Question 1

Market equilibrium is achieved when consumer surplus is equal to producer surplus.

Accepted Answer

A) True 
 B)False  False

Question 2

Exhibit 7-10  
-Refer to Exhibit 7-10. What would the tax revenue be if the government imposed on producers a tax of $3 per unit sold?

Accepted Answer

A) $135 
B) $150 
C) $180 
D) $105 
E) $120 
A) $135 
B) $150 
C) $180 
D) $105 
E) $120 B

Question 3

A tax on a good results in no deadweight loss if consumers and producers share the benefits of the tax revenues.

Accepted Answer

A) True 
 B)False  False

Question 4

In a market, the sum of producer and consumer surplus is maximized when marginal benefit is greater than marginal cost.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 7-10  
-Refer to Exhibit 7-10. If the government imposed on consumers a tax of $3 per unit bought, the tax revenue would be

Accepted Answer

A) $150. 
B) $120. 
C) $135. 
D) $180. 
E) $165. 
A) $150. 
B) $120. 
C) $135. 
D) $180. 
E) $165.

Question 6

An ad valorem tax

Accepted Answer

A) is proportionate to the quantity of a good sold. 
B) increases supply by shifting the curve up. 
C) is a percentage tax on the total value of sales. 
D) is a tax that is paid only by producers. 
E) is a per-unit tax on a good. 
A) is proportionate to the quantity of a good sold. 
B) increases supply by shifting the curve up. 
C) is a percentage tax on the total value of sales. 
D) is a tax that is paid only by producers. 
E) is a per-unit tax on a good.

Question 7

Deadweight loss

Accepted Answer

A) results when marginal benefits and marginal costs are not equal. 
B) is measured by calculating the costs of government. 
C) results when competitive markets are in equilibrium. 
D) is a by-product of Pareto efficiency. 
E) is the cost of protecting private property rights. 
A) results when marginal benefits and marginal costs are not equal. 
B) is measured by calculating the costs of government. 
C) results when competitive markets are in equilibrium. 
D) is a by-product of Pareto efficiency. 
E) is the cost of protecting private property rights.

Question 8

Exhibit 7-11  
-A competitive equilibrium model does a good job of predicting the effects of the introduction of a new tax on a good or service.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements is true?

Accepted Answer

A) In a market system, costs and benefits are publicly posted by individual participants. 
B) In a nonmarket system, individuals voluntarily sacrifice self-interest. 
C) Only in a market system does greed play a motivational role. 
D) It is easy to calculate costs and benefits in a market system. 
E) Regardless of the economic system, it is difficult to measure all costs and benefits. 
A) In a market system, costs and benefits are publicly posted by individual participants. 
B) In a nonmarket system, individuals voluntarily sacrifice self-interest. 
C) Only in a market system does greed play a motivational role. 
D) It is easy to calculate costs and benefits in a market system. 
E) Regardless of the economic system, it is difficult to measure all costs and benefits.

Question 10

When a tax is assessed on producers,

Accepted Answer

A) the amount of the product traded does not change because demand is unaffected. 
B) the price of the product does not change because the tax is on producers. 
C) consumers bear the brunt of the tax because producers simply pass their costs on to the buyers of the good. 
D) the price of the product always goes up by the amount of the tax. 
E) the product price typically does not rise by the full amount of the tax. 
A) the amount of the product traded does not change because demand is unaffected. 
B) the price of the product does not change because the tax is on producers. 
C) consumers bear the brunt of the tax because producers simply pass their costs on to the buyers of the good. 
D) the price of the product always goes up by the amount of the tax. 
E) the product price typically does not rise by the full amount of the tax.

Question 11

Exhibit 7-1  
-Refer to Exhibit 7-1. Firm A has much higher costs of production, and under no circumstances should it produce when Firm B is already producing.

Accepted Answer

A) True 
 B)False

Question 12

The competitive equilibrium model gets its name from the

Accepted Answer

A) fact that the number of participants eliminated from the market equals the number of new participants. 
B) competition between buyers and sellers, each trying to drive the other out of business. 
C) competition between buyers and sellers, which establishes a market price equating the amounts people wish to buy and sell. 
D) steady-state nature of the model, in which prices can never change. 
E) way that the government is trying to balance the market's supply and demand forces. 
A) fact that the number of participants eliminated from the market equals the number of new participants. 
B) competition between buyers and sellers, each trying to drive the other out of business. 
C) competition between buyers and sellers, which establishes a market price equating the amounts people wish to buy and sell. 
D) steady-state nature of the model, in which prices can never change. 
E) way that the government is trying to balance the market's supply and demand forces.

