Question 1

Table 4-8
  Table 4-8 shows the demand and supply schedules for the low-skilled labor market in the city of Westover.
-Refer to Table 4-8. If a minimum wage of $10.50 an hour is mandated, what is the quantity of labor supplied?

Accepted Answer

A)  400,000 
B)  370,000 
C)  340,000 
D)  60,000

Question 2

Table 4-3
 
-Which of the following statements is true?

Accepted Answer

A)  Consumer surplus measures the total benefit from participating in a market. 
B)  When a market is in equilibrium consumer surplus equals producer surplus. 
C)  Consumer surplus measures the net benefit from participating in a market. 
D)  Producer surplus measures the total benefit received by producers from participating in a market.

Question 3

Figure 4-6  Figure 4-6 shows the market for granola. The market is initially in equilibrium at a price of P1 and a quantity of Q1. Now suppose producers decide to cut output to Q2 in order to raise the price to P2.
-Refer to Figure 4-6. At the equilibrium price of P1, consumers are willing to buy the Q1 pounds of granola. Is this an economically efficient quantity?

Accepted Answer

A)  No, the marginal benefit of the last unit (Q1) exceeds the marginal cost of that last unit. 
B)  Yes, because marginal cost is zero at the price of P1. 
C)  Yes, because P1 is the price where marginal benefit equals marginal cost. 
D)  No, the marginal cost of the last unit (Q1) exceeds the marginal benefit of the last unit.

Question 4

Figure 4-3  Figure 4-3 shows Kendra's demand curve for ice-cream cones.
-Refer to Figure 4-3. What is the total amount that Kendra is willing to pay for 2 ice cream cones?

Accepted Answer

A)  $1.50 
B)  $3.00 
C)  $5.50 
D)  $6.50

Question 5

Table 4-11
 
-Refer to Table 4-11. The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick. The equilibrium price and quantity for Chef Ernie's sushi are $60 and 20 thousand units. What is the value of consumer surplus?

Accepted Answer

A)  $100 thousand 
B)  $200 thousand 
C)  $600 thousand 
D)  $800 thousand

Question 6

Figure 4-10  Figure 4-10 shows the market for apartments in Bay City. Recently, the government imposed a rent ceiling at R0.
-Refer to Figure 4-10. Suppose that instead of a price ceiling, the government imposed a price floor of R1. What area represents the deadweight loss after the imposition of the price floor?

Accepted Answer

A)  G + H 
B)  J + H 
C)  C + E + J + H 
D)  C + E

Question 7

The difference between consumer surplus and producer surplus in a market is equal to the deadweight loss.

Accepted Answer

A) True 
 B)False

Question 8

Suppose the demand curve for a product is vertical and the supply curve is upward sloping. If a unit tax is imposed in the market for this product,

Accepted Answer

A)  sellers bear the entire burden of the tax. 
B)  buyers bear the entire burden of the tax. 
C)  the tax burden will be shared equally between buyers and sellers. 
D)  buyers share the burden of the tax with government.

Question 9

What is deadweight loss? When is deadweight loss equal to zero?

Accepted Answer

The answer of What is deadweight loss? When is deadweight...

Question 10

Figure 4-7 
-Refer to Figure 4-7. The figure above represents the market for iced tea. Assume that this is a competitive market. If 10,000 units of iced tea are sold,

Accepted Answer

A)  the deadweight loss is equal to economic surplus. 
B)  producer surplus equals consumer surplus. 
C)  the marginal benefit of each of the 10,000 units of iced tea equals $3. 
D)  marginal benefit is less than marginal cost.

Question 11

Figure 4-10  Figure 4-10 shows the market for apartments in Bay City. Recently, the government imposed a rent ceiling at R0.
-Refer to Figure 4-10. Suppose that instead of a price ceiling, the government imposed a price floor of R1. What is the area representing consumer surplus after the imposition of the price floor?

Accepted Answer

A)  A 
B)  A+ B + D 
C)  C + E 
D)  B + C + D + E

Question 12

Arthur buys a new cell phone for $150. He receives consumer surplus of $150 from the purchase. How much does Arthur value his cell phone?

Accepted Answer

A)  $0 
B)  $150 
C)  $225 
D)  $300

Question 13

Figure 4-5 
-Refer to Figure 4-5. The figure above represents the market for pecans. Assume that this is a competitive market. If the price of pecans is $9,

Accepted Answer

A)  economic surplus is maximized. 
B)  too many consumers want to buy pecans. 
C)  the quantity supplied is greater than the economically efficient quantity. 
D)  the quantity demanded is economically efficient but the quantity supplied is economically inefficient.

Question 14

What is the difference between scarcity and a shortage?

Accepted Answer

The answer of What is the difference between scarcity and...

