Question 1

Long-run economic rent or profit do not exist for fixed factors like land because

Accepted Answer

A)  bidding drives up the price of the factor until no economic rent exists.
B)  there is no market for such factors.
C)  these factors have L-shaped isoquants.
D)  these factors will earn economic profits. A

Question 2

Suppose the market supply curve is p = 5Q.If price increases from 10 to 15,the change in producer surplus is

Accepted Answer

A)  25.
B)  5.
C)  12.5.
D)  20. C

Question 3

If a city decides to restrict the number of pizza parlors,

Accepted Answer

A)  the price of pizza will increase.
B)  pizza parlors will make higher profits.
C)  total welfare will decrease.
D)  All of the above. D

Question 4

-The above figure shows supply and demand curves for milk.If the government passes a $2 per gallon specific tax,the loss in consumer surplus will equal

Accepted Answer

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

Question 5

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.

Question 6

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 social welfare will most likely

Accepted Answer

A)  not change but there will be a transfer from consumer to producer.
B)  not change but there will be a transfer from producer to consumer.
C)  decrease although producers are made better off.
D)  decrease although consumers are made better off.

Question 7

Advocates of steel tariffs to protect American steel firms realize that when imposing such tariffs the gains of firms are outweighed by the losses to consumers.This implies that

Accepted Answer

A)  such advocates value producer surplus more than consumer surplus.
B)  such advocates want to help consumers.
C)  such advocates value consumer surplus more than producer surplus.
D)  such advocates value producer surplus and consumer surplus equally.

Question 8

Economists claim that measuring society's welfare as CS + PS

Accepted Answer

A)  is inappropriate since ultimately everyone is a consumer.
B)  is valid only when the same person could be either a consumer or a producer.
C)  treats the gains to consumers and producers equally.
D)  is not commonly accepted.

Question 9

-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 $2 per gallon price ceiling to ensure that children are nourished,estimate the change in p,Q,and social welfare.

Accepted Answer

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

Question 10

-The above figure shows the demand and supply curves in the market for milk.Currently the market is in equilibrium.If the government imposes a $2 per gallon tax to be collected from sellers,estimate the change in p,Q,and social welfare.

Accepted Answer

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

Question 11

-The domestic demand curve,domestic supply curve,and world supply curves for a good are given in the above figure.All the curves are linear.Initially,the country allows imports.Then imports are banned.Calculate how consumer and producer surplus change because of the ban.Is the country better off with the ban on imports? Why?

Accepted Answer

The answer of 
-The domestic demand curve,domestic supply curve,and world...

Question 12

Producer surplus is equal to

Accepted Answer

A)  the area under the supply curve.
B)  the difference between price and average cost for all units sold.
C)  the difference between price and marginal cost for all units sold.
D)  the firm's profit when fixed costs exist.

Question 13

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.

Question 14

-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 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

The cost of lobbying for an import quota in a perfectly competitive market

Accepted Answer

A)  increases the welfare loss of the quota.
B)  decreases the deadweight loss of the quota.
C)  shifts the supply curve of the good to the left.
D)  increases the consumer surplus.

Question 17

-The above figure shows supply and demand curves for milk.If the government passes a $2 per gallon specific tax,the loss in social welfare will equal

Accepted Answer

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

Question 18

-The above figure shows the demand and supply curves in the market for milk.If the government imposes a quota at 500 gallons,calculate the deadweight loss.

Accepted Answer

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

Question 19

Producer surplus is the sum of the profits earned by all firms in a market.

Accepted Answer

A) True 
 B)False

Question 20

"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...

Exam 9: Properties and Applications of the Competitive Model

Long-run economic rent or profit do not exist for fixed factors like land because

Suppose the market supply curve is p = 5Q.If price increases from 10 to 15,the change in producer surplus is

If a city decides to restrict the number of pizza parlors,

-The above figure shows supply and demand curves for milk.If the government passes a $2 per gallon specific tax,the loss in consumer surplus will equal

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

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 social welfare will most likely

Advocates of steel tariffs to protect American steel firms realize that when imposing such tariffs the gains of firms are outweighed by the losses to consumers.This implies that

Economists claim that measuring society's welfare as CS + PS

-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 $2 per gallon price ceiling to ensure that children are nourished,estimate the change in p,Q,and social welfare.

-The above figure shows the demand and supply curves in the market for milk.Currently the market is in equilibrium.If the government imposes a $2 per gallon tax to be collected from sellers,estimate the change in p,Q,and social welfare.

Producer surplus is equal to

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

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

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

The cost of lobbying for an import quota in a perfectly competitive market

-The above figure shows supply and demand curves for milk.If the government passes a $2 per gallon specific tax,the loss in social welfare will equal

-The above figure shows the demand and supply curves in the market for milk.If the government imposes a quota at 500 gallons,calculate the deadweight loss.

Producer surplus is the sum of the profits earned by all firms in a market.

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