Question 1

Table 4-11
 $$\begin{array} { | c | c | } 
\hline \text { Demand } & \text { Supply } \
\hline P = 80 - Q ^ { \mathrm { D } } & P = 50 + 1 / 2 Q ^ { \mathrm { S } } \
\hline Q ^ { \mathrm { D } } = 80 - P & Q ^ { \mathrm { S } } = 2 P - 100 \
\hline
\end{array}$$
-Refer to Table 4-11.The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick.What are the equilibrium price and quantity (in thousands)for Chef Ernie's sushi?

Accepted Answer

A) $80 and 80 thousand 
B) $60 and 20 thousand 
C) $50 and 100 thousand 
D) $40 and 50 thousand

Question 2

Figure 4-3 shows Kendra's demand curve for ice cream cones.
-Refer to Figure 4-3.If the market price is $2.50,what is Kendra's consumer surplus?

Accepted Answer

A) $9.00 
B) $7.50 
C) $1.50 
D) $0

Question 3

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.

Question 4

Figure 4-8 shows the market for apartments in Springfield.Recently,the government imposed a rent ceiling of $1,000 per month.
-Refer to Figure 4-8.What is the value of producer surplus after the imposition of the ceiling?

Accepted Answer

A) $40,000 
B) $100,000 
C) $300,000 
D) $430,000

Question 5

Figure 4-6 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 4-6.What area represents consumer surplus at the equilibrium price of P1?

Accepted Answer

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

Question 6

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 7

Paul goes to Sportsmart to buy a new tennis racquet.He is willing to pay $200 for a new racquet,but buys one on sale for $125.Paul's consumer surplus from the purchase is

Accepted Answer

A) $325. 
B) $200. 
C) $125. 
D) $75.

Question 8

When Airbnb customers in Malibu start paying hotel taxes,this will have the potential to raise the equilibrium price in this market and,therefore,decrease efficiency.This would have a tendency to

Accepted Answer

A) decrease producer surplus and decrease deadweight loss. 
B) decrease consumer surplus and increase deadweight loss. 
C) increase consumer surplus and increase producer surplus. 
D) maximize consumer surplus and minimize producer surplus.

Question 9

The division of the burden of a tax between buyers and sellers in a market is called tax incidence.

Accepted Answer

A) True 
 B)False

Question 10

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?

Accepted Answer

A) Quantity demanded will decrease,quantity supplied will increase,and a surplus will result. 
B) Quantity demanded will increase,quantity supplied will decrease,and a surplus will result. 
C) Quantity demanded will decrease,quantity supplied will increase,and a shortage will result. 
D) Quantity demanded will increase,quantity supplied will decrease,and a shortage will result.

Question 11

Article Summary
Among a package of anti-smoking bills designed to lower California's health care costs by reducing the use of tobacco products is a bill sponsored by Dr.Richard Pan that would increase the tax on a pack of cigarettes by $2.California currently has a tobacco tax of 87-cents-per-pack,making California's tax 33rd in the nation and well below the New York state tax of $4.35 a pack.The state taxes are in addition to a $1.01 federal tax on cigarettes.The bill stipulates that the revenue collected must be used to increase the number of physicians in California as well as support existing health care programs managed by the state.A Field Poll taken one day following the announcement of the bill found that two-thirds of California voters support the increase in the cigarette tax.
-Refer to the Article Summary.The additional tax of $2 per pack of cigarettes being proposed by Senator Pan would have which of the following effects on the market for cigarettes in California?

Accepted Answer

A) Consumer surplus will decrease. 
B) Producer surplus will increase. 
C) Deadweight loss will decrease. 
D) Market efficiency will increase.

Question 12

Figure 4-4 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 4-4.What is the value of the deadweight loss at the equilibrium price of $15?

Accepted Answer

A) $0 
B) $40 
C) $60 
D) $100

Question 13

Marco goes to the pet store to buy a dozen Koi fish for his new Koi pond.He is willing to pay $200 for the dozen fish,but buys them for a total of $140.Marco's consumer surplus from the purchase is

Accepted Answer

A) $5. 
B) $60. 
C) $140. 
D) $200.

Question 14

Economists refer a to a market where buying and selling take place at prices that violate government price regulations as

Accepted Answer

A) a black market. 
B) an outlaw market. 
C) a noncompetitive market. 
D) a restricted market.

Question 15

Equilibrium in a competitive market results in the greatest amount of economic surplus from the production of a good or service.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following describes the difference between "scarcity" and "shortage"?

Accepted Answer

A) There is no difference;either word can be used to describe the situation that exists when there is less of a good or service available than people want. 
B) In the economic sense,almost everything is scarce.A shortage of a good or service occurs when the quantity demanded is greater than the quantity supplied at the current market price. 
C) There is a shortage of almost everything.Scarcity occurs only if the quantity demanded of a good or service is greater than the quantity supplied at the current market price. 
D) In the economic sense,almost everything is scarce.A shortage of a good or service occurs when the quantity demanded is greater than the quantity supplied at the equilibrium price.

Question 17

Increases in the minimum wage are intended to raise the incomes of low-income workers.Many economists favor a different policy to achieve this goal,a policy that avoids the deadweight losses that result from the minimum wage.What is this policy?

Accepted Answer

A) distribution of food stamps to low-income consumers 
B) distribution of vouchers that can be used for rent or mortgage payments 
C) the Alternative Minimum Tax 
D) the earned income tax credit

Question 18

Figure 4-10 shows the market for apartments in Bay City.Recently,the government imposed a rent ceiling at R0.
-Refer to Figure 4-10.What area represents the deadweight loss after the imposition of the ceiling?

Accepted Answer

A) G + H 
B) J + H 
C) C + E + J + H 
D) C + E

Question 19

Figure 4-2 
-Refer to Figure 4-2.What area represents producer surplus at a price of P2?

Accepted Answer

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

Question 20

Figure 4-15 shows the market for beer.The government plans to impose a per-unit tax in this market.
-Refer to Figure 4-15.The price buyers pay after the tax is

Accepted Answer

A) $7. 
B) $20. 
C) $22. 
D) $27.

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

Figure 4-3 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-3.If the market price is $2.50,what is Kendra's consumer surplus?

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 4-8 shows the market for apartments in Springfield.Recently,the government imposed a rent ceiling of $1,000 per month. -Refer to Figure 4-8.What is the value of producer surplus after the imposition of the ceiling?

Figure 4-6 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 4-6.What area represents consumer surplus at the equilibrium price of P1?