PART 7 (Additional)

A

QN=249 (17367) The term market failure refers to a. a market that fails to allocate resources efficiently. b. an unsuccessful advertising campaign which reduces demand. c. ruthless competition among firms. d. a firm that is forced out of business because of losses.

A

QN=201 (17343) Refer to Figure 7-5. What is the consumer surplus if the price is $100? a. $2,500 b. $5,000 c. $10,000 d. $20,000

D

QN=202 (17332) Inefficiency can be caused in a market by the presence of a. (i) market power. b. (ii) externalities. c. (iii) imperfectly competitive markets. d. All of (i), (ii), and (iii) are correct.

A

QN=203 (17314) Refer to Table 7-9. Both the demand curve and the supply curve are straight lines. If the price is $8 but only 4 units are bought and sold, producer surplus will be a. $24. b. $28. c. $32. d. $40.

A

QN=204 (17306) Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is a. $150. b. $200. c. $350. d. $550.

D

QN=205 (17335) Which of the following will cause a decrease in consumer surplus? a. an increase in the number of sellers of the good b. a decrease in the production cost of the good c. sellers expect the price of the good to be lower next month d. the imposition of a binding price floor in the market

A

QN=206 (17326) Total surplus is a. equal to producer surplus plus consumer surplus. b. equal to the total cost to sellers minus the total value to buyers. c. equal to consumers' willingness to pay plus producers' cost. d. greater than the sum of consumer surplus plus producer surplus.

A

QN=207 (17309) Refer to Figure 7-15. At the equilibrium price, consumer surplus is a. $480. b. $640. c. $1,120. d. $1,280.

B

QN=208 (17330) Which of the Ten Principles of Economics does welfare economics explain more fully? a. The cost of something is what you give up to get it. b. Markets are usually a good way to organize economic activity. c. Trade can make everyone better off. d. A country's standard of living depends on its ability to produce goods and services.

A

QN=209 (17333) Externalities are a. side effects passed on to a party other than the buyers and sellers in the market. b. side effects of government intervention in markets. c. external forces that cause the price of a good to be higher than it otherwise would be. d. external forces that help establish equilibrium price.

A

QN=210 (17308) Which of the following is correct? a. Efficiency deals with the size of the economic pie, and equality deals with how fairly the pie is sliced. b. Equality can be judged on positive grounds whereas efficiency requires normative judgments. c. Efficiency is more difficult to evaluate than equality. d. Equality and efficiency are both maximized in a society when total surplus is maximized.

C

QN=211 (17322) 3. Refer to Table 7-1. If the table represents the willingness to pay of 4 buyers and the price of the product is $15, then who would be willing to purchase the product? a. Mike b. Mike and Sandy c. Mike, Sandy, and Jonathan d. Mike, Sandy, Jonathan, and Haley

A

QN=212 (17345) Producer surplus measures the a. benefits to sellers of participating in a market. b. costs to sellers of participating in a market. c. price that buyers are willing to pay for sellers' output of a good or service. d. benefit to sellers of producing a greater quantity of a good or service than buyers demand.

A

QN=213 (17340) Consumer surplus is equal to the a. Value to buyers - Amount paid by buyers. b. Amount paid by buyers - Costs of sellers. c. Value to buyers - Costs of sellers. d. Value to buyers - Willingness to pay of buyers.

B

QN=214 (17328) Raisins and milk are complementary goods. An increase in supply of raisins will a. increase consumer surplus in the market for raisins and decrease producer surplus in the market for milk. b. increase consumer surplus in the market for raisins and increase producer surplus in the market for milk. c. decrease consumer surplus in the market for raisins and increase producer surplus in the market for milk. d. decrease consumer surplus in the market for raisins and decrease producer surplus in the market for milk.

A

QN=215 (17338) Which of the following events would increase producer surplus? a. (i) Sellers' costs stay the same and the price of the good increases. b. (ii) Sellers' costs increase and the price of the good stays the same. c. (iii) Sellers' costs increase and the price of the good decreases. d. All of (i), (ii), and (iii) are correct.

C

QN=216 (17316) Refer to Figure 7-1. If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus? a. $625 b. $1,250 c. $2,500 d. $5,000

B

QN=217 (17323) Suppose there is an early freeze in California that ruins the lemon crop. What happens to consumer surplus in the market for lemons? a. It increases. b. It decreases. c. It is not affected by this change in market forces. d. It increases very briefly then decreases.

