MACROECON CH 4

A. the willingness of consumers to buy a product at different prices.

A demand curve shows A. the willingness of consumers to buy a product at different prices. B. the relationship between the price of a product and the demand for the product. C. the relationship between the price of a product and the total benefit consumers receive from the product. D. the willingness of consumers to substitute one product for another product.

A. consumer surplus.

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called A. consumer surplus. B. producer surplus. C. the income effect. D. the substitution effect.

A. people who are not directly involved in producing or paying for a good or service benefit from it.

A positive externality results when A. people who are not directly involved in producing or paying for a good or service benefit from it. B. people who live in one country benefit from the production of a good or service that occurs in another country. C. economists are sure that a good or service provides benefits to consumers. D. someone pays for a good or service even though she is not directly affected by the production or consumption of it.

C. demand

Each point on a ________ curve shows the willingness of consumers to purchase a product at different prices. A. production possibilities B. marginal cost C. demand D. supply

therefore, output is inefficiently high. B. producers should lower the price to $3 in order to sell the quantity demanded of 4,000. C. the marginal benefit of pecans is greater than the marginal cost; therefore, output is inefficiently low. D. the marginal benefit of pecans is greater than the marginal cost; therefore, output is inefficiently high. ; C. the marginal benefit of pecans is greater than the marginal cost; therefore, output is inefficiently low.

The figure to the right represents the market for pecans. Assume that this is a competitive market. At a quantity of 4,000 pounds, A. the marginal cost of pecans is greater than the marginal benefit

B. $1.50.

The figure to the right shows Arnold's demand curve for burritos. Arnold's marginal benefit from consuming the third burrito is A. $1.25. B. $1.50. C. $2.50. D. $6.00.

A. A

The figure to the right shows the market for granola. The market is initially in equilibrium at a price of P1 and a quantity of Q1. Now suppose producers decide to cut output to Q2 in order to raise the price to P2. What area represents consumer surplus at P2? A. A B. A + B + D + E C. A + B D. B + C

C. subsidizing the production of the product so that the supply is increased and market price is reduced.

Governments can increase the consumption of a product that creates positive externalities by A. assigning property rights to the producers of the product. B. taxing the production and consumption of the product. C. subsidizing the production of the product so that the supply is increased and market price is reduced. D. convincing everyone to consume the product.

B. $160

The figure to the right shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to$18. What is the value of producer surplus at the equilibrium price of $15? A. $80 B. $160 C. $240 D. $400

B. too much of the good will be produced.

If there are no externalities, a competitive market achieves economic efficiency. If there is a negativeexternality, economic efficiency will not be achieved because A. a deadweight loss will occur that is equal to the area under the demand curve for the good. B. too much of the good will be produced. C. economic surplus is maximized. D. too little of the good will be produced.

C. must lie below the free market equilibrium price.

In order to be binding, a price ceiling A. must be high enough for firms to earn a profit. B. must coincide with the free market equilibrium price. C. must lie below the free market equilibrium price. D. must lie above the free market equilibrium price.

B. total

Marginal benefit is equal to the ________ benefit a consumer receives from consuming one more unit of a good or service. A. unintended B. total C. additional This is the correct answer. D. surplus

D. the area above the market supply curve and below the market price.

The total amount of producer surplus in a market is equal to A. the difference between quantity supplied and quantity demanded. B. the area above the market supply curve. C. the area between the demand curve and the supply curve below the market price. D. the area above the market supply curve and below the market price.

A. forcing producers to factor into their production costs, the cost of the externalities created in the production of their output

What does the phrase "internalizing an external cost" mean? A. forcing producers to factor into their production costs, the cost of the externalities created in the production of their output B. prohibiting economic activities that create externalities C. limiting the extent to which domestic firms can outsource production D. finding a way to address cross−border pollution

C. keeping a junked car parked on your front lawn

Which of the following activities create a negative externality? A. cleaning up the sidewalk on your block B. repainting the house you live in to improve its appearance C. keeping a junked car parked on your front lawn D. graduating from college

D. Producers have an incentive to offer workers non-wage benefits such as healthcare benefits and convenient working hours rather than a higher wage.

Which of the following is not a consequence of minimum wage laws? A. Some workers benefit when the minimum wage is increased. B. Low-skilled workers are hurt because it reduces the number of jobs providing low-skilled workers with training. C. Employers will be reluctant to offer low-skilled workers jobs with training. D. Producers have an incentive to offer workers non-wage benefits such as healthcare benefits and convenient working hours rather than a higher wage.

B. there will be no deadweight loss.

If equilibrium is achieved in a competitive market A. the deadweight loss be the same as the opportunity cost of the last unit of output sold. B. there will be no deadweight loss. C. the deadweight loss will equal the sum of consumer surplus and producer surplus. D. the deadweight loss will be maximized.

C. $75

Paul goes to Sportsmart to buy a new tennis racquet. He is willing to pay $200 for a new racquet, but buys one on sale for $125. Paul's consumer surplus from the purchase is A. $200 B. $325 C. $75 D. $125

C. Tom will receive $12 of consumer surplus from buying one shirt.

The table above lists the highest prices three consumers, Tom, Dick, and Harriet, are willing to pay for a short−sleeved polo shirt. If the price of one of the shirts is $28 dollars A. Harriet will receive $25 of consumer surplus since she will buy no shirts. B. Tom and Dick receive a total of $70 of consumer surplus from buying one shirt each. Harriet will buy no shirts. C. Tom will receive $12 of consumer surplus from buying one shirt. D. Tom will buy two shirts, Dick will buy one shirt and Harriet will buy no shirts.

