Question 1

Explain why a government would impose an import tariff when domestic consumers suffer more than producers gain.Q₂

Accepted Answer

The tariff may be a product of producer rent seeking.Each producer will gain a relatively large amount compared to the loss of each consumer.The producers may be able to coordinate their rent seeking activities.Each consumer will only lose a relatively small amount so it is unlikely that consumers will coordinate a protest to the tariff.

Question 2

-The above figure shows the market for rice in Japan.SDₒmₑstᵢc represents the domestic supply curve,and Swₒᵣld represents the world supply curve.If a $1 tariff is imposed on imported rice,the change in consumer surplus is

Accepted Answer

A)  c + d. 
B)  c + d +g. 
C)  a + b + c + d. 
D)  f + g. 
A)  c + d. 
B)  c + d +g. 
C)  a + b + c + d. 
D)  f + g. B

Question 3

-The above figure shows supply and demand curves for milk.If the government passes a law that establishes $3 per month as the legal minimum per gallon price,change in producer surplus will be

Accepted Answer

A)  b + c + d. 
B)  b - f - g. 
C)  c + d + g. 
D)  b - g. 
A)  b + c + d. 
B)  b - f - g. 
C)  c + d + g. 
D)  b - g. D

Question 4

Suppose an industry trade group has convinced legislators that a price floor should be used so that producer surplus is maximized in the market for milk.The group argues that such a policy would save the "family farm." Assuming a downward-sloping linear demand curve and a horizontal long-run supply curve,determine the resulting price,output and social welfare from such a policy.Compare this result to the competitive equilibrium.

Accepted Answer

Producer surplus is maximized at a price

Question 5

For the following, please answer "True" or "False" and explain why.
-In the long run,firms in a competitive market make zero economic profit.This induces most firms to leave the industry.

Accepted Answer

A) True 
 B)False

Question 6

-The above figure shows the demand and supply curves in the market for milk.Currently the market is in equilibrium.If the government establishes a $4 per gallon price support,estimate the change in p,Q,and social welfare.

Accepted Answer

Price rises to $4 per gallon.Consumers p

Question 7

A new law applied to a competitive market that requires that laid off workers be paid a large severance payment will

Accepted Answer

A)  not generate a deadweight loss. 
B)  increase total welfare. 
C)  increase consumer surplus in the market. 
D)  decrease consumer surplus in the market. 
A)  not generate a deadweight loss. 
B)  increase total welfare. 
C)  increase consumer surplus in the market. 
D)  decrease consumer surplus in the market.

Question 8

Suppose anyone with a driver's license is capable of supplying one trip from the airport to the downtown business center on any given day.The long-run supply curve of such trips is horizontal at p = $50,which is the average cost of such trips.Suppose daily demand is Q = 1000 - 10p.Calculate the change in consumer surplus,producer surplus and social welfare if the city government requires those people supplying such trips to possess a special license,and the government will issue only 300 licenses.

Accepted Answer

The competitive equilibrium is Q = 1000

Question 9

-The above figure shows supply and demand curves for apartment units in a large city.The area "e" represents

Accepted Answer

A)  the loss in producer surplus if a rent ceiling of $350 is imposed. 
B)  the total variable cost of supplying Q1 units. 
C)  the marginal cost of supplying Q1 units. 
D)  the total revenue received by supplying Q1 units. 
A)  the loss in producer surplus if a rent ceiling of $350 is imposed. 
B)  the total variable cost of supplying Q1 units. 
C)  the marginal cost of supplying Q1 units. 
D)  the total revenue received by supplying Q1 units.

Question 10

Giving presents on Christmas does NOT generate a deadweight loss if

Accepted Answer

A)  all gift are money. 
B)  everybody gets exactly want she wants. 
C)  nobody can be made better off by returning the gift and purchasing a different one. 
D)  All of the above. 
A)  all gift are money. 
B)  everybody gets exactly want she wants. 
C)  nobody can be made better off by returning the gift and purchasing a different one. 
D)  All of the above.

