Question 1

When a tax is imposed on the producers of a product, which of the following is incorrect?

Accepted Answer

A) The consumers and producers each bear some part of the burden. 
B) If the demand curve is relatively inelastic, the burden borne by consumers increases. 
C) If the supply curve is relatively elastic, the burden borne by consumers increases. 
D) If the tax is levied on producers, the producers bear the burden of the tax; if the tax is levied on consumers, the consumers bear the burden of the tax. 
A) The consumers and producers each bear some part of the burden. 
B) If the demand curve is relatively inelastic, the burden borne by consumers increases. 
C) If the supply curve is relatively elastic, the burden borne by consumers increases. 
D) If the tax is levied on producers, the producers bear the burden of the tax; if the tax is levied on consumers, the consumers bear the burden of the tax.

Question 2

When a perfectly competitive market is in equilibrium, consumer and producer surplus are maximized.

Accepted Answer

A) True 
 B)False

Question 3

Partial equilibrium analysis determines equilibrium in a single market, taking the prices and outputs of other markets as fixed.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is false?

Accepted Answer

A) With a price floor, the market will not clear. 
B) With a price floor, consumers will buy less of the good than they would in a free market. 
C) With a price floor, producer surplus will always increase. 
D) With a price floor there will be excess supply. 
A) With a price floor, the market will not clear. 
B) With a price floor, consumers will buy less of the good than they would in a free market. 
C) With a price floor, producer surplus will always increase. 
D) With a price floor there will be excess supply.

Question 5

Government purchase programs in agriculture tend not to be more expensive than acreage limitation programs.

Accepted Answer

A) True 
 B)False

Question 6

When a tax is imposed on the producers of a product, if the supply curve is relatively elastic, the burden borne by consumers increases.

Accepted Answer

A) True 
 B)False

Question 7

When a tax is imposed on the producers of a product, if the demand curve is relatively inelastic, the burden borne by consumers increases.

Accepted Answer

A) True 
 B)False

Question 8

With a price floor, producer surplus will always increase.

Accepted Answer

A) True 
 B)False

Question 9

-Based on the graph above, suppose the government sets a price ceiling of $50 in this market. What is the maximum level of consumer surplus with the price ceiling?

Accepted Answer

A) 16,875 
B) 11,250 
C) 8,437.50 
D) 4,687.50 
A) 16,875 
B) 11,250 
C) 8,437.50 
D) 4,687.50

Question 10

In a perfectly competitive market, a tariff:

Accepted Answer

A) is another term for an excise tax imposed on any good. 
B) sets the price of an imported good. 
C) is a tax on an imported good. 
D) is the same as an import quota. 
A) is another term for an excise tax imposed on any good. 
B) sets the price of an imported good. 
C) is a tax on an imported good. 
D) is the same as an import quota.

Question 11

The domestic market for calculators is perfectly competitive and is in equilibrium. Domestic demand is given by $Q ^ { d } = 100 - P$ and domestic supply is given by $Q ^ { s } = 4 P$. The world price for calculators is $\$ 10$. How many units of calculators will be imported?

Accepted Answer

A)  0 
B)  10 
C)  30 
D)  50 
A)  0 
B)  10 
C)  30 
D)  50

Question 12

When a perfectly competitive market is in equilibrium, price is maximized.

Accepted Answer

A) True 
 B)False

Question 13

Consider a perfectly competitive market with market supply $Q ^ { s } = - 2 + P$ and market demand $Q ^ { d } = 30 - P$. Suppose the government imposes an excise tax of $\$ 4$ per unit on this market.
What is total surplus (consumer surplus plus producer surplus) after the government imposes the tax?

Accepted Answer

A)  72 
B)  98 
C)  144 
D)  196 
A)  72 
B)  98 
C)  144 
D)  196

Question 14

Suppose that the market for cigarettes is initially in equilibrium and is perfectly competitive. The demand curve can be expressed as $P = 60 - Q ^ { d }$; the supply curve can be expressed as $P =$ $0.5 Q ^ { s }$. Quantity is expressed in millions of boxes per month. Now suppose that the federal government imposes a production quota on cigarettes of 30 million boxes per month. What is the deadweight loss (per million boxes) associated with the quota?

Accepted Answer

A)  $\$ 275$ 
B)  $\$ 75$ 
C)  $\$ 50$ 
D)  $\$ 25$ 
A)  $\$ 275$ 
B)  $\$ 75$ 
C)  $\$ 50$ 
D)  $\$ 25$

Question 15

When a perfectly competitive market is in equilibrium, quantity is maximized.

