Question 1

Figure 5.1  Figure 5.1 shows Arnold's demand curve for burritos.
-Refer to Figure 5.1.What is the total amount that Arnold is willing to pay for 4 burritos?

Accepted Answer

A)  $1.00 
B)  $4.00 
C)  $7.00 
D)  $10.00

Question 2

Using a supply and demand graph,illustrate the effect of the addition of a $10.00 unit tax on digital cameras,where the entire tax burden falls on the seller.Assume the equilibrium price before the tax is $125 and the equilibrium quantity is 50 000.What happens to the price and quantity after the tax is implemented?
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Accepted Answer

The answer of Using a supply and demand graph,illustrate the...

Question 3

What is a black market?
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Accepted Answer

The answer of What is a black market?
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Question 4

Figure 5.5  Figure 5.5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1 000 per month.
-Refer to Figure 5.5.The value of consumer surplus after the imposition of the ceiling is ________.

Accepted Answer

A)  $120 000 
B)  $230 000 
C)  $270 000 
D)  $430 000

Question 5

Table 5.3
 $$\begin{array} { | l | c | } 
\hline{ \begin{array} { c } 
\text { The Waco Kid's } \
\text { Cowboy Hats }
\end{array} } & \begin{array} { c } 
\text { Marginal Cost } \
\text { (dollars) }
\end{array} \
\hline \text { 1st hat } & 24 \
\hline \text { 2nd hat } & 30 \
\hline \text { 3rd hat } & 38 \
\hline \text { 4th hat } & 46 \
\hline
\end{array}$$
-Refer to Table 5.3.The table above lists the marginal cost of cowboy hats by The Waco Kid,a firm that specialises in producing fancy dress costumes.If the market price of The Waco Kid's cowboy hats is $40,__________.

Accepted Answer

A)  The Waco Kid will produce four hats 
B)  producer surplus from the first hat is $40 
C)  producer surplus will equal $28 
D)  there will be a surplus; as a result, the price will fall to $24

Question 6

The marginal cost for Java Joe's to produce its first cup of coffee is $0.75.Its marginal cost to produce its second cup of coffee is $1.25.Its marginal cost increases by $0.50 for each additional cup of coffee it produces.Suppose the market price for coffee is $2.25.Construct a graph showing the producer surplus for each cup of coffee Java Joe's will sell.How many cups of coffee will Java Joe's sell? What is the value of the producer surplus Java Joe's receives for each cup of coffee it sells?
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Accepted Answer

The answer of The marginal cost for Java Joe's to...

Question 7

Suppliers will be willing to supply a product only if ________.

Accepted Answer

A)  the price received is less than the additional cost of producing the product 
B)  the price received is at least equal to the additional cost of producing the product 
C)  the price is higher than the average cost of producing the product 
D)  the price received is at least double the additional cost of producing the product

Question 8

Assume the market price for lemon grass is $4.00 per metric,but most buyers are willing to pay more than the market price.At the market price of $4.00,the quantity of lemon grass demanded is 1 500 metrics per month,and quantity demanded does not reach zero until the price reaches $30.00 per metric.Construct a graph showing this data,calculate the total consumer surplus in the market for lemon grass,and show the consumer surplus on the graph.
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Accepted Answer

The answer of Assume the market price for lemon grass...

Question 9

What is maximised in a competitive market when marginal benefit equals marginal cost?

Accepted Answer

A)  Dead-weight loss 
B)  Marginal profit 
C)  Economic surplus 
D)  Selling price

Question 10

Figure 5.5  Figure 5.5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1 000 per month.
-Refer to Figure 5.5.The value of producer surplus after the imposition of the ceiling is ________.

Accepted Answer

A)  $40 000 
B)  $100 000 
C)  $300 000 
D)  $430 000

Question 11

Will equilibrium in a market always result in an outcome that is economically efficient? Explain.
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Accepted Answer

The answer of Will equilibrium in a market always result...

Question 12

The total amount of producer surplus in a market is equal to the area below the supply curve.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not a result of imposing a rent ceiling?

Accepted Answer

A)  Some consumer surplus is converted to producer surplus. 
B)  There is a reduction in the quantity supplied of apartments. 
C)  There is an increase in the quantity demanded of apartments. 
D)  The marginal benefit of the last apartment rented is greater than the marginal cost of supplying it.

Question 14

What do economists mean by an efficient tax?
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Accepted Answer

The answer of What do economists mean by an efficient...

Question 15

Figure 5.1  Figure 5.1 shows Arnold's demand curve for burritos.
-Refer to Figure 5.1.If the market price is $1.50,what is Arnold's consumer surplus?

