Question 1

Issuing a fixed number of licenses to operate a taxicab in a city would mean that the number of:

Accepted Answer

A) cabs and fares are both above the efficient level. 
B) cabs is less than the efficient quantity and fares are above free-market levels. 
C) cabs is above the efficient level and fares are depressed below the free-market level. 
D) cabs and fares are both below the efficient level. 
A) cabs and fares are both above the efficient level. 
B) cabs is less than the efficient quantity and fares are above free-market levels. 
C) cabs is above the efficient level and fares are depressed below the free-market level. 
D) cabs and fares are both below the efficient level.

Question 2

The following figure shows the effect of a price ceiling in the market for yams.The market was initially in equilibrium at price PS1U1B12 S1U1B0and quantity B.
Figure 10-1  
-Refer to Figure 10-1.The total surplus at the initial point of equilibrium,F,is given by _____.

Accepted Answer

A) LFP2 
B) LFGP1 
C) LFM 
D) LFIP1 
A) LFP2 
B) LFGP1 
C) LFM 
D) LFIP1

Question 3

Is the outcome of a competitive market efficient? Explain with the help of a graph.

Accepted Answer

The equilibrium level of output in a com

Question 4

A rent control has been imposed on the market for rental housing in a country.If the long run supply curve in this competitive market is more price elastic than the short run supply curve,it implies that:

Accepted Answer

A) the deadweight loss of the rent control is higher in the long run compared to the short run. 
B) the deadweight loss of the rent control is higher in the short run compared to the long run. 
C) the deadweight loss of the rent control is zero in the long run. 
D) the deadweight loss of the rent control is zero in the short run. 
A) the deadweight loss of the rent control is higher in the long run compared to the short run. 
B) the deadweight loss of the rent control is higher in the short run compared to the long run. 
C) the deadweight loss of the rent control is zero in the long run. 
D) the deadweight loss of the rent control is zero in the short run.

Question 5

In the short run,an excise tax placed on all firms in an increasing-cost competitive industry will result in:

Accepted Answer

A) a fall in price and an increase in output. 
B) an increase in output and a fall in price. 
C) a fall in both price and output. 
D) an increase in price and a fall in output. 
A) a fall in price and an increase in output. 
B) an increase in output and a fall in price. 
C) a fall in both price and output. 
D) an increase in price and a fall in output.

Question 6

Suppose an increasing-cost competitive industry is in equilibrium at a price of $100 and an output of 1,000 units.When a price ceiling of $80 is imposed the quantity traded in the market reduces to 800 units.Which of the following is true?

Accepted Answer

A) Consumer surplus will increase and producer surplus will fall,but total surplus stays the same. 
B) Consumer surplus will fall and producer surplus will increase,keeping total surplus unchanged. 
C) Consumer surplus may or may not fall but producer surplus will fall. 
D) Consumer surplus will remain unchanged,but producer surplus and total surplus will fall. 
A) Consumer surplus will increase and producer surplus will fall,but total surplus stays the same. 
B) Consumer surplus will fall and producer surplus will increase,keeping total surplus unchanged. 
C) Consumer surplus may or may not fall but producer surplus will fall. 
D) Consumer surplus will remain unchanged,but producer surplus and total surplus will fall.

Question 7

Given that quotas benefit producers,who are few in number,at a greater expense to consumers,who are more in number,which of the following correctly explains why quotas are still in effect?

Accepted Answer

A) Domestic consumers are better organized than domestic producers. 
B) Quotas reduce prices in domestic markets. 
C) The benefits of quotas are concentrated and visible while the costs are dispersed. 
D) When a quota is imposed by the importing country,it lowers prices in the global market. 
A) Domestic consumers are better organized than domestic producers. 
B) Quotas reduce prices in domestic markets. 
C) The benefits of quotas are concentrated and visible while the costs are dispersed. 
D) When a quota is imposed by the importing country,it lowers prices in the global market.

Question 8

In the long run,the imposition of an excise tax in a constant-cost competitive industry will cause price to:

Accepted Answer

A) rise by the amount of the tax. 
B) fall by the amount of the tax. 
C) rise by less than the amount of the tax. 
D) fall by more than the amount of the tax. 
A) rise by the amount of the tax. 
B) fall by the amount of the tax. 
C) rise by less than the amount of the tax. 
D) fall by more than the amount of the tax.

Question 9

One of the reasons for the low profitability of U.S.airlines during the era of regulation by the Civil Aeronautics Board (CAB)was _____.

Accepted Answer

A) the absence of organized labor unions 
B) low airline safety 
C) the scheduling of airline flights to sparsely populated areas 
D) the price ceiling imposed by the CAB 
A) the absence of organized labor unions 
B) low airline safety 
C) the scheduling of airline flights to sparsely populated areas 
D) the price ceiling imposed by the CAB

Question 10

The Civil Aeronautics Board (CAB)allowed airlines to charge prices above the equilibrium price.Even then the airlines were not profitable because:

Accepted Answer

A) their economic profits were zero. 
B) nonprice competition between the airlines raised costs and eroded profits. 
C) the demand was too low to make profit. 
D) they were subject to heavy taxes by the government which drove down profits. 
A) their economic profits were zero. 
B) nonprice competition between the airlines raised costs and eroded profits. 
C) the demand was too low to make profit. 
D) they were subject to heavy taxes by the government which drove down profits.

