Question 1

If a city decides to lift restrictions of how many taxi cabs can operate, social welfare will increase.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following characterizes long-run equilibrium in perfect competition?

Accepted Answer

A) P = MC = ATC 
B) P = MC  MC = ATC 
D) P = MC > ATC

Question 3

Suppose a farmer in a perfectly competitive agricultural industry rents land that is uniquely productive in the production of a certain crop. In the long run,

Accepted Answer

A) the owner of the land receives economic rent while the farmer earns zero economic profit. 
B) the owner of the land earns zero economic profit while the farmer receives economic rent. 
C) both the farmer and the owner of the land receive economic rent. 
D) neither the farmer nor the owner of the land receive economic rent.

Question 4

-The above figure shows the market for rice in Japan where price is expressed in dollars. S represents the domestic supply curve, and the horizontal line at P = $1 represents the world supply curve. Currently Q1 units are imported. The loss from shifting production from foreign to domestic producers equals

Accepted Answer

A) c + e 
B) i. 
C) e. 
D) a + c + d + e.

Question 5

An individual's ________ surplus is the area ________ the ________ curve and ________ the ________ up to the quantity ________.

Accepted Answer

A) consumer; above; supply; below; market price, produced. 
B) producer; above; supply; below; market price, produced. 
C) consumer; below; demand; above; choke price, purchased. 
D) producer; below; supply; choke price, below; the producer sells.

Question 6

Producer surplus equals total revenue minus the sum of all marginal cost.

Accepted Answer

A) True 
 B)False

Question 7

Ann and Bill each spend $30 per month on cigarettes when the price is $1 per pack. Draw a graph to illustrate that the consumer with the less elastic demand will suffer the greater loss of consumer surplus when the price of cigarettes increases. Explain and label the figure.

Accepted Answer

The answer of Ann and Bill each spend $30 per...

Question 8

-The above figure shows supply and demand curves for milk. If the government passes a $2 per gallon specific tax, the tax revenue is

Accepted Answer

A) $2 ∗ Q1. 
B) $2 ∗ Q2. 
C) $2 ∗ (Q2 - Q1). 
D) $2.

Question 9

-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.

Question 10

Policies that restrict supply could generate an increase in social welfare because the increase in producer surplus could exceed the decrease in consumer surplus.

Accepted Answer

A) True 
 B)False

Question 11

-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

The answer of 
-The above figure shows the demand and...

Question 12

"Supporters of import restrictions and protectionist policies place greater weight on producer welfare than on consumer welfare." Comment.

Accepted Answer

The answer of "Supporters of import restrictions and protectionist policies...

Question 13

-Figure shows an individual's demand curve for time per month spent telecommunicating while driving (talking on the car phone.)A car phone is useless except for talking with somebody who is not in the car. If calls are priced at ten cents per minute, what is the consumer surplus derived from talking? What is the most this person would pay for the car phone? Explain.

Accepted Answer

The answer of 
-Figure shows an individual's demand curve for...

Question 14

Mister Jones was selling his house. The asking price was $220,000, and Jones decided he would take no less than $200,000. After some negotiation, Mister Smith purchased the house for $205,000. Smith's consumer surplus is

Accepted Answer

A) $5,000. 
B) $15,000. 
C) $20,000. 
D) not able to be calculated from the information given.

Question 15

A competitive market maximizes social welfare because in a competitive market,

Accepted Answer

A) profits are zero. 
B) price equals marginal cost of the last unit produced. 
C) price equals average cost of the last unit produced. 
D) there is free entry and exit.

Question 16

In economics, welfare analysis is useful to

Accepted Answer

A) gauge the validity of "mend it, don't end it." 
B) determine who should receive income transfers. 
C) determine who gains and who loses in a particular policy option. 
D) prove which policy option is "best."

Question 17

-The above figure shows supply and demand curves for apartment units in a large city. At the unregulated equilibrium, producer surplus will be

Accepted Answer

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

Question 18

-The above figure shows the market demand curve for telecommunication while driving one's car (time spent on the car phone). At the current price of $0.35 per minute, consumer surplus equals

Accepted Answer

A) $301.00. 
B) $924.50. 
C) $1,225.50. 
D) $1,250.00.

Question 19

Suppose the market supply curve is p = 5Q. At a price of 10, producer surplus equals

Accepted Answer

A) 50. 
B) 25. 
C) 12.50. 
D) 10.

Question 20

-The above figure shows supply and demand curves for milk. In an effort to help farmers, the government passes a law that establishes a $3 per gallon price support. To maintain the price support, government must purchase

Accepted Answer

A) Q1 gallons. 
B) Q2 gallons. 
C) Q1 - Q2 gallons. 
D) Q2 - Q1 gallons.

Exam 9: Applying the Competitive Model

If a city decides to lift restrictions of how many taxi cabs can operate, social welfare will increase.

Which of the following characterizes long-run equilibrium in perfect competition?

Suppose a farmer in a perfectly competitive agricultural industry rents land that is uniquely productive in the production of a certain crop. In the long run,

An individual's surplus is the area the curve and the up to the quantity .

Producer surplus equals total revenue minus the sum of all marginal cost.

Ann and Bill each spend $30 per month on cigarettes when the price is $1 per pack. Draw a graph to illustrate that the consumer with the less elastic demand will suffer the greater loss of consumer surplus when the price of cigarettes increases. Explain and label the figure.

-The above figure shows supply and demand curves for milk. If the government passes a $2 per gallon specific tax, the tax revenue 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

Policies that restrict supply could generate an increase in social welfare because the increase in producer surplus could exceed the decrease in consumer surplus.

-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.

"Supporters of import restrictions and protectionist policies place greater weight on producer welfare than on consumer welfare." Comment.

Mister Jones was selling his house. The asking price was $220,000, and Jones decided he would take no less than $200,000. After some negotiation, Mister Smith purchased the house for $205,000. Smith's consumer surplus is

A competitive market maximizes social welfare because in a competitive market,

In economics, welfare analysis is useful to

-The above figure shows supply and demand curves for apartment units in a large city. At the unregulated equilibrium, producer surplus will be

-The above figure shows the market demand curve for telecommunication while driving one's car (time spent on the car phone) . At the current price of $0.35 per minute, consumer surplus equals

Suppose the market supply curve is p = 5Q. At a price of 10, producer surplus equals

-The above figure shows supply and demand curves for milk. In an effort to help farmers, the government passes a law that establishes a $3 per gallon price support. To maintain the price support, government must purchase