econ ch 4

Economic surplus is maximized when A. the marginal benefit of consumption is greater than the marginal costs of production. B. the marginal benefit of consumption is equal to the marginal costs of production. C. the marginal benefit of consumption is less than the marginal costs of production.

B

Deadweight loss is A. the reduction in sales revenue resulting from market distortions. B. a measure of market equity. C. the reduction in economic surplus resulting from a market not being in competitive equilibrium. D. the reduction in consumer expenditure resulting from market failure.

C

"If there is a shortage of a​ good, it must be​ scarce, but there is not a shortage of every scarce​ good." A. The statement is correct because there is a shortage of some goods that are not scarce. B. The statement is incorrect because every good​ (except undesirable​ things) is scarce. C. The statement is incorrect because there is no shortage of scarce goods. D. The statement is correct because every good​ (except undesirable​ things) is scarce. E. The statement is incorrect because there is a shortage of every scarce good.

D

A black market is A. a market in which there are​ non-binding price controls. B. a market in which participants exchange goods and services without using money. C. a market in which buying and selling occur at legal prices. D. a market in which buying and selling occur at prices that violate government price regulations. E. a market in which there is no deadweight loss.

D

Do the people who are legally required to pay a tax always bear the burden of the​ tax? Briefly explain. A. No. Producers always bear the burden of the tax. B. No. Those who are legally required to send a tax payment to the government never bear the burden of the tax. C. No. Consumers always bear the burden of the tax. D. No. Whoever bears the burden of the tax is not affected by who legally is required to pay the tax to the government. E. Yes. Those who are legally required to send a tax payment to the government bear the burden of the tax.

D

Economic efficiency A. is a market outcome in which the sum of consumer surplus and producer surplus is at a maximum. B. is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production. C. is a market outcome in which every individual is better off than they would be at any other market outcome. D. both a and b. E. all of the above.

D

Producers favor A. price floors​ because, when​ binding, price floors increase price above the equilibrium and decrease deadweight loss. B. price ceilings​ because, when​ binding, price ceilings increase price above the equilibrium and may increase producer surplus. C. price floors​ because, when​ binding, price floors decrease price below the equilibrium and increase producer surplus. D. price floors​ because, when​ binding, price floors increase price above the equilibrium and may increase producer surplus. E. price floors​ because, when​ non-binding, price floors increase price above the equilibrium and may increase producer surplus.

D

Tax incidence indicates A. who is not legally required to send a tax payment to the government. B. the burden of a tax on producers. C. who is legally required to send a tax payment to the government. D. the actual division of the burden of a tax. E. the burden of a tax on consumers.

D

Why is the demand curve referred to as a marginal benefit​ curve? It shows the difference between the highest price a consumer is willing to pay and the lowest price a firm would be willing to accept. B. It shows the difference between the highest price a consumer is willing to pay and the marginal benefit of consumption. C. It shows the willingness of firms to supply a product at different prices. D. It shows the willingness of consumers to purchase a product at different prices. E. It shows the price consumers actually pay to consume a product.

D

Economists define economic efficiency in this way A. to help policymakers understand the negative consequences of taxes. B. to illustrate the benefits of a competitive market equilibrium. C. to help policymakers understand the negative consequences of price ceilings. D. to help policymakers understand the negative consequences of price floors. E. all of the above.

E

Black markets may arise in reaction to

binding price ceilings

Marginal benefit is

the additional benefit from consuming one more unit.