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 andcars; 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.