Question 11

What would be the welfare effect of a per-unit tax in the following markets?
(
A)The market for cigarettes

Accepted Answer

Cashmere scarves are a luxury good that

Question 12

An excise tax imposed on junk food reduces consumer surplus by $50,producer surplus by $80,and results in tax revenue of $40 for the government.What is the welfare effect of this tax?

Accepted Answer

A) A net loss of $10 
B) A net gain of $40 
C) A net loss of $90 
D) A net loss of $130 
A) A net loss of $10 
B) A net gain of $40 
C) A net loss of $90 
D) A net loss of $130

Question 13

The city planning authority in a city decides that street food vendors should be issued licenses in the interests of reducing inconvenience to pedestrians on the streets.They decide to issue a fixed number of transferable permits,say Q.Over time,how would this licensing system affect the price and quantity of street food?

Accepted Answer

Since the number of vendor permits are f

Question 14

What is meant by producer surplus?

Accepted Answer

A) It is the total quantity of a good produced by the seller. 
B) It is the difference between the producer's marginal cost and the price. 
C) It is the difference between a producer's minimum selling price and the actual price. 
D) It is a measure of the total benefit to producers resulting from the purchase of an input. 
A) It is the total quantity of a good produced by the seller. 
B) It is the difference between the producer's marginal cost and the price. 
C) It is the difference between a producer's minimum selling price and the actual price. 
D) It is a measure of the total benefit to producers resulting from the purchase of an input.

Question 15

What is meant by a deadweight loss?

Accepted Answer

A) It is the aggregate loss in total surplus in an inefficient market. 
B) It is the total loss in producer surplus due to output being at an inefficient level. 
C) It is the sum of the consumer and producer surpluses in an inefficient market. 
D) It is the loss in consumer surplus due to a price ceiling or floor in the market. 
A) It is the aggregate loss in total surplus in an inefficient market. 
B) It is the total loss in producer surplus due to output being at an inefficient level. 
C) It is the sum of the consumer and producer surpluses in an inefficient market. 
D) It is the loss in consumer surplus due to a price ceiling or floor in the market.

Question 16

Although U.S.airline fares fell significantly after deregulation,profits did not fall.This was because:

Accepted Answer

A) the airline industry is a decreasing cost industry. 
B) the airlines reduced costs by lowering wages to workers. 
C) the demand for air travel did not increase by a significant percentage. 
D) the airlines received subsidies from the federal government. 
A) the airline industry is a decreasing cost industry. 
B) the airlines reduced costs by lowering wages to workers. 
C) the demand for air travel did not increase by a significant percentage. 
D) the airlines received subsidies from the federal government.

Question 17

The following figure shows the demand and supply for a commodity in the domestic U.S.market as well as the global market.The commodity is imported from the rest of the world to the U.S.market.
Figure 10-3  
-In Figure 10-3,for the rest of the world:

Accepted Answer

A) the gain in producer surplus equals the gain in consumer surplus. 
B) producer surplus increases while consumer surplus is unchanged. 
C) the gain in consumer surplus is greater than the gain in producer surplus. 
D) there are no changes in consumer or producer surplus after trade. 
A) the gain in producer surplus equals the gain in consumer surplus. 
B) producer surplus increases while consumer surplus is unchanged. 
C) the gain in consumer surplus is greater than the gain in producer surplus. 
D) there are no changes in consumer or producer surplus after trade.

Question 18

The level of output produced by a firm is efficient if _____ at that level of output.

Accepted Answer

A) marginal benefit equals marginal cost 
B) total cost equals total revenue 
C) fixed cost equals price 
D) average variable cost equals average revenue 
A) marginal benefit equals marginal cost 
B) total cost equals total revenue 
C) fixed cost equals price 
D) average variable cost equals average revenue

Question 19

What is meant by consumer surplus?

Accepted Answer

A) It is the total quantity of a good bought by a consumer divided by the price paid. 
B) It is a measure of an individual consumer's utility from the consumption of a good. 
C) It is the difference between a consumer's maximum willingness to pay and the price. 
D) It is a measure of the total benefit to consumers from the purchase of a good. 
A) It is the total quantity of a good bought by a consumer divided by the price paid. 
B) It is a measure of an individual consumer's utility from the consumption of a good. 
C) It is the difference between a consumer's maximum willingness to pay and the price. 
D) It is a measure of the total benefit to consumers from the purchase of a good.

Question 20

The following figure shows the intersection of demand and supply at the price PS1U1B12S1U1B0 and quantity QS1U1B12S1U1B0 in a competitive market.
Figure 10-2  
-Refer to Figure 10-2.What is the deadweight loss if a price ceiling is imposed at the price level P3 in this market?

