MACROECON Quiz #4

Economic efficiency in a competitive market is achieved when A) the marginal benefit equals the marginal cost from the last unit sold. B) economic surplus is equal to consumer surplus. C) producer surplus equals the total amount firms receive from consumers minus the cost of production. D) consumers and producers are satisfied.

A

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. What area represents consumer surplus at P2? A) A B) A + B C) A + B + D + E D) B + C

A

In a competitive market, the demand curve shows the ________ received by consumers and the supply curve shows the ________. A) marginal benefit; marginal cost B) net benefit; net cost C) utility; average cost. D) economic surplus; opportunity cost

A

Refer to Figure 4-1. If the market price is $1.00, what is the consumer surplus on the third burrito? A) $0.50 B) $1.00 C) $1.50 D) $7.50

A

Refer to Figure 4-10. What area represents the deadweight loss after the imposition of the ceiling? A) C + E B) G + H C) J + H D) C + E + J + H

A

Refer to Figure 4-10. What is the area that represents consumer surplus after the imposition of the ceiling? A) A + B + D B) A + B + D + F + G C) A + B + D + F D) A + B + C

A

Refer to Figure 4-15. For each unit sold, the price sellers receive after the tax (net of tax) is A) $20. B) $22. C) $27. D) $32.

A

Refer to Figure 4-15. How much of the tax is paid by sellers? A) $2 B) $5 C) $7 D) $12

A

Refer to Figure 4-9. What is the area that represents producer surplus after the imposition of the price floor? A) B + E B) B + E + F C) A + B + E D) B + C + D + E

A

Refer to Table 4-7. If a minimum wage of $11.50 is mandated, there will be a A) surplus of 40,000 units of labor. B) shortage of 20,000 units of labor. C) shortage of 40,000 units of labor. D) surplus of 20,000 units of labor.

A

Economists refer a to a market where buying and selling take place at prices that violate government price regulations as A) a restricted market. B) a black market. C) an outlaw market. D) a noncompetitive market.

B

In a competitive market equilibrium A) marginal benefit and marginal cost are maximized. B) the marginal benefit equals the marginal cost of the last unit sold. C) total consumer surplus equals total producer surplus. D) consumers and producers benefit equally.

B

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

B

Refer to Figure 4-1. Arnold's marginal benefit from consuming the third burrito is A) $1.25. B) $1.50. C) $2.50. D) $6.00.

B

Refer to Figure 4-15. How much of the tax is paid by buyers? A) $2 B) $5 C) $7 D) $12

B

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 $3, what changes in the market would result in an economically efficient output? A) The price would increase, the demand would decrease, and the supply would increase. B) The price would increase, the quantity demanded would decrease, and the quantity supplied would increase. C) The quantity supplied would increase, the quantity demanded would decrease, and the equilibrium price would increase. D) The price would increase, the quantity supplied would decrease, and the quantity demanded would increase.

B

Refer to Table 4-7. If a minimum wage of $11.50 an hour is mandated, what is the quantity of labor demanded? A) 40,000 B) 570,000 C) 610,000 D) 1,180,000

B

Suppliers will be willing to supply a product only if A) the price is higher than the average cost of producing the product. B) the price received is at least equal to the additional cost of producing the product. C) the price received is less than the additional cost of producing the product. D) the price received is at least double the additional cost of producing the product.

B

The additional cost to a firm of producing one more unit of a good or service is the A) minimum cost. B) marginal cost. C) total cost. D) opportunity cost.

B

The minimum wage is an example of A) a subsidy for low-skilled workers. B) a price floor. C) a black market. D) a price ceiling

B

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

B

Which term refers to a legally established minimum price that firms may charge? A) a subsidy B) a price floor C) a tariff D) a price ceiling

B

________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium. A) Economic shortage B) Deadweight loss C) Producer atrophy D) Marginal cost

B

Producer surplus is the difference between A) The quantity supplied and quantity demanded at an above equilibrium price. B) The maximum prices consumers are willing to pay for a product and the lower equilibrium price. C) The minimum prices producers are willing to accept for a product and the higher equilibrium price. D) The maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept.

C

Refer to Figure 4-1. If the market price is $1.00, what is Arnold's consumer surplus? A) $1.00 B) $2.00 C) $3.00 D) $7.00

C

Refer to Figure 4-6. What area represents the deadweight loss at P2? A) G + H B) C + E + H C) C + E D) B + C

C

Refer to Table 4-7. If a minimum wage of $11.50 an hour is mandated, what is the quantity of labor supplied? A) 40,000 B) 570,000 C) 610,000 D) 1,180,000

C

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

C

Economic growth can be portrayed as A) A movement from a point on to a point inside a production possibilities curve. B) A movement from one point to another point on a fixed production possibilities curve. C) An inward shift of the production possibilities curve. D) An outward shift of the production possibilities curve.

D

Economic surplus A) is equal to the difference between consumer surplus and producer surplus. B) does not exist when a competitive market is in equilibrium. C) is the difference between quantity demanded and quantity supplied when the market price for a product is greater than the equilibrium price. D) is equal to the sum of consumer surplus and producer surplus.

D

If equilibrium is achieved in a competitive market, then A) the deadweight loss will be the same as the opportunity cost of the last unit of output sold. B) the deadweight loss will be maximized. C) the deadweight loss will equal the sum of consumer surplus and producer surplus. D) there is no deadweight loss.

D

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

Refer to Figure 4-10. What is the area that represents the producer surplus after the imposition of the ceiling? A) D + F + G B) A + B + D + F + G C) F + G D) F

D

Refer to Figure 4-15. The price buyers pay after the tax is A) $7. B) $20. C) $22. D) $27.

D

Refer to Figure 4-6. What area represents producer surplus at P2? A) A + B + D B) B + D + G C) B + C + D + E D) B + D

D

Refer to Figure 4-6. What area represents the deadweight loss at the equilibrium price of P1? A) C + E + H B) G + H C) C + E D) There is no deadweight loss at the price of P1.

D

Refer to Figure 4-9. What area represents consumer surplus after the imposition of the price floor? A) A + B + E B) A + B C) A + B + E + F D) A

D

Refer to Figure 4-9. What area represents the deadweight loss after the imposition of the price floor? A) C + D + F + G B) C + D + G C) F + G D) C + D

D

Refer to Table 4-7. What is the equilibrium hourly wage (W*) and the equilibrium quantity of labor (Q*)? A) W* = $10.50; Q* = 1,180,000 B) W* = $9.50; Q* = 570,000 C) W* = $11.50; Q* = 570,000 D) W* = $10.50; Q* = 590,000

D

The area ________ the market supply curve and ________ the market price is equal to the total amount of producer surplus in a market. A) below; above B) below; below C) above; above D) above; below

D

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called A) producer surplus. B) the substitution effect. C) the income effect. D) consumer surplus.

D

The sum of consumer surplus and producer surplus is equal to A) total profit. B) the deadweight loss. C) zero. D) the economic surplus.

D

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

D