Question 11

The government requires the steel industry to adopt new eco-friendly machines,which cannot be used in other industries.If the machines are very expensive and the capital market does not work efficiently,then

Accepted Answer

A)  entrants are encouraged to enter the market and adopt the new machines. 
B)  firms can easily leave the steel industry without loss. 
C)  entrants are discouraged by the new requirements. 
D)  None of the above. 
A)  entrants are encouraged to enter the market and adopt the new machines. 
B)  firms can easily leave the steel industry without loss. 
C)  entrants are discouraged by the new requirements. 
D)  None of the above.

Question 12

If in a market the last unit of output was sold at a price higher than marginal cost,

Accepted Answer

A)  producers are better off producing more. 
B)  consumers are better off if less of the product is sold. 
C)  social welfare is not maximized. 
D)  the unit increased total profit. 
A)  producers are better off producing more. 
B)  consumers are better off if less of the product is sold. 
C)  social welfare is not maximized. 
D)  the unit increased total profit.

Question 13

-The above figure shows supply and demand curves for apartment units in a large city.The area "c" represents

Accepted Answer

A)  the loss in consumer surplus if a rent ceiling of $350 is imposed. 
B)  a transfer from producers to consumers if a rent ceiling of $350 is imposed. 
C)  a transfer from consumers to producers if a rent ceiling of $350 is imposed. 
D)  the total revenue received by supplying Q1 units. 
A)  the loss in consumer surplus if a rent ceiling of $350 is imposed. 
B)  a transfer from producers to consumers if a rent ceiling of $350 is imposed. 
C)  a transfer from consumers to producers if a rent ceiling of $350 is imposed. 
D)  the total revenue received by supplying Q1 units.

Question 14

A firm that generates zero economic profit usually faces

Accepted Answer

A)  negative business profit. 
B)  zero business profit. 
C)  positive business profit. 
D)  business profit equal to half the total revenue. 
A)  negative business profit. 
B)  zero business profit. 
C)  positive business profit. 
D)  business profit equal to half the total revenue.

Question 15

Suppose the inverse supply curve in a market is Q = 6p².What is the producer surplus when price is equal to 4?

Accepted Answer

A)  96 
B)  128 
C)  28 
D)  48 
A)  96 
B)  128 
C)  28 
D)  48

Question 16

-Suppose the market supply curve for wheat is shown in the above figure.Calculate the producer surplus when price is $2 per bushel.If legislation mandates that the price be $1 per bushel,what is the resulting loss in producer surplus?

Accepted Answer

At a price of $2,producer surplus equals

Question 17

Suppose the inverse supply curve in a market is Q=6p².If price decreases from 5 to 4,the change in producer surplus is

Accepted Answer

A)  150. 
B)  -54. 
C)  -6. 
D)  -122. 
A)  150. 
B)  -54. 
C)  -6. 
D)  -122.

Question 18

-The above figure shows supply and demand curves for apartment units in a large city.If the city government passes a law that establishes $350 per month as the legal maximum rent,producer surplus will be

Accepted Answer

A)  d. 
B)  d + e. 
C)  d + g. 
D)  d + c + g. 
A)  d. 
B)  d + e. 
C)  d + g. 
D)  d + c + g.

Question 19

When is the profit a firm earns equal to the producer surplus? Explain.

Accepted Answer

Profit equals producer surplus when the

Question 20

The services of real estate brokers are provided in a competitive market.If the state Board of Realtors enacts several requirements that limit the number of real estate brokers,then consumer surplus will most likely

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  There is not enough information to answer. 
A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  There is not enough information to answer.

Explain why a government would impose an import tariff when domestic consumers suffer more than producers gain.Q₂

-The above figure shows the market for rice in Japan.SDₒmₑstᵢc represents the domestic supply curve,and Swₒᵣld represents the world supply curve.If a $1 tariff is imposed on imported rice,the change in consumer surplus is

-The above figure shows supply and demand curves for milk.If the government passes a law that establishes $3 per month as the legal minimum per gallon price,change in producer surplus will be

For the following, please answer "True" or "False" and explain why. -In the long run,firms in a competitive market make zero economic profit.This induces most firms to leave the industry.

