ECON EXAM 2

The figure shows the market for apartments in Springfield.​ Recently, the government imposed a rent ceiling of​ $1,000 per month. Suppose that instead of a rent​ ceiling, the government imposed a price floor of​ $2,000 per month for apartments. What is the value of the deadweight loss after the imposition of the price​ floor?

$100,000

The figure shows the market for apartments in Springfield.​ Recently, the government imposed a rent ceiling of​ $1,000 per month. What is the value of the deadweight loss after the imposition of the​ ceiling?

$100,000

Most municipalities and states in the northeastern United States use rock salt to​ "produce" ice−free roadways in the face of winter snowstorms.​ However, using rock salt has several​ drawbacks: it speeds up corrosion of bridges and​cars; it can choke​ vegetation; as​ runoff, it is harmful to creeks and​ rivers; and it is not very effective in de−icing roads at low temperatures. If the marginal social cost of rock salt is ​$56 per ton and the marginal external cost of rock salt is ​$11 per​ ton, what is the optimal corrective tax per ton of rock​ salt? The optimal corrective tax is ----- per ton of rock salt

$11

The marginal social benefit from the production of the last unit of a good is ​$385 and the willingness to pay for that unit is ​$275. What is the external benefit from producing the last unit of the​ good?

$110

Most municipalities and states in the northeastern United States use rock salt to​ "produce" ice−free roadways in the face of winter snowstorms.​ However, using rock salt has several​ drawbacks: it speeds up corrosion of bridges and​ cars; it can choke​ vegetation; as​ runoff, it is harmful to creeks and​ rivers; and it is not very effective in​ de-icing roads at low temperatures. If the marginal private cost of rock salt is ​$63 per ton and the marginal external cost of rock salt is ​$13 per​ ton, what is the optimal corrective tax per ton of rock​ salt?

$13

Emma is willing to pay ​$1.00 a month for a music streaming service​, Mia is willing to pay ​$23.00 a​ month, and Noah is willing to pay ​$10.50 a month. The current monthly price of the music streaming service is ​$9.97. What is the total consumer​ surplus?

$13.56

The figure shows Arnold's demand curve for burritos. If the market price is $2, what is the consumer surplus on the second burrito?

0

The following equations represent the demand and respectively the supply for vests. Qd(P)=120−1•P and Qs(P)=−60+1•P​, where Q is the number of vests and P is in dollars per vest. 1) The highest price any consumer would be willing to pay for a vest in this market is $ 2) The lowest price any producer would be willing to accept for a vest is $ 3) The equilibrium price of a vest is $ 4) The equilibrium quantity is --- vests 5) The total economic surplus is $

1) $120 2) $60 3) $90 4) 30 5) $900

The following equations represent the demand and respectively the supply for backpacks. Qd(P)=360−2•P and Qs(P)=−60+2•P​, where Q is the number of backpacks and P is in dollars per backpack. 1) The highest price any consumer would be willing to pay for a backpack in this market is $ 2) The lowest price any producer would be willing to accept for a backpack is $ 3) The equilibrium price of a backpack is $ 4) The equilibrium quantity is --- backpacks 5) The total economic surplus is $

1) $180 2) $30 3) $105 4) 150 5) $11250

Frank was willing to pay ​$3.00 for a carton of milk but only paid ​$1.80. What is Frank​'s marginal benefit and what is Frank​'s consumer​ surplus? 1) marginal benefit: 2) consumer surplus:

1) $3.00 2) $1.20

The figure shows​ Arnold's demand curve for burritos. If the market price is​ $1.00, what is the consumer surplus on the third​ burrito?

$0.50

The figure shows​ Arnold's demand curve for burritos. If the market price is​ $2.00, what is the consumer surplus on the first​ burrito?

$0.50

The figure shows​ Arnold's demand curve for burritos. ​Arnold's marginal benefit from consuming the third burrito is

$1.50

Some policymakers have argued that products like​ cigarettes, alcohol, and sweetened soda generate negative externalities in consumption. If the government decided to impose a tax on​ soda, the government will cause

consumers to internalize the externality

Some policymakers have argued that products like​ cigarettes, alcohol, and sweetened soda generate negative externalities in consumption. All else​ equal, if the government decided to impose a tax on​ soda, the equilibrium quantity of soda would​ ________ and the equilibrium price of soda would​ ________.

decrease; decrease

The government proposes a tax on imported champagne. Buyers will bear the entire burden of the tax if the

demand curve for imported champagne is vertical

If policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set

equal to the marginal external cost at the economically efficient level of pollution

Public

good are non-excludable and non-rival in consumption

Which of the following is a source of marker failure?

incomplete property rights or inability to enforce property rights

In order to be​ binding, a price ceiling

must lie below the free market equilibrium price.

Which of the following is an example of a positive​ externality?

planting trees along a sidewalk which add beauty and create shade

​________ are​ non-excludable in consumption.

public and common resource goods

Suppose the demand curve for a product is horizontal and the supply curve is upward sloping. If a unit tax is imposed in the market for this​ product,

sellers bear the entire burden of the tax

A positive externality causes

the marginal social benefit to exceed the marginal private cost at the market equilibrium.

