Micro Ch. 4-5

Javier and Pierre each want to buy an ice cream cone. Javier is willing to pay $2.50 and Pierre is willing to pay $4.00. If the ice cream cone costs $2.25, what is the total consumer surplus after Javier and Pierre make their purchases?

$2.00

Samia is willing to pay $10 for one bracelet and $5 for a second. Isabella is willing to pay $12 for one bracelet and $2 for a second. If the price is currently $8 per bracelet, what is the total consumer surplus after Samia and Isabella make their purchases?

$6

Suppose that the price of a hotel room in San Diego averages $200 per night and that 30,000 people stay in hotel rooms on an average night in San Diego. If the average level of consumer surplus for each hotel guest equals $24, what is the total consumer surplus per night?

$720,000

Which of the following is NOT an instance of market failure?

A bad harvest increases the price of oranges.

If a price floor is imposed above the equilibrium price in a market, what is the effect?

A surplus results.

Ahmed, Boris, Roberto, and Sunil all want to attend a football game. The admission price is $48. Ahmed is willing to pay $59 for the ticket. Boris is willing to pay $39. Roberto is willing to pay $45, and Sunil is willing to pay $55. Based on this information, who will go to the game?

Ahmed and Sunil

Mario is willing to mow one lawn for $18; he will mow a second for $22, and a third for $28. Assume that the market rate for lawn mowing is $24. How many lawns will Mario mow? What will be his total revenue? What will be his producer surplus?

Mario will mow two lawns for a total revenue of $48, and his producer surplus will be $8

Graciela is willing to sell a dozen roses for $50, while Giuseppe is willing to sell a dozen roses for $60. Carlos is willing to buy a dozen roses for $60, while Yuriko is willing to pay $50. If the market price is $52, how many roses are sold and what is the sum total of consumer and producer surplus after the transaction(s)?

One dozen roses will be sold, and the total consumer and producer surplus will be $10.

Which of the following statements regarding price floors is TRUE?

Price floors are intended to help certain people, but they have side effects that may harm others in predictable ways.

What is the result of a binding quota restriction on quantity?

The market-clearing price will be higher than the equilibrium price.

Why do minimum wage laws in Italy and Spain result in a greater prevalence of workers being hired in unreported jobs "off the books" than do minimum wage laws in the United States?

The minimum wages in these countries are so far above the equilibrium wage that they have generated significant unemployment.

Which of the following is a likely result of a price floor imposed on providers of a particular service?

The service providers will offer an inefficiently high quality.

If a price ceiling is imposed above the equilibrium price, what is the effect?

There is no visible effect on the market outcome.

Which of the following is not a likely result of a quantity control in the form of a binding quota?

a surplus of the good or service

Market failure arises when the market fails to:

achieve an efficient outcome.

Why did Venezuela experience a shortage of basic food in 2006?

because the price of basic food was legally prevented from rising to its equilibrium level

Economic theory asserts that:

both producers and consumers gain from trade.

Look again at the table above that shows willingness to pay for a concert ticket to see Green Day at Red Rocks. If each ticket is priced at $20 instead of the original $30:

both quantity demanded and total consumer surplus will increase.

In a voluntary exchange:

both the producer and the consumer can experience a net benefit.

Consumer surplus is the:

difference between the price that consumers are willing to pay for a good and the price they actually pay.

Producer surplus is the:

difference between the price that producers receive and the price at which they are willing to sell the good.

Which of the following is not a predictable result of a price ceiling?

exorbitant profits for producers of the good

Suppose at a price of $1.73 per gallon, residents of Tacoma purchase 1 million gallons of gas every week. If the price of gas increases to $2.46 per gallon, consumer surplus will:

fall.

Look again at the table above that shows willingness to pay for a concert ticket to see Green Day at Red Rocks. Now assume that the ticket seller is able to charge $20 a ticket for general admission and $50 per ticket for a reserved seat. All consumers would rather have a reserved seat and any consumer willing to meet the price is given a reserve seat. The number of tickets sold and the total consumer surplus is equal to:

four tickets sold; total consumer surplus = $40.

A binding price ceiling is designed to:

keep the price below the equilibrium price.

An efficient outcome is one in which:

no individual can be made better off without making someone else worse off.

A binding price floor is presented graphically as a(n):

price above equilibrium.

A binding price ceiling is presented graphically as a(n):

price below equilibrium.

A binding minimum wage is a type of:

price floor.

The graphical result of a binding price ceiling is:

quantity demanded at the price ceiling exceeds the amount at the equilibrium price, and quantity supplied is less than the amount at the equilibrium price.

The result of a binding price floor is:

quantity supplied at the price floor exceeds the amount at the equilibrium price, and quantity demanded is less than the amount at the equilibrium price.

What is the name given to the wedge that occurs between the supply price and the demand price of the transacted quantity, when a good is subject to quantity restrictions?

quota rent

The medallion system used to license taxicabs in New York City is an example of a(n):

quota.

A binding price floor is designed to:

raise the price above the equilibrium price.

Which of the following would enhance the level of efficiency in a market?

removing a binding price floor, allowing the price to return to its equilibrium level

Which group would be most likely to benefit from a binding price floor imposed on wheat?

sellers of wheat that are seeking higher prices

Which area on a graph showing a firm's supply curve represents producer surplus?

the area above the supply curve up to a line indicating price

Consumer surplus is positive when:

the price the consumer is willing to pay is more than the market price.

Producer surplus is positive when:

the price the producer is willing to charge is less than the market price.

Look at the table above that shows willingness to pay for a concert ticket to see Green Day at Red Rocks stadium. If the ticket price is $30 ticket how many tickets will be sold and what is total consumer surplus?

three tickets sold; total consumer surplus = $35.