Accepted Answer

A)  $1.50 
B)  $2.25 
C)  $3.00 
D)  $4.75

Question 16

Table 5.5
 $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Price per } \
\text { Bushel } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { Demanded } \
\text { (bushels) }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { Supplied } \
\text { (bushels) }
\end{array} \
\hline 2 & 40000 & 0 \
\hline 4 & 34000 & 4000 \
\hline 6 & 28000 & 8000 \
\hline 8 & 24000 & 16000 \
\hline 10 & 20000 & 20000 \
\hline 12 & 18000 & 28000 \
\hline 14 & 12000 & 36000 \
\hline 16 & 6000 & 40000 \
\hline
\end{array}$$ Table 5.5 above contains information about the corn market. Answer the following questions based on this table.
-Refer to Table 5.5.An agricultural price floor is a price that the government guarantees farmers will receive for a particular crop.Suppose the federal government sets a price floor for corn at $12 per bushel.
a.What is the amount of shortage or surplus in the corn market as result of the price floor?
b.If the government agrees to purchase any surplus output at $12,how much will it cost the government?
c.If the government buys all of the farmers' output at the floor price,how many bushels of corn will it have to purchase and how much will it cost the government?
d.Suppose the government buys up all of the farmers' output at the floor price and then sells the output to consumers at whatever price it can get.Under this scheme,what is the price at which the government will be able to sell off all of the output it had purchased from farmers? What is the revenue received from the government's sale?
e.In this problem we have considered two government schemes: (1)a price floor is established and the government purchases any excess output and (2)the government buys all the farmers' output at the floor price and resells at whatever price it can get.Which scheme will taxpayers prefer?
f.Consider again the two schemes.Which scheme will the farmers prefer?
g.Consider again the two schemes.Which scheme will corn buyers prefer?
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Accepted Answer

The answer of Table 5.5
 \[\begin{array} { | c |...

Question 17

Figure 5.7  Figure 5.7 shows the market for beer. The government plans to impose a unit tax in this market.
-Refer to Figure 5.7.What is the size of the unit tax?

Accepted Answer

A)  $2 
B)  $5 
C)  $7 
D)  $12

Question 18

Figure 5.3  Figure 5.3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40S1U1B1 S1U1B0in order to raise the price to $18.
-Refer to Figure 5.3.The value of the dead-weight loss at the equilibrium price of $15 is ________.

Accepted Answer

A)  $0 
B)  $40 
C)  $60 
D)  $100

Question 19

Economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production,and in which _________.

Accepted Answer

A)  the sum of consumer surplus and producer surplus is at a maximum 
B)  economic surplus is minimised 
C)  the sum of the benefits to firms is equal to the sum of the benefits to consumers 
D)  the sum of consumer surplus and producer surplus is minimised

Question 20

Figure 5.1  Figure 5.1 shows Arnold's demand curve for burritos.
-Refer to Figure 5.1.If the market price is $1.00,what is the maximum number of burritos that Arnold will buy?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4

Exam 5: Economic Efficiency,government Price Setting and Taxes

Figure 5.1 Figure 5.1 shows Arnold's demand curve for burritos. -Refer to Figure 5.1.What is the total amount that Arnold is willing to pay for 4 burritos?

What is a black market? __________________________________________________________________________________________________________________________________________________________________________________________

Figure 5.5 Figure 5.5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1 000 per month. -Refer to Figure 5.5.The value of consumer surplus after the imposition of the ceiling is ________.

Suppliers will be willing to supply a product only if ________.

What is maximised in a competitive market when marginal benefit equals marginal cost?

Figure 5.5 Figure 5.5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1 000 per month. -Refer to Figure 5.5.The value of producer surplus after the imposition of the ceiling is ________.

Will equilibrium in a market always result in an outcome that is economically efficient? Explain. __________________________________________________________________________________________________________________________________________________________________________________________

The total amount of producer surplus in a market is equal to the area below the supply curve.

Which of the following is not a result of imposing a rent ceiling?

What do economists mean by an efficient tax? __________________________________________________________________________________________________________________________________________________________________________________________

Figure 5.1 Figure 5.1 shows Arnold's demand curve for burritos. -Refer to Figure 5.1.If the market price is $1.50,what is Arnold's consumer surplus?

Figure 5.7 Figure 5.7 shows the market for beer. The government plans to impose a unit tax in this market. -Refer to Figure 5.7.What is the size of the unit tax?

Economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production,and in which _________.

Figure 5.1 Figure 5.1 shows Arnold's demand curve for burritos. -Refer to Figure 5.1.If the market price is $1.00,what is the maximum number of burritos that Arnold will buy?