Question 13

The "invisible hand" is a term coined by

Accepted Answer

A) Adam Smith. 
B) Benjamin Franklin. 
C) George Washington. 
D) Robert E.Lee. 
E) Abraham Lincoln. 
A) Adam Smith. 
B) Benjamin Franklin. 
C) George Washington. 
D) Robert E.Lee. 
E) Abraham Lincoln.

Question 14

Exhibit 7-6  
-Refer to Exhibit 7-6. The deadweight loss that results from a minimum price of $50 being established in the market is

Accepted Answer

A) $2,000. 
B) $6,000. 
C) $4,000. 
D) $14,000. 
E) $10,000. 
A) $2,000. 
B) $6,000. 
C) $4,000. 
D) $14,000. 
E) $10,000.

Question 15

All of the following are conditions of Pareto efficiency except

Accepted Answer

A) price equals marginal benefit. 
B) marginal benefit is the same for all consumers. 
C) marginal cost is the same for all producers. 
D) income is the same for all consumers and producers. 
E) marginal benefit equals marginal cost. 
A) price equals marginal benefit. 
B) marginal benefit is the same for all consumers. 
C) marginal cost is the same for all producers. 
D) income is the same for all consumers and producers. 
E) marginal benefit equals marginal cost.

Question 16

Exhibit 7-10  
-Refer to Exhibit 7-10. What would the new equilibrium quantity be if the government assessed on producers a tax of $3 per unit sold?

Accepted Answer

A) 55 
B) 40 
C) 50 
D) 60 
E) 45 
A) 55 
B) 40 
C) 50 
D) 60 
E) 45

Question 17

The equilibrium price in a competitive equilibrium model is determined by supply and demand.

Accepted Answer

A) True 
 B)False

Question 18

Without market coordination,

Accepted Answer

A) prices are entirely ignored. 
B) only that which is good for a society as a whole is produced. 
C) it is difficult for individuals to communicate costs and benefits. 
D) money is not used. 
E) self-interest ceases to be a motivating factor. 
A) prices are entirely ignored. 
B) only that which is good for a society as a whole is produced. 
C) it is difficult for individuals to communicate costs and benefits. 
D) money is not used. 
E) self-interest ceases to be a motivating factor.

Question 19

A tax that is assessed on producers has no effect on a product's price if

Accepted Answer

A) demand is perfectly inelastic. 
B) demand is perfectly elastic. 
C) demand is unit elastic. 
D) supply is unit elastic. 
E) supply is perfectly elastic. 
A) demand is perfectly inelastic. 
B) demand is perfectly elastic. 
C) demand is unit elastic. 
D) supply is unit elastic. 
E) supply is perfectly elastic.

Question 20

In economics, income inequality means Pareto inefficiency.

Accepted Answer

A) True 
 B)False

Exam 7: The Efficiency of Markets

Market equilibrium is achieved when consumer surplus is equal to producer surplus.

Exhibit 7-10 -Refer to Exhibit 7-10. What would the tax revenue be if the government imposed on producers a tax of $3 per unit sold?

A tax on a good results in no deadweight loss if consumers and producers share the benefits of the tax revenues.

In a market, the sum of producer and consumer surplus is maximized when marginal benefit is greater than marginal cost.

Exhibit 7-10 -Refer to Exhibit 7-10. If the government imposed on consumers a tax of $3 per unit bought, the tax revenue would be

An ad valorem tax

Deadweight loss

Exhibit 7-11 -A competitive equilibrium model does a good job of predicting the effects of the introduction of a new tax on a good or service.

Which of the following statements is true?

When a tax is assessed on producers,

Exhibit 7-1 -Refer to Exhibit 7-1. Firm A has much higher costs of production, and under no circumstances should it produce when Firm B is already producing.

The competitive equilibrium model gets its name from the

The "invisible hand" is a term coined by

Exhibit 7-6 -Refer to Exhibit 7-6. The deadweight loss that results from a minimum price of $50 being established in the market is

All of the following are conditions of Pareto efficiency except

Exhibit 7-10 -Refer to Exhibit 7-10. What would the new equilibrium quantity be if the government assessed on producers a tax of $3 per unit sold?

The equilibrium price in a competitive equilibrium model is determined by supply and demand.

Without market coordination,

A tax that is assessed on producers has no effect on a product's price if

In economics, income inequality means Pareto inefficiency.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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