B. 570,000

The table to the right shows the demand and supply schedules for the labor market in the city of Pixley. If a minimum wage of $11.50 an hour is mandated, what is the quantity of labor demanded? A. 40,000 B. 570,000 C. 610,000 D. 1,180,000

C. a benefit or cost experienced by someone who is not a producer or consumer of a good or service.

An externality is A. anything that is external or not relevant to the production of a good or service. B. a cost paid for by the producer of a good or service. C. a benefit or cost experienced by someone who is not a producer or consumer of a good or service. D. a benefit realized by the purchaser of a good or service.

C. A + B + C

Refer to the diagram to the right. What area represents producer surplus at a price of P2? A. A + B B. A + B + C + D + E C. A + B + C D. B + D

B. a price ceiling.

Rent control is an example of A. a subsidy for low-skilled workers. B. a price ceiling. C. a price floor. D. a black market.

D. the price received is at least equal to the additional cost of producing the product.

Suppliers will be willing to supply a product only if A. the price is higher than the average cost of producing the product. B. the price received is less than the additional cost of producing the product. C. the price received is at least double the additional cost of producing the product. D. the price received is at least equal to the additional cost of producing the product.

lowest price it was willing to accept B. highest price a firm would have been willing to accept; price a firm actually receives C. cost to produce a product; profit received D. lowest price a firm would have been willing to accept; price it actually receives; D. lowest price a firm would have been willing to accept; price it actually receives

The difference between the ________ and the ________ from the sale of a product is called producer surplus. A. highest price a firm would have been willing to accept

B. Yes, because $15 is the price where the marginal benefit is equal to the marginal cost.

The figure to the right shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to$18. At the equilibrium price of $15 consumers are willing to buy 80 pounds of tiger shrimp. Is this an economically efficient quantity? A. Yes, because marginal cost is zero at the 80th unit. B. Yes, because $15 is the price where the marginal benefit is equal to the marginal cost. C. No, the marginal cost of the 80th unit exceeds the marginal benefit of the 80th unit. D. No, the marginal benefit of the 80th unit exceeds the marginal cost of the 80th unit.

D. $240

The figure to the right shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to$18. What is the value of consumer surplus at the equilibrium price of $15? A. $60 B. $120 C. $180 D. $240

B. No, the marginal benefit of the 40th unit exceeds the marginal cost of that 40th unit.

The graph at the right shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to$18. At a price of $18 consumers are willing to buy 40 pounds of tiger shrimp. Is this an economically efficient quantity? A. No, the marginal cost of the 40th unit exceeds the marginal benefit of the 40th unit. B. No, the marginal benefit of the 40th unit exceeds the marginal cost of that 40th unit. C. Yes, because $18 shows what consumers are willing to pay for the product. D. Yes, otherwise consumers would not buy 40 units.

D. $100

The graph to the right shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to$18. What is the value of the deadweight loss at a price of$18? A. $1,040 B. $660 C. $180 D. $100

D. W* = $10.50; Q* = 590,000

The table at the right shows the demand and supply schedules for the labor market in the city of Pixley. What is the equilibrium hourly wage (W*) and the equilibrium quantity of labor (Q*)? A. W* = $9.50; Q* = 570,000 B. W* = $10.50; Q* = 1,180,000 C. W* = $11.50; Q* = 570,000 D. W* = $10.50; Q* = 590,000

C. 610,000

The table to the right shows the demand and supply schedules for the labor market in the city of Pixley. If a minimum wage of $11.50 an hour is mandated, what is the quantity of labor supplied? A. 40,000 B. 570,000 C. 610,000 D. 1,180,000

D. surplus of 40,000 units of labor.

The table to the right shows the demand and supply schedules for the labor market in the city of Pixley. If a minimum wage of $11.50 is mandated there will be a A. surplus of 20,000 units of labor. B. shortage of 40,000 units of labor. C. shortage of 20,000 units of labor. D. surplus of 40,000 units of labor.

C. "I was going to pay $200 for new sunglasses that I had seen at the Oakley store but I ended up paying only $140 for the same sunglasses."

Which of the following statements best describes the concept of consumer surplus? A. "I sold my hard copy of Harry Potter and the Half−Blood Prince to a used book store for $10 even though I was willing to sell it for $5." B. "Target was having a sale on tube socks so I bought 5 pairs." C. "I was going to pay $200 for new sunglasses that I had seen at the Oakley store but I ended up paying only $140 for the same sunglasses." D. "I paid $89 for a microwave oven last week. This week the same store is selling the same microwave oven for $69."

D. A price floor.

Which term refers to a legally established minimum price that firms may charge? A. A subsidy. B. A tariff. C. A price ceiling. D. A price floor.

C. Deadweight loss

________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium. A. Producer atrophy B. Economic shortage C. Deadweight loss D. Marginal cost