Accepted Answer

A) True 
 B)False

Question 16

In a perfectly competitive market, an import quota:

Accepted Answer

A) sets a minimum level of production that domestic firms must produce. 
B) sets a minimum level of imports for a country. 
C) sets a maximum level of production that domestic firms may produce. 
D) sets a maximum level of imports into a country. 
A) sets a minimum level of production that domestic firms must produce. 
B) sets a minimum level of imports for a country. 
C) sets a maximum level of production that domestic firms may produce. 
D) sets a maximum level of imports into a country.

Question 17

With a price floor, consumers will buy less of the good than they would in a free market.

Accepted Answer

A) True 
 B)False

Question 18

Suppose the government decides to create a price support (floor)on the price of corn. A non-binding price support/floor below the equilibrium price in the market will also lead to a rise in the price of corn.

Accepted Answer

A) True 
 B)False

Question 19

When a perfectly competitive market is in equilibrium, deadweight loss is positive.

Accepted Answer

A) True 
 B)False

Question 20

The domestic market for calculators is perfectly competitive and is in equilibrium. Domestic demand is given by $Q ^ { d } = 100 - P$ and domestic supply is given by $Q ^ { s } = 4 P$. The world price for calculators is $\$ 10$. Now, a tariff of $\$ 10$ is imposed on all imports. How many units of calculators will be imported now?

Accepted Answer

A)  0 
B)  10 
C)  30 
D)  50 
A)  0 
B)  10 
C)  30 
D)  50

When a tax is imposed on the producers of a product, which of the following is incorrect?

When a perfectly competitive market is in equilibrium, consumer and producer surplus are maximized.

Partial equilibrium analysis determines equilibrium in a single market, taking the prices and outputs of other markets as fixed.

Which of the following statements is false?

Government purchase programs in agriculture tend not to be more expensive than acreage limitation programs.

When a tax is imposed on the producers of a product, if the supply curve is relatively elastic, the burden borne by consumers increases.

When a tax is imposed on the producers of a product, if the demand curve is relatively inelastic, the burden borne by consumers increases.

With a price floor, producer surplus will always increase.

-Based on the graph above, suppose the government sets a price ceiling of $50 in this market. What is the maximum level of consumer surplus with the price ceiling?

In a perfectly competitive market, a tariff:

The domestic market for calculators is perfectly competitive and is in equilibrium. Domestic demand is given by $Q ^ { d } = 100 - P$ and domestic supply is given by $Q ^ { s } = 4 P$ . The world price for calculators is $\$ 10$ . How many units of calculators will be imported?

When a perfectly competitive market is in equilibrium, price is maximized.

When a perfectly competitive market is in equilibrium, quantity is maximized.

In a perfectly competitive market, an import quota:

With a price floor, consumers will buy less of the good than they would in a free market.

Suppose the government decides to create a price support (floor)on the price of corn. A non-binding price support/floor below the equilibrium price in the market will also lead to a rise in the price of corn.

When a perfectly competitive market is in equilibrium, deadweight loss is positive.

Analyzing Economic Problems

Demand and Supply Analysis

Consumer Preferences and the Concept of Utility

Consumer Choice

The Theory of Demand

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Monopoly and Monopsony

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Externalities and Public Goods

Filters

Exam 10: Competitive Markets: Applications

When a tax is imposed on the producers of a product, which of the following is incorrect?

When a perfectly competitive market is in equilibrium, consumer and producer surplus are maximized.

Partial equilibrium analysis determines equilibrium in a single market, taking the prices and outputs of other markets as fixed.

Which of the following statements is false?

Government purchase programs in agriculture tend not to be more expensive than acreage limitation programs.

When a tax is imposed on the producers of a product, if the supply curve is relatively elastic, the burden borne by consumers increases.

When a tax is imposed on the producers of a product, if the demand curve is relatively inelastic, the burden borne by consumers increases.

With a price floor, producer surplus will always increase.

-Based on the graph above, suppose the government sets a price ceiling of $50 in this market. What is the maximum level of consumer surplus with the price ceiling?

In a perfectly competitive market, a tariff:

When a perfectly competitive market is in equilibrium, price is maximized.

When a perfectly competitive market is in equilibrium, quantity is maximized.

In a perfectly competitive market, an import quota:

With a price floor, consumers will buy less of the good than they would in a free market.

Suppose the government decides to create a price support (floor)on the price of corn. A non-binding price support/floor below the equilibrium price in the market will also lead to a rise in the price of corn.

When a perfectly competitive market is in equilibrium, deadweight loss is positive.

Analyzing Economic Problems

Demand and Supply Analysis

Consumer Preferences and the Concept of Utility

Consumer Choice

The Theory of Demand

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Monopoly and Monopsony

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Externalities and Public Goods

Filters