A

QN=218 (17339) Consumer surplus equals the a. value to buyers minus the amount paid by buyers. b. value to buyers minus the cost to sellers. c. amount received by sellers minus the cost to sellers. d. amount received by sellers minus the amount paid by buyers.

B

QN=219 (17331) 2. Refer to Figure 7-15. If the price decreases from $22 to $16 due to a shift in the supply curve, consumer surplus increases by a. $120. b. $360. c. $480. d. $600.

D

QN=220 (17337) Refer to Figure 7-2. When the price rises from P1 to P2, consumer surplus a. increases by an amount equal to A. b. decreases by an amount equal to B+C. c. increases by an amount equal to B+C. d. decreases by an amount equal to C.

D

QN=221 (17305) In which of the following circumstances would a buyer be indifferent about buying a good? a. (i) The amount of consumer surplus the buyer would experience as a result of buying the good is zero. b. (ii) The price of the good is equal to the buyer's willingness to pay for the good. c. (iii) The price of the good is equal to the value the buyer places on the good. d. All of (i), (ii), and (iii) are correct.

B

QN=222 (17318) Suppose Larry, Moe and Curly are bidding in an auction for a mint-condition video of Charlie Chaplin's first movie. Each has in mind a maximum amount that he will bid. This maximum is called a. a resistance price. b. willingness to pay. c. consumer surplus. d. producer surplus.

A

QN=223 (17324) Market efficiency occurs when a. total surplus is maximized. b. producer surplus is maximized. c. all resources are being used. d. consumer surplus equals producer surplus.

D

QN=224 (17319) Which of the following statements is not correct? a. A seller would be eager to sell her product at a price higher than her cost. b. A seller would refuse to sell her product at a price lower than her cost. c. A seller would be indifferent about selling her product at a price equal to her cost. d. Since sellers cannot set the price for their product, they must be willing to sell their product at any price.

A

QN=225 (17321) Belva is willing to pay $65.00 for a pair of shoes for a formal dance. She finds a pair at her favorite outlet shoe store for $48.00. Belva's consumer surplus is a. $17. b. $31. c. $48. d. $65.

A

QN=226 (17313) Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $350. His consumer surplus is a. $50. b. $150. c. $350. d. $400.

B

QN=227 (17307) Which tools allow economists to determine if the allocation of resources determined by free markets is desirable? a. profits and costs to firms b. consumer and producer surplus c. the equilibrium price and quantity d. incomes of and prices paid by buyers

B

QN=228 (17342) On a graph, consumer surplus is represented by the area a. between the demand and supply curves. b. below the demand curve and above the price. c. below the price and above the supply curve. d. below the demand curve and to the right of equilibrium price.

D

QN=229 (17341) In a market, the marginal buyer is the buyer a. whose willingness to pay is higher than that of all other buyers and potential buyers. b. whose willingness to pay is lower than that of all other buyers and potential buyers. c. who is willing to buy exactly one unit of the good. d. who would be the first to leave the market if the price were any higher.

A

QN=230 (17315) Consumer surplus is a. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. b. the amount a buyer is willing to pay for a good minus the cost of producing the good. c. the amount by which the quantity supplied of a good exceeds the quantity demanded of the good. d. a buyer's willingness to pay for a good plus the price of the good.

B

QN=231 (17344) Refer to Figure 7-5. What happens to the consumer surplus if the price rises from $100 to $150? a. The new consumer surplus is half of the original consumer surplus. b. The new consumer surplus is 25 percent of the original consumer surplus. c. The new consumer surplus is double the original consumer surplus. d. The new consumer surplus is triple the original consumer surplus.

B

QN=232 (17310) Which of the Ten Principles of Economics does welfare economics explain more fully? a. The cost of something is what you give up to get it. b. Markets are usually a good way to organize economic activity. c. Trade can make everyone better off. d. A country's standard of living depends on its ability to produce goods and services.

D

QN=233 (17334) When a buyer's willingness to pay for a good is equal to the price of the good, the a. buyer's consumer surplus for that good is maximized. b. buyer will buy as much of the good as the buyer's budget allows. c. price of the good exceeds the value that the buyer places on the good. d. buyer is indifferent between buying the good and not buying it.

