Chapter 4 Econ 510

Marginal cost is A. the total cost of producing one unit of a good or service. B. the difference between the lowest price a firm would have been willing to accept and the price it actually receives. C. the average cost of producing a good or service . D. the additional cost to a firm of producing one more unit of a good or service.

" D. the additional cost to a firm of producing one more unit of a good or service.

The figure shows the market for beer. The government plans to impose a unit tax in this market. How much of the tax is paid by sellers? A. $2 B. $5 C. $7 D. $12

A. $2

The figure shows the market for beer. The government plans to impose a unit tax in this market. For each unit sold, the price sellers receive after the tax (net of tax) is A. $20. B. $22. c. $27. D. $32.

A. $20.

The table above lists the highest prices three consumers, Tom, Dick, and Harriet, are willing to pay for a short - sleeved polo shirt. If the price of the shirts falls from $28 to $20, A. consumer surplus increases from $14 to $35. B. Tom will buy two shirts; Dick and Harriet will each buy one shirt. C. Harriet will receive more consumer surplus than Tom or Dick. D. consumer surplus will increase from $70 to $95.

A. consumer surplus increases from $14 to $35.

Consumers are willing to purchase a product up to the point where A. the marginal benefit of consuming the product is equal to the marginal cost of consuming it. B. the consumer surplus is equal to the producer surplus. C the marginal benefit of consuming the product equals the area below the supply curve and above the market price. D the marginal benefit of consuming a product is equal to zero.

A. the marginal benefit of consuming the product is equal to the marginal cost of consuming it.

Refer to the diagram to the right which shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf What is the area that represents producer surplus after the imposition of the price floor? A. B+C+D+E B. B + E C. B+E+F D. A +B+ E

B. B + E

If Uber is required to start paying the value - added tax (VAT) in Great Britain, this will have the potential to raise the equilibrium price in this market and, therefore, decrease efficiency. This would have a tendency to A. increase consumer surplus and increase producer surplus. B. decrease consumer surplus and increase deadweight loss. C. decrease producer surplus and decrease deadweight loss. D. maximize consumer surplus and minimize producer surplus.

B. decrease consumer surplus and increase deadweight loss.

The table lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of The Waco Kid's cowboy hats is $40, A. producer surplus from the first hat is $40. B. producer surplus will equal $28. C. there will be a surplus; as a result, the price will fall to $24. D. The Waco Kid will produce four hats.

B. producer surplus will equal $28.

In the diagram to the right, illustrating a binding price floor at P 1, the amount of consumer surplus transferred to producers is represented by area _____ and the deadweight loss is equal to areas _________

B; C and E

Rent control is an example of A. a black market. B a subsidy for low-skilled workers. C. a price ceiling. D. a price floor

C. a price ceiling.

Marginal benefit is equal to the ___ benefit a consumer receives from consuming one more unit of a good or service . A. total B. surplus C. additional D. unintended

C. additional

To affect the market outcome a price ceiling A. must be set below the black market price. B. must be set below the price floor. C. must be set below the equilibrium price. D. must be set below the legal price.

C. must be set below the equilibrium price.

In the diagram to the right, illustrating a binding price ceiling at P3, the amount of producer surplus transferred to consumers is represented by area ______ and the deadweight loss is equal to areas ______ .

C; B and D

The figure shows the market for beer. The government plans to impose a unit tax in this market. The price buyers pay after the tax is A. $7. B. $20 . C. $22. D. $27

D. $27

When the government imposes price floors or price ceilings, A. everyone wins, goods and services distribution is more just, and there is an increase in economic efficiency. B. some people win , some people lose , and there is an increase in economic efficiency. C. everyone wins, goods and services distribution is more just , and there is a loss of economic efficiency . D. some people win , some people lose , and there is a loss of economic efficiency.

D. some people win , some people lose , and there is a loss of economic efficiency.

The graph at the right 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 40 in order to raise the price to $18. What is the value of consumer surplus at a price of $18? A. $120 B. $240 c. $60 D. $180

c. $60

A price ceiling is a legally determined __________ price that sellers may charge. A price floor is a legally determined ____________ price that sellers may receive.

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