A negative externality exists if

the marginal social cost of producing a good or service exceeds the private cost.

Willingness to pay measures

the maximum price that a buyer is willing to pay for a good

When there is a positive externality

the social benefit received by consumers is greater than the private benefit

When there is a positive​ externality,

the social benefit received by consumers is greater than the private benefit.

What is a "social cost" of production?

the sum total of all costs to individuals in society, regardless of whether the costs are borne by those who produce the products or consume the product

The following equations represent the demand and respectively the supply for cardigans. Qd(P)=120−2•P and Qs(P)=−60+2•P​, where Q is the number of cardigans and P is in dollars per cardigan. 1) The equilibrium price of a cardigan is 2) The equilibrium quantity is --- cardigans 3) The consumer surplus equals $ 4) The total economic surplus is 5) Suppose the local government imposes a price ceiling of $34 per cardigan. As a result, there will be a shortage of --- cardigans

1) $45 2) 30 3) $225 4) $450 5) 44

George was willing to pay ​$5.10 for a salad but only paid $2.80. What is George​'s marginal benefit and what is George​'s consumer ​surplus? 1) marginal benefit: 2) consumer surplus:

1) $5.10 2) $2.30

The figure shows the market for apartments in Springfield.​ Recently, the government imposed a rent ceiling of​ $1,000 per month. Suppose that instead of a rent​ ceiling, the government imposed a price floor of​ $2,000 per month for apartments. What is the quantity of apartments demanded at the new​ price?

200,000

Josh plays loud music​, which prevents his neighbor from studying. Josh knows that his neighbor values studying at ​$8,500​, while the cost of soundproofing Josh​'s room is ​$2,700. If Josh has the right to play loud music late in the​ evening, how much does his neighbor need to pay him to stop playing loud music​?

Any amount between ​$2,700 and $8,500

Arnold plays the string bass​, which prevents his neighbor from studying. Arnold knows that his neighbor values studying at ​$5,100​, while the cost of soundproofing Arnold​'s room is ​$4,800. If Arnold​'s neighbor has the right to quiet study time in the​ evening, what is the efficient​ outcome?

Arnold pays for the soundproofing of $4,800​, which Arnold installs.

Arnold plays the trumpet, which prevents his neighbor from studying. Arnold knows that his neighbor values studying at $8,700, while the cost of soundproofing Arnold's room is $7,300. If Arnold's neighbor has the right to quiet study time in the evening, what is the efficient outcome?

Arnold plays for the soundproofing of $7,300, which Arnold installs.

Refer to the diagram to the right which shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf. What area represents the portion of consumer surplus that has been transferred to producer surplus as a result of the price​ floor?

B

Refer to the diagram to the right which shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf. What is the area that represents producer surplus after the imposition of the price​ floor?

B+E

Mick plays the string bass​, which prevents his neighbor from studying. Mick knows that his neighbor values studying at ​$3,200​, while the cost of soundproofing Mick​'s room is ​$2,500. If Mick has the right to play the string bass late in the​ evening, what is the efficient​ outcome?

Mick's neighbor pays for the soundproofing of $2,500, which Mick installs.

---- goods are excludable and rival in consumption.

Private

________ are​ non-rival in consumption.

Public goods and club goods

The figure shows the market for beer. The government plans to impose a unit tax in this market. As a result of the​ tax, is there a loss in consumer​ surplus?

Yes, because consumers pay a price above the economically efficient price.

Rent control is an example of

a price ceiling

Which term refers to a legally established minimum price that firms may​ charge?

a price floor

Which of the following is an example of a Pigovian​ tax?

a tax imposed on a utility that internalizes the cost of externalities caused by the utility

The following equations represent the demand and respectively the supply for cardigans. Qd(P)=120−4•P and Qs(P)=−60+4•P​, where Q is the number of cardigans and P is in dollars per cardigan. 1) The highest price any consumer would be willing to pay for a cardigan in this market is $ 2) The lowest price any producer would be willing to accept for a cardigan is $ 3) The equilibrium price of a cardigan is $ 4) The equilibrium quantity is --- cardigans 5) The total economic surplus is $

1) $30 2) $15 3) $22.5 4) 30 5) $225

The following equations represent the demand and respectively the supply for vests. Qd(P)=120−3•P and Qs(P)=−60+3•P​, where Q is the number of vests and P is in dollars per vest. 1) The equilibrium price of a vest is $ 2) The equilibrium quantity is --- vests 3) The consumer surplus equals $ 4) The total economic surplus is $ 5) Suppose the local government imposes a price ceiling of $21 per vest. As a​ result, there will be a shortage of --- vests

1) $30 2) 30 3) $150 4) $300 5) 54

Elaine was willing to pay ​$4.00 for a sandwich but only paid $1.60. What is Elaine​'s marginal benefit and what is Elaine​'s consumer​ surplus? 1) marginal benefit: 2) consumer surplus:

1) $4 2) $2.40

Jerry was willing to pay ​$4.00 for a bag of carrots but only paid $1.40. What is Jerry​'s marginal benefit and what is Jerry​'s consumer​ surplus? 1) marginal benefit: 2) consumer surplus:

1) $4 2) $2.60

Frank was willing to pay $4.60 for a soup but only paid $3.10. What is Frank​'s marginal benefit and what is Frank​'s consumer surplus? 1) marginal benefit: 2) consumer surplus:

1) $4.60 2) $1.50

The area​ ________ the market supply curve and​ ________ the market price is equal to the total amount of producer surplus in a market.

above; below

Public goods and common resource goods

are non-excludable in consumption

Suppose the demand curve for a product is vertical and the supply curve is upward sloping. If a unit tax is imposed in the market for this​ product,

buyers bear the entire burden of the tax

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called

consumer surplus

The figure shows the market for beer. The government plans to impose a unit tax in this market. How much of the tax is paid by​ buyers?

$5

The figure shows the market for apartments in Springfield.​ Recently, the government imposed a rent ceiling of​ $1,000 per month. Suppose that instead of a rent​ ceiling, the government imposed a price floor of​ $2,000 per month for apartments. What is the value of consumer surplus after the imposition of the price​ floor?

$50,000

The figure shows the market for apartments in Springfield.​ Recently, the government imposed a rent ceiling of​ $1,000 per month. What is the value of producer surplus after the imposition of the​ ceiling?

$50,000

The marginal social benefit from the production of the last unit of a good is ​$470 and the willingness to pay for that unit is ​$410. What is the external benefit from producing the last unit of the​ good? The external benefit of the last unit of the good is equal to ​

$60

Becky produces three baskets with marginal costs of ​$17​, ​$37​, and ​$43​, ​respectively, and sells each basket for ​$53. What is Becky​'s total producer​ surplus?

$62

The marginal social benefit from the production of the last unit of a good is ​$195 and the willingness to pay for that unit is ​$125. What is the external benefit from producing the last unit of the​ good?

$70

Most municipalities and states in the northeastern United States use rock salt to​ "produce" ice−free roadways in the face of winter snowstorms.​ However, using rock salt has several​ drawbacks: it speeds up corrosion of bridges and​ cars; it can choke​ vegetation; as​ runoff, it is harmful to creeks and​ rivers; and it is not very effective in de−icing roads at low temperatures. If the marginal social cost of rock salt is ​$86 per ton and the marginal external cost of rock salt is ​$15 per​ ton, what is the optimal corrective tax per ton of rock​ salt?

$15

Ben produces three baskets with marginal costs of $22, $23, and $41, respectively, and sells each basket for $80. What is Ben's total producer surplus?

$154

Most municipalities and states in the northeastern United States use rock salt to​ "produce" ice−free roadways in the face of winter snowstorms.​ However, using rock salt has several​ drawbacks: it speeds up corrosion of bridges and​ cars; it can choke​ vegetation; as​ runoff, it is harmful to creeks and​ rivers; and it is not very effective in​ de-icing roads at low temperatures. If the marginal private cost of rock salt is ​$36 per ton and the marginal external cost of rock salt is ​$19 per​ ton, what is the optimal corrective tax per ton of rock​ salt?

$19

The figure shows the market for beer. The government plans to impose a unit tax in this market. How much of the tax is paid by sellers?

$2

The figure shows the market for beer. The government plans to impose a unit tax in this market. For each unit​ sold, the price sellers receive after the tax​ (net of​ tax) is

$20

Arthur buys a new cell phone for​ $150. He receives consumer surplus of​ $150 from the purchase. What value does Arthur place on his cell​ phone?

$300

The marginal social benefit from the production of the last unit of a good is ​$275 and the willingness to pay for that unit is ​$240. What is the external benefit from producing the last unit of the​ good?

$35

The marginal social benefit from the production of the last unit of a good is $110 and the willingness to pay for that unit is $65. What is the external benefit from producing the last unit of the​ good?

$45

Refer to the diagram to the right which shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf. What area represents the deadweight loss after the imposition of the price​ floor?

C+D

Which of the following statements is​ true?

Consumer surplus measures the net benefit from participating in a market.

Isabella is willing to pay ​$9.10 a month for a movie streaming service​, Mia is willing to pay ​$18.20 a​ month, and Noah is willing to pay ​$18.20 a month. The current monthly price of the movie streaming service is ​$12.35. What is the total consumer​ surplus?

The total consumer surplus for Isabella​, Mia and Noah is ​$11.70 a month.

Bert plays drums​, which prevents his neighbor from studying. Bert knows that his neighbor values studying at ​$2,900​, while the cost of soundproofing Bert​'s room is ​$1,800. If Bert has the right to play drums late in the​ evening, what is the efficient​ outcome?

​Bert's neighbor pays for the soundproofing of $1,800​, which Bert installs.