Econ 103 Quiz Week 6 - Market Efficiency and Government Intervention

The NFL wants to give the "common fan" the opportunity to attend the Super Bowl, so it sets Super Bowl prices "low"—tickets for a regular seat at Super Bowl XXXVII cost just $400. Scalpers, however, were selling tickets for $1,500 or more. The true cost to the "common fan" of a regular ticket to Super Bowl XXXVII was:

$1,500.

A price ceiling imposed below the equilibrium price of a good will cause:

a supply shortage.

An effective price floor would result in:

a surplus of the good.

The going rent in the market for 1-bedroom apartments in your neighborhood is $500. If the government imposes a price ceiling of $700 in this market total surplus in this market will

not change

Adie wants to take some online classes this semester. She is willing to pay $1,000 for the first class, $800 for the second, $700 for the third, and $500 for the fourth. If online classes cost $750, Adie will take ________ online classes and her consumer surplus will equal ________.

2; $300

When a tenant in a rent-controlled apartment sublets the apartment to another renter at a rent higher than the price ceiling:

we say that the transaction takes place on a black market.

If the price is above the equilibrium price in the market for grapefruit, total surplus:

will decrease.

If there is a decrease in demand, total surplus:

will decrease.

If there is a decrease in supply, total surplus:

will decrease.

If more agricultural land is devoted to producing peanuts, total surplus in the peanut butter market:

will increase.

If the price of a good rises, then producer surplus:

will increase.

If there is an increase in demand, total surplus:

will increase.

Peanut butter and jelly are complements. If there is a decrease in the price of jelly, producer surplus in the peanut butter market:

will increase.

When there is a new medical report extolling the health advantages of grapefruit, total producer surplus in the grapefruit market:

will increase.

Which of the following is true if there is a decrease in the demand for ice cream?

There is a decrease in producer surplus.

Natasha, Nelson, and Nikolai are all looking to buy flashlights for a camping trip. Natasha is willing to pay $4, Nelson is willing to pay $10, and Nikolai is willing to pay $20. If the actual price of a flashlight turns out to be $9, what is the total consumer surplus for these three shoppers?

$12

Ahmed is willing to mow lawns for $10 each, Boris is willing to mow lawns for $20 each, and Chelsea is willing to mow lawns for $30 each. If the going rate for lawn mowing is $24, what is the total producer surplus received by the three of them?

$18

Ahmed is willing to mow lawns for $10 each, Boris is willing to mow lawns for $20 each, and Chelsea is willing to mow lawns for $30 each. If the going rate for lawn mowing is $12, what is the total producer surplus received by the 3 of them?

$2

Luis is willing to sell his pool table for $600, but if he gets $840, the producer surplus Luis receives is ________.

$240

Ahmed is willing to mow lawns for $10 each, Boris is willing to mow lawns for $20 each, and Chelsea is willing to mow lawns for $30 each. If the going rate for lawn mowing is $28, what is the total producer surplus received by the three of them?

$26

Vonda and Aleiyah are shopping together at the mall for new jeans. Vonda is willing to pay $90 and Aleiyah is willing to pay $50 for a pair of jeans. What is the gain in total consumer surplus when the price decreases from $59 to $40?

$29

Natasha, Nelson, and Nikolai are all looking to buy flashlights for a camping trip. Natasha is willing to pay $4, Nelson is willing to pay $10, and Nikolai is willing to pay $20. If the actual price of a flashlight turns out to be $16, what is the total consumer surplus for these 3 shoppers?

$4

Natasha, Nelson, and Nikolai are all looking to buy flashlights for a camping trip. Natasha is willing to pay $4, Nelson is willing to pay $10, and Nikolai is willing to pay $20. If the actual price of a flashlight turns out to be $14, what is the total consumer surplus for these three shoppers?

$6

Ahmed is willing to mow lawns for $10 each, Boris is willing to mow lawns for $20 each, and Chelsea is willing to mow lawns for $30 each. If the going rate for lawn mowing is $17, what is the total producer surplus received by the three of them?

$7

Natasha, Nelson, and Nikolai are all looking to buy flashlights for a camping trip. Natasha is willing to pay $4, Nelson is willing to pay $10, and Nikolai is willing to pay $20. If the actual price of a flashlight turns out to be $13, what is the total consumer surplus for these three shoppers?