Accepted Answer

A) b + f + c + g 
B) b + c + d + e 
C) c + g 
D) d + e 
A) b + f + c + g 
B) b + c + d + e 
C) c + g 
D) d + e

Issuing a fixed number of licenses to operate a taxicab in a city would mean that the number of:

The following figure shows the effect of a price ceiling in the market for yams.The market was initially in equilibrium at price P₂and quantity B. Figure 10-1 -Refer to Figure 10-1.The total surplus at the initial point of equilibrium,F,is given by _____.

Is the outcome of a competitive market efficient? Explain with the help of a graph.

A rent control has been imposed on the market for rental housing in a country.If the long run supply curve in this competitive market is more price elastic than the short run supply curve,it implies that:

In the short run,an excise tax placed on all firms in an increasing-cost competitive industry will result in:

Suppose an increasing-cost competitive industry is in equilibrium at a price of $100 and an output of 1,000 units.When a price ceiling of $80 is imposed the quantity traded in the market reduces to 800 units.Which of the following is true?

Given that quotas benefit producers,who are few in number,at a greater expense to consumers,who are more in number,which of the following correctly explains why quotas are still in effect?

In the long run,the imposition of an excise tax in a constant-cost competitive industry will cause price to:

One of the reasons for the low profitability of U.S.airlines during the era of regulation by the Civil Aeronautics Board (CAB)was _____.

The Civil Aeronautics Board (CAB)allowed airlines to charge prices above the equilibrium price.Even then the airlines were not profitable because:

What would be the welfare effect of a per-unit tax in the following markets? ( A)The market for cigarettes

An excise tax imposed on junk food reduces consumer surplus by $50,producer surplus by $80,and results in tax revenue of $40 for the government.What is the welfare effect of this tax?

What is meant by producer surplus?

What is meant by a deadweight loss?

Although U.S.airline fares fell significantly after deregulation,profits did not fall.This was because:

The following figure shows the demand and supply for a commodity in the domestic U.S.market as well as the global market.The commodity is imported from the rest of the world to the U.S.market. Figure 10-3 -In Figure 10-3,for the rest of the world:

The level of output produced by a firm is efficient if _____ at that level of output.

What is meant by consumer surplus?

The following figure shows the intersection of demand and supply at the price P₂ and quantity Q₂ in a competitive market. Figure 10-2 -Refer to Figure 10-2.What is the deadweight loss if a price ceiling is imposed at the price level P₃ in this market?

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 10: Using the Competitive Model

Issuing a fixed number of licenses to operate a taxicab in a city would mean that the number of:

The following figure shows the effect of a price ceiling in the market for yams.The market was initially in equilibrium at price P2 and quantity B. Figure 10-1 -Refer to Figure 10-1.The total surplus at the initial point of equilibrium,F,is given by _____.

Is the outcome of a competitive market efficient? Explain with the help of a graph.

A rent control has been imposed on the market for rental housing in a country.If the long run supply curve in this competitive market is more price elastic than the short run supply curve,it implies that:

In the short run,an excise tax placed on all firms in an increasing-cost competitive industry will result in:

Suppose an increasing-cost competitive industry is in equilibrium at a price of $100 and an output of 1,000 units.When a price ceiling of $80 is imposed the quantity traded in the market reduces to 800 units.Which of the following is true?

Given that quotas benefit producers,who are few in number,at a greater expense to consumers,who are more in number,which of the following correctly explains why quotas are still in effect?

In the long run,the imposition of an excise tax in a constant-cost competitive industry will cause price to:

One of the reasons for the low profitability of U.S.airlines during the era of regulation by the Civil Aeronautics Board (CAB)was _____.

The Civil Aeronautics Board (CAB)allowed airlines to charge prices above the equilibrium price.Even then the airlines were not profitable because:

What would be the welfare effect of a per-unit tax in the following markets? ( A)The market for cigarettes

An excise tax imposed on junk food reduces consumer surplus by $50,producer surplus by $80,and results in tax revenue of $40 for the government.What is the welfare effect of this tax?

What is meant by producer surplus?

What is meant by a deadweight loss?

Although U.S.airline fares fell significantly after deregulation,profits did not fall.This was because:

The following figure shows the demand and supply for a commodity in the domestic U.S.market as well as the global market.The commodity is imported from the rest of the world to the U.S.market. Figure 10-3 -In Figure 10-3,for the rest of the world:

The level of output produced by a firm is efficient if _____ at that level of output.

What is meant by consumer surplus?

The following figure shows the intersection of demand and supply at the price P2 and quantity Q2 in a competitive market. Figure 10-2 -Refer to Figure 10-2.What is the deadweight loss if a price ceiling is imposed at the price level P3 in this market?

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

The following figure shows the effect of a price ceiling in the market for yams.The market was initially in equilibrium at price P₂and quantity B. Figure 10-1 -Refer to Figure 10-1.The total surplus at the initial point of equilibrium,F,is given by _____.

The following figure shows the intersection of demand and supply at the price P₂ and quantity Q₂ in a competitive market. Figure 10-2 -Refer to Figure 10-2.What is the deadweight loss if a price ceiling is imposed at the price level P₃ in this market?