Question 15

Article Summary
In an attempt to discourage smoking, New York City Mayor Michael Bloomberg proposed a bill which would set a $10.50 minimum price for a pack of cigarettes. The bill would also prohibit retailers from offering any discounts such as 2-for-1 offers or accepting discount coupons. New York City already has the highest cigarette tax in the country, at $5.85 per pack, and the state of New York is one of many which already require cigarettes be marked up by a specified percentage. This bill is a companion to one which would require stores to keep tobacco products hidden from sight. Although the bills are expected to be challenged in court, a precedent has been set in Rhode Island, where a court upheld a ruling allowing the city of Providence to forbid retailers from accepting coupons and offering discounts on cigarettes.
Source: Vivian Yee, "Bloomberg Seeks End to Cheap Cigarettes," New York Times, March 26, 2013.
-Refer to the Article Summary. The minimum price of $10.50 per pack of cigarettes being proposed by mayor Bloomberg would have which of the following effects on the market for cigarettes?

Accepted Answer

A)  Consumer surplus will increase. 
B)  Producer surplus will increase. 
C)  Deadweight loss will increase. 
D)  Market efficiency will increase.

Question 16

Table 4-12
 
-Refer to Table 4-12. The equations above describe the demand and supply for Bubba's Fried Jellybeans. The equilibrium price and quantity for Bubba's Fried Jellybeans are $40 and 5 thousand units. What is the value of producer surplus?

Accepted Answer

A)  $5 thousand 
B)  $12.5 thousand 
C)  $25 thousand 
D)  $37.5 thousand

Question 17

Figure 4-7 
-Refer to Figure 4-7. The figure above represents the market for iced tea. Assume that this is a competitive market. If the price of iced tea is $1,

Accepted Answer

A)  the quantity supplied is less than the economically efficient quantity. 
B)  the quantity supplied is economically efficient but the quantity demanded is economically inefficient. 
C)  economic surplus is maximized. 
D)  not enough consumers want to buy iced tea.

Question 18

Table 4-11
 
-Refer to Table 4-11. The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick. What are the equilibrium price and quantity (in thousands) for Chef Ernie's sushi?

Accepted Answer

A)  $80 and 80 thousand 
B)  $60 and 20 thousand 
C)  $50 and 100 thousand 
D)  $40 and 50 thousand

Question 19

Table 4-3
 
-Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of cowboy hats is $35, The Waco Kid will produce

Accepted Answer

A)  1 hat. 
B)  2 hats. 
C)  3 hats. 
D)  4 hats.

Question 20

The graph below represents the market for alfalfa. The market price is $7.00 per bushel. Identify the areas representing consumer surplus, producer surplus, and economic surplus.

Accepted Answer

The answer of The graph below represents the market for...

Exam 4: Economic Efficiency, Government Price Setting, and Taxes

Table 4-8 Table 4-8 shows the demand and supply schedules for the low-skilled labor market in the city of Westover. -Refer to Table 4-8. If a minimum wage of $10.50 an hour is mandated, what is the quantity of labor supplied?

Table 4-3 -Which of the following statements is true?

Figure 4-3 Figure 4-3 shows Kendra's demand curve for ice-cream cones. -Refer to Figure 4-3. What is the total amount that Kendra is willing to pay for 2 ice cream cones?

Table 4-11 -Refer to Table 4-11. The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick. The equilibrium price and quantity for Chef Ernie's sushi are $60 and 20 thousand units. What is the value of consumer surplus?

The difference between consumer surplus and producer surplus in a market is equal to the deadweight loss.

Suppose the demand curve for a product is vertical and the supply curve is upward sloping. If a unit tax is imposed in the market for this product,

What is deadweight loss? When is deadweight loss equal to zero?

Figure 4-7 -Refer to Figure 4-7. The figure above represents the market for iced tea. Assume that this is a competitive market. If 10,000 units of iced tea are sold,

Arthur buys a new cell phone for $150. He receives consumer surplus of $150 from the purchase. How much does Arthur value his cell phone?

Figure 4-5 -Refer to Figure 4-5. The figure above represents the market for pecans. Assume that this is a competitive market. If the price of pecans is $9,

What is the difference between scarcity and a shortage?

Table 4-12 -Refer to Table 4-12. The equations above describe the demand and supply for Bubba's Fried Jellybeans. The equilibrium price and quantity for Bubba's Fried Jellybeans are $40 and 5 thousand units. What is the value of producer surplus?

Figure 4-7 -Refer to Figure 4-7. The figure above represents the market for iced tea. Assume that this is a competitive market. If the price of iced tea is $1,

Table 4-11 -Refer to Table 4-11. The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick. What are the equilibrium price and quantity (in thousands) for Chef Ernie's sushi?

Table 4-3 -Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of cowboy hats is $35, The Waco Kid will produce

The graph below represents the market for alfalfa. The market price is $7.00 per bushel. Identify the areas representing consumer surplus, producer surplus, and economic surplus.