$7

Mountain River Adventures offers whitewater rafting trips down the Colorado River. It costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third, and $160 for the fourth. If the market price for a raft trip was $120 but has now increased to $150, the gain in producer surplus is equal to:

$70.

Ahmed is willing to mow lawns for $10 each, Boris is willing to mow lawns for $20 each, and Chelsea is willing to mow lawns for $30 each. If the going rate for lawn mowing is $18, what is the total producer surplus received by the three of them?

$8

Jeanette is willing to pay $100 for the first pair of shoes, $80 for the second pair, $50 for the third, and $30 for the fourth. If shoes cost $50, Jeanette will buy ________ pairs of shoes and her total consumer surplus equals ________.

3; $80

A price control is:

a legal restriction on how high or low a price in a market may go.

The going rent in the market for 1-bedroom apartments in your neighborhood is $400. If the government imposes a price ceiling of $800 in this market:

The same number of apartments will be rented

Which of the following is true if there is a decrease in the supply of ice cream?

There is a decrease in consumer surplus.

Which of the following is a reason for governments imposing or maintaining price controls?

It may be politically expedient to impose price controls that benefit influential voting groups.

The going rent in the market for 1-bedroom apartments in your neighborhood is $800. If the government imposes a price ceiling of $400 in this market:

Less people will rent apartments.

Which of the following is true when a market is in equilibrium and there is no outside intervention to change the equilibrium price?

No mutually beneficial trades are missed.

Governments continue to impose price controls. Which of the following is not a valid reason for this?

Price controls are always effective.

The going rent in the market for 1-bedroom apartments in your neighborhood is $200. If the government imposes a price ceiling of $400 in this market:

The same number of apartments will be rented

If total surplus falls, which of the following must have occurred?

There was a decrease in demand or a decrease in supply.

If total surplus rises, which of the following must have occurred?

There was an increase in demand or an increase in supply.

Suppose that the average cost of a doctor's visit is $100. If the government imposes a price ceiling of $50 on the cost of a doctor's visit, there will be:

an excess demand for doctor's visits.

An effective price ceiling will most likely result in which of the following?

an increase in consumer surplus

Rent controls in New York City cause all of the following except:

an increase in the quantity supplied of rent-controlled apartments.

Economists in general agree that rent controls are:

an inefficient and ineffective way to help low-income families.

Producers may supply a good with an inefficiently high quality if the government imposes a(n):

binding price floor.

A price ceiling on a good often results in:

black market or underground transactions of the good.

Well-defined property rights:

can allow for mutually beneficial trades.

Suppose the government sets a price floor of $2.85 per bushel on corn when the current price is $2.55. This price floor will:

cause a surplus of corn.

Suppose the government of the oil-rich country of Oiland sets gasoline prices at $0.25 per gallon, when the market price is $1.50. The Oiland government's actions will:

cause gasoline shortages even in an oil-rich country.

If the market for grapefruit is in equilibrium without any outside intervention to change the equilibrium price:

consumer and producer surplus are maximized.

Some smaller retailers often go out of business when Walmart opens a new store. One of the reasons for this development could be that:

consumers in those areas receive a larger consumer surplus from shopping at Walmart than from the smaller stores.

If the government feels that a price in the market is too high for the ________, it can impose a ________.

consumers; price ceiling

If the price of a good rises while demand remains unchanged, then total consumer surplus will ____________.

decrease

Milk is an input in the production of cheese, and cheese and humus are substitutes. A decrease in the price of milk will _________ the producer surplus in the market for humus.

decrease

Oil is an input in the production of gasoline, and gasoline and cars are complements. An increase in the price of oil will _________ the producer surplus in the market for cars.

decrease

Rubber is an input in the production of tires, and tires and cars are complements. An increase in the price of rubber will _________ the total surplus in the market for cars (assume that neither curve is perfectly inelastic).

decrease

The current price in the market for cab rides in your neighborhood is $3.00/mile. If the government imposes a price ceiling of $2.50/mile, in this market total surplus in this market will:

decrease

Tomatoes are an input in the production of ketchup, and ketchup and mustard are substitutes. A decrease in the price of tomatoes will _________ the total surplus in the market for mustard.

decrease

Price ceilings may be imposed if:

demanders can make strong moral or political arguments for lower prices.

An effective minimum wage ultimately means that:

employees must demonstrate that they have characteristics greater than other potential employees even if they are willing to work at a lower wage.

