure 4-9 shows the market for cigarettes.The government plans to impose a per-unit tax in this market. -Refer to Figure 4-9.How much of the tax is paid by producers?

Figure 4-4 -Refer to Figure 4-4.The figure above represents the market for iced tea.Assume that this is a competitive market.At an output of 30,000 units

The following equations represent the demand and supply for kumquats. QD = 60 - 3P QS = -20 + 5P What is the equilibrium price (P) and quantity (Q - in thousands) of kumquats?

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

Figure 4-1 Figure 4-1 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-1.If the market price is $2.50,what is the consumer surplus on the third ice cream cone?

Figure 4-1 Figure 4-1 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-1.What is the total amount that Kendra is willing to pay for 2 ice cream cones?

In a competitive market when there is no deadweight loss

Figure 4-1 Figure 4-1 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-1.If the market price is $3.50,what is the maximum number of ice cream cones that Kendra will buy?

Figure 4-1 Figure 4-1 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-1.If the market price is $2.50,what is the consumer surplus on the first ice cream cone?

In a competitive market the ________ curve shows the marginal benefit received by consumers and the ________ curve shows the marginal cost to producers.

If the price of toothpaste is represented by equation P = 40 - .5QD,then the corresponding quantity of toothpaste demanded is represented by the equation

Figure 4-3 Figure 4-3 shows the market for granola.The market is initially in equilibrium at a price of P₁ and a quantity of Q₁.Now suppose producers decide to cut output to Q₂in order to raise the price to P_2. -Refer to Figure 4-3.What area represents consumer surplus at P₂?

The following equations represent the demand and supply for kumquats. Q_D = 60 - 3P Q_S = -20 + 5P What is the equilibrium price (P) and quantity (Q - in thousands) of kumquats?

In a competitive market the curve shows the marginal benefit received by consumers and the curve shows the marginal cost to producers.

If the price of toothpaste is represented by equation P = 40 - .5Q_D,then the corresponding quantity of toothpaste demanded is represented by the equation