A

QN=234 (17327) 3. Refer to Figure 7-16. If the price were P1, producer surplus would be represented by the area a. F. b. F+G. c. D+H+F. d. D+H+F+G+I.

C

QN=235 (17387) Suppose that electricity producers create a negative externality equal to $6 per unit. Further suppose that the government imposes a $8 per-unit tax on the producers. What is the relationship between the after-tax equilibrium quantity and the socially optimal quantity of electricity to be produced? a. They are equal. b. The after-tax equilibrium quantity is greater than the socially optimal quantity. c. The after-tax equilibrium quantity is less than the socially optimal quantity. d. There is not enough information to answer the question.

D

QN=236 (17348) Which of the following is not correct? a. Markets allocate scarce resources with the forces of supply and demand. b. The equilibrium of supply and demand is typically an efficient allocation of resources. c. Governments can sometimes improve market outcomes. d. Externalities cannot be positive.

C

QN=237 (17352) An externality is the impact of a. society's decisions on the well-being of society. b. a person's actions on that person's well-being. c. one person's actions on the well-being of a bystander. d. society's decisions on the poorest person in the society.

C

QN=238 (17349) Refer to Figure 10-2. Suppose that the production of plastic creates a social cost which is depicted in the graph above. What is the socially optimal quantity of plastic? a. 200 units b. 450 units c. 500 units d. 650 units

B

QN=239 (17382) The difference between social cost and private cost is a measure of the a. loss in profit to the seller as the result of a negative externality. b. cost of an externality. c. cost reduction when the negative externality is eliminated. d. cost incurred by the government when it intervenes in the market.

A

QN=240 (17351) Which of the following statements is correct? a. (i) Corrective taxes are often preferred over direct regulation because they typically reduce externalities at a lower cost. b. (ii) Corrective taxes distort economic incentives. c. (iii) Corrective taxes are often preferred over direct regulation because they typically reduce externalities at a faster rate. d. Both (i) and (ii) are correct.

A

QN=241 (17357) Which of the following is the best statement about markets? a. Markets are usually a good way to organize economic activity. b. Markets are generally inferior to central planning as a way to organize economic activity. c. Markets fail and are therefore not an acceptable way to organize economic activity. d. Markets are a good way to organize economic activity in developed nations, but not in less-developed nations.

B

QN=242 (17354) A paper plant produces water pollution during the production process. If the government forces the plant to internalize the negative externality, then the a. supply curve for paper would shift to the right. b. supply curve for paper would shift to the left. c. demand curve for paper would shift to the right. d. demand curve for paper would shift to the left.

C

QN=243 (17372) When a market is characterized by an externality, the government a. can correct the market failure only in the case of positive externalities. b. can correct the market failure only in the case of negative externalities. c. can correct the market failure in the case of both positive and negative externalities by inducing market participants to internalize the externality. d. cannot correct for externalities due to the existence of patents.

A

QN=244 (17366) If the government were to limit the release of air-pollution produced by a steel mill to 75 parts per million, the policy would be considered a a. regulation. b. corrective tax. c. subsidy. d. market-based policy.

D

QN=245 (17386) Corrective taxes that are imposed upon the producer of a nasty smell can be successful in reducing that smell because the tax makes the producer a. externalize the positive externality. b. externalize the negative externality. c. internalize the positive externality. d. internalize the negative externality.

D

QN=246 (17364) Refer to Figure 10-11. This graph shows the market for pollution when permits are issued to firms and traded in the marketplace. In the absence of a pollution permit system, the quantity of pollution would be a. 25 b. 50 c. 75 d. 100

C

QN=247 (17368) If a sawmill creates too much noise for local residents, a. noise restrictions will force residents to move out of the area. b. a sense of social responsibility will cause owners of the mill to reduce noise levels. c. the government can raise economic well-being through noise-control regulations. d. the government should avoid intervening because the market will allocate resources efficiently.

C

QN=248 (17384) Refer to Figure 10-7. Which quantity represents the social optimum for this market? a. Q1. b. Q2. c. Q3. d. Q4.

C

QN=250 (17355) The supply curve for a product reflects the a. willingness to pay of the marginal buyer. b. quantity buyers will ultimately purchase of the product. c. cost to sellers of producing the product. d. seller's profit from producing the product.