-The above figure shows the demand and supply curves in the market for milk.Currently the market is in equilibrium.If the government establishes a $4 per gallon price support,estimate the change in p,Q,and social welfare.

A new law applied to a competitive market that requires that laid off workers be paid a large severance payment will

-The above figure shows supply and demand curves for apartment units in a large city.The area "e" represents

Giving presents on Christmas does NOT generate a deadweight loss if

The government requires the steel industry to adopt new eco-friendly machines,which cannot be used in other industries.If the machines are very expensive and the capital market does not work efficiently,then

If in a market the last unit of output was sold at a price higher than marginal cost,

-The above figure shows supply and demand curves for apartment units in a large city.The area "c" represents

A firm that generates zero economic profit usually faces

Suppose the inverse supply curve in a market is Q = 6p².What is the producer surplus when price is equal to 4?

-Suppose the market supply curve for wheat is shown in the above figure.Calculate the producer surplus when price is $2 per bushel.If legislation mandates that the price be $1 per bushel,what is the resulting loss in producer surplus?

Suppose the inverse supply curve in a market is Q=6p².If price decreases from 5 to 4,the change in producer surplus is

-The above figure shows supply and demand curves for apartment units in a large city.If the city government passes a law that establishes $350 per month as the legal maximum rent,producer surplus will be

When is the profit a firm earns equal to the producer surplus? Explain.

The services of real estate brokers are provided in a competitive market.If the state Board of Realtors enacts several requirements that limit the number of real estate brokers,then consumer surplus will most likely

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, externalities, rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 9: Properties and Applications of the Competitive Model

Explain why a government would impose an import tariff when domestic consumers suffer more than producers gain.Q₂

-The above figure shows the market for rice in Japan.SDₒmₑstᵢc represents the domestic supply curve,and Swₒᵣld represents the world supply curve.If a $1 tariff is imposed on imported rice,the change in consumer surplus is

-The above figure shows supply and demand curves for milk.If the government passes a law that establishes $3 per month as the legal minimum per gallon price,change in producer surplus will be

For the following, please answer "True" or "False" and explain why. -In the long run,firms in a competitive market make zero economic profit.This induces most firms to leave the industry.

-The above figure shows the demand and supply curves in the market for milk.Currently the market is in equilibrium.If the government establishes a $4 per gallon price support,estimate the change in p,Q,and social welfare.

A new law applied to a competitive market that requires that laid off workers be paid a large severance payment will

-The above figure shows supply and demand curves for apartment units in a large city.The area "e" represents

Giving presents on Christmas does NOT generate a deadweight loss if

The government requires the steel industry to adopt new eco-friendly machines,which cannot be used in other industries.If the machines are very expensive and the capital market does not work efficiently,then

If in a market the last unit of output was sold at a price higher than marginal cost,

-The above figure shows supply and demand curves for apartment units in a large city.The area "c" represents

A firm that generates zero economic profit usually faces

Suppose the inverse supply curve in a market is Q = 6p².What is the producer surplus when price is equal to 4?

-Suppose the market supply curve for wheat is shown in the above figure.Calculate the producer surplus when price is $2 per bushel.If legislation mandates that the price be $1 per bushel,what is the resulting loss in producer surplus?

Suppose the inverse supply curve in a market is Q=6p².If price decreases from 5 to 4,the change in producer surplus is

-The above figure shows supply and demand curves for apartment units in a large city.If the city government passes a law that establishes $350 per month as the legal maximum rent,producer surplus will be

When is the profit a firm earns equal to the producer surplus? Explain.

The services of real estate brokers are provided in a competitive market.If the state Board of Realtors enacts several requirements that limit the number of real estate brokers,then consumer surplus will most likely

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, externalities, rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters