Ch. 4 - HW
Why is the demand curve referred to as a marginal benefit curve?
A. It shows the willingness of consumers to purchase a product at different prices.
A black market is
C. a market in which buying and selling occur at prices that violate government price regulations.
Tax incidence is
C. the actual division of the burden of a tax between buyers and sellers in a market.
A price ceiling is a legally determined __________________ price that sellers may charge. A price floor is a legally determined ________________ price that sellers may receive.
Maximum, minimum
The graph to the right shows the market demand and supply for eggs. Assume that the market for eggs is perfectly competitive. Suppose the egg producers organize themselves and establish a system of quotas. Each farmer's output is restricted by an amount indicated in the graph. Compared with the market-clearing equilibrium, is the quota system efficient? _________
No
Tim mows neighborhood lawns for extra money. Suppose that he would be willing to mow one lawn for $1313, a second lawn for $1717, and a third lawn for $2222. Also, suppose that three neighbors are interested in having their lawns mowed. Mrs. Jones would be willing to pay $3030 to have her lawn mowed, Mr. Wilson would be willing to pay $3030, and Ms. Smith would be willing to pay $2222. What will be his producer surplus if Tim offers to mow lawns for $2222 each? $____________
$14
Consider the information given in the table on four consumers in the market for premium bottled water. Highest Price Willing Consumer to Pay Jill $4 Jose 3 Josh 2 Jordan 1 If the price of a bottle of premium bottled water is $1.50, the total consumer surplus received by these consumers is $________ (Enter your response rounded to two decimal places.)
$4.50
Dissolvable tobacco products contain less nicotine than cigarettes and can help people quