MacroEcon Chapter 4 Homework

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

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

In the diagram to the right, illustrating a binding price floor at P1, the amount of consumer surplus transferred to producers is represented by area ________ and the deadweight loss is equal to areas ____________.

B, C and E

Tax incidence is A. the potential division of the burden of a tax between buyers and government in a market. B. the actual division of the burden of a tax between buyers and sellers in a market. C. the potential division of the burden of a tax between buyers and sellers in a market. D. the actual division of the burden of a tax between buyers and government in a market.

B. the actual division of the burden of a tax between buyers and sellers in a market.

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

Deadweight loss is the reduction in economic surplus resulting from a market not being in competitive equilibrium. In the diagram to the right, deadweight loss is equal to the area(s): A. B & D. B. A. C. C & E. D. A, B, & C.

C. C & E.

Consumer and producer surplus measure the ____________ benefit rather than the ____________ benefit. A. marginal; additional B. subjective; objective C. net; total D. total; net

C. Net; total

A black market is A. very similar to a "gray" market except that the goods and services exchanged are imported. B. a market in which buying and selling take place at prices consistent with government price regulations. C. a market in which buying and selling take place at prices that violate government price regulations. D. a market in which all transactions involve activities (such illicit drugs, prostitution, etc.) many in the population find morally offensive.

C. a market in which buying and selling take place at prices that violate government price regulations.

____________ surplus is the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. This component of economic surplus is illustrated in the diagram to the right by area ________.

Consumer, A

In the diagram to the right, illustrating a per-unit tax equal to P2 minus P3, tax revenue is represented by the areas ____________ and the excess burden of the tax is represented by areas ____________.

D and F, E and G

Economic efficiency is A. a government outcome in which the marginal benefit to consumers of the last unit proceeded is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum. B. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the dum of consumer surplus and producer surplus is not at a maximum. C. a market outcome in which the marginal benefit to consumers of the last unit produced is greater than its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum. D. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

D. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

Economic surplus in a market is the sum of ____________ surplus and ____________ surplus. In a competitive market, with many buyers and sellers and no government restrictions, economic surplus is at a ____________ when the market is in ____________. A. consumer; producer; maximum; disequilibrium B. consumer; government; maximum; equilibrium C. consumer; producer; minimum; equilibrium D. consumer; producer; maximum; equilibrium

D. consumer; producer; maximum; equilibrium

"Rent controls, government farm programs, and other price ceilings and price floors are bad." This is an example of a A. positive statement. The statement is concerned with what is. B. positive statement. The statement is concerned with what should be. C. normative statement. The statement is concerned with what is. D. normative statement. The statement is concerned with what should be.

D. normative statement. The statement is concerned with what should be.

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

Maximum, minimum

____________ surplus is the difference between the lowest price a firm would be willing to accept and the price it actually receives. This component of economic surplus is illustrated in the diagram to the right by area ________.

Producer, B

In the diagram to the right, marginal benefit ____________ marginal cost at output level Q3. This output level is considered economically ____________.

is less than, inefficient