Anna is willing to sell her 20-year-old boat, but not for less than $2,300. For Anna, the cost of selling this boat is ________ $2,300.

equal to

Suppose the government sets a price floor below the current price of the good. This price floor will:

have no effect on the price of the good.

Total surplus in the market is equal to:

he sum of consumer surplus and producer surplus.

One of the ways rent control is inefficient is that it leads to:

high opportunity costs associated with wasted time.

In a black market, goods or services are bought and sold:

illegally.

If the cost to download a song from the Internet falls from $0.99 to $0.50, then we would predict that producer surplus would ________ in the market for MP3 players.

increase

If the price of a good falls while demand remains unchanged, then total consumer surplus will ____________.

increase

Tomatoes are an input in the production of ketchup, and ketchup and mustard are substitutes. An increase in the price of tomatoes will _________ the total surplus in the market for mustard.

increase

A price floor in the market for wheat that is set above the current market price:

increases the price paid by consumers.

A price floor in the market for wheat:

increases the price paid by consumers.

A market price support policy establishes a price floor, which:

increases the price received by farmers.

Black markets may develop with price controls because:

individuals can profit by illegal exchanges.

Which is not an inefficiency caused by price floors?

inefficiently low quality

A price ceiling will have no effect if:

it is set above the equilibrium price.

If the government imposes rent control:

it may result in some landlords leaving the business because they cannot cover costs.

Farmers in developing countries want the United States to reduce the subsidies that it gives to American farmers because subsidized agricultural products from the United States:

lead to global agricultural surpluses and lower prices for developing country farmers.

According the model of supply and demand, a significant increase in the minimum wage could have the effect of:

making it harder for workers to find jobs.

Market failure refers to a situation in which:

markets fail to reach an efficient outcome.

Equilibrium in the market for peanut butter is disturbed by an increase in the price of peanuts. Producer surplus in the peanut butter market:

may change, but we cannot determine the change without more information.

A price floor is a ________ set ________ the equilibrium price.

minimum price; above

The current price in the market for milk is $8.00 If the government imposed a price floor of $4.00 in this market total surplus would ____________.

not change

A rent control scheme that would set a maximum amount of rent paid that is below the equilibrium rental price would most likely be supported by which of the following groups?

people who wish to rent such an apartment

In the rental housing market, landlords determine the number of units rented. If a price control is present in the market, this control must be a:

price ceiling.

Inefficient allocations of goods to consumers often result from:

price ceilings.

When price controls take the form of maximum prices set below the equilibrium price they are:

price ceilings.

A price that the government guarantees farmers will receive for a particular crop is a(n):

price floor (price support).

A minimum price set above the equilibrium price is a:

price floor.

A competitive market for cell phone chargers is currently in equilibrium. If the price is below the equilibrium price in the cell phone charger market, what will happen to producer surplus?

producer surplus will fall.

If the government feels that the price in the market is too low for the ________, it can impose a ________.

producers; price floor

Rent controls set a price ceiling below the equilibrium price and therefore:

quantity demanded exceeds the quantity supplied.

Government intervention in the form of price floors or price ceilings will:

result in either surpluses or shortages.

The government decides to impose a price ceiling on a good because it thinks the market-determined price is "too high." If it imposes the price ceiling above the equilibrium price:

there will be no change to either the price or quantity in the market.

Alex is willing to buy the last ticket to the Billy Bragg concert for $15, while Jake is willing to pay $25. Alex is first in line and buys a ticket for $15. He then resells his ticket to Jake for $20. By reselling the ticket instead of going to the concert himself, Alex caused:

total surplus to increase.

Government may choose to impose a price floor if:

suppliers can make strong moral or political arguments for higher prices.

Maximum total surplus in the market for chocolate occurs when:

the market is in equilibrium.

If the minimum wage is a binding price floor, then:

the number of workers who want to work will be greater than the number of jobs available.

The market for apples is in equilibrium at a price of $0.50 per pound. If the government imposes a price floor in the market at a price of $0.40 per pound, then:

the price floor will not affect the market price or output.

The total producer surplus in the Wisconsin milk market is represented by:

the sum of the individual producer surpluses in this market.

The fact that there is a positive amount of total surplus in a market shows that:

there are gains from trade.

When a market is efficient:

there is no way to make some people better off without making other people worse off.

The market for apples is in equilibrium at a price of $0.50 per pound. If the government imposes a price ceiling in the market at a price of $0.40 per pound, then:

there will be a shortage of the good.