econ ch 4
increases
As the price of a good rises, consumer surplus decreases , and as the price of a good falls, consumer surplus _____ .
true
As the price of a good rises, producer surplus increases , and as the price of a good falls, producer surplus decreases .
E
Consumer surplus is A. the difference between the lowest price a firm would be willing to accept and the price it actually receives. B. the difference between the highest price a consumer is willing to pay and the lowest price a firm would be willing to accept. C. the difference between the highest price a consumer is willing to pay and marginal benefit. D. the highest price a consumer is willing to pay to consume a good or service. E. the difference between the highest price a consumer is willing to pay and the price the consumer actually pays.
C
Deadweight loss is A. the reduction in sales revenue resulting from market distortions. B. a measure of market equity. C. the reduction in economic surplus resulting from a market not being in competitive equilibrium. Your answer is correct.D. the reduction in consumer expenditure resulting from market failure.
D
Economic efficiency A. is a market outcome in which the sum of consumer surplus and producer surplus is at a maximum. B. is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production. C. is a market outcome in which every individual is better off than they would be at any other market outcome. D. both a and b. Your answer is correct.E. all of the above.
C
Economic surplus is maximized when A. the marginal benefit of consumption is greater than the marginal costs of production. B. the marginal benefit of consumption is less than the marginal costs of production. C. the marginal benefit of consumption is equal to the marginal costs of production.
D
Firm A is a new producer in the market for good X, which is characterized by linear demand and supply curves. Initially, to attract customers, the firm prices its product low at $8 per unit. While the firm sells 1,000 units of the product at this price, there is a shortage in the market. This shortage can be cleared if price is increased to $10 per unit. The quantity demanded and supplied at this higher price will be 1,500 units. Which of the following is most strongly supported by this information? A. Firm A is a monopolist. B. The increase in price from $8 to $10 will cause a deadweight loss in this market. C. The law of demand does not hold for good X. D. Producer surplus will increase if the price rises from $8 per unit to $10. Your answer is correct.E. Good X has many substitutes.
A
Marginal benefit is A. the additional benefit from consuming one more unit. Your answer is correct.B. the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. C. a legally determined maximum price that sellers may charge. D. the additional cost of producing one more unit.
A
Marginal cost is A. the additional cost of producing one more unit. Your answer is correct.B. the difference between the lowest price a firm would be willing to accept and the price it actually receives. C. the cost of producing output. D. a legally determined minimum price that sellers may charge. E. the additional benefit from consuming one more unit.
A
Producer surplus is A. the difference between the lowest price a firm would be willing to accept and the price it actually receives. Your answer is correct.B. the market price multiplied by the number of units sold by a firm. C. the difference between the highest price a consumer is willing to pay and the lowest price a firm would be willing to accept. D. the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. E. the difference between the lowest price a firm would be willing to accept and marginal cost.
D
Tax incidence is A. the actual division of the burden of a tax between buyers and government in a market. B. the potential 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 government in a market. D. the actual division of the burden of a tax between buyers and sellers in a market.
D
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. everyone wins, goods and services distribution is more just, and there is an increase in economic efficiency. C. everyone wins, goods and services distribution is more just, and there is a loss of economic efficiency. D. some people win, some people lose, and there is an increase in economic efficiency.
C
Why is the demand curve referred to as a marginal benefit curve? A. It shows the difference between the highest price a consumer is willing to pay and the lowest price a firm would be willing to accept. B. It shows the willingness of firms to supply a product at different prices. C. It shows the willingness of consumers to purchase a product at different prices. Your answer is correct.D. It shows the price consumers actually pay to consume a product. E. It shows the difference between the highest price a consumer is willing to pay and the marginal benefit of consumption.
C
Why is the supply curve referred to as a marginal cost curve? A. It shows the difference between the lowest price a firm would be willing to accept and the marginal cost of production. B. It shows the willingness of consumers to purchase a product at different prices. Your answer is not correct.C. It shows the willingness of firms to supply a product at different prices. This is the correct answer.D. It shows the price producers actually receive in the market. E. It shows the difference between the highest price a consumer is willing to pay and the lowest price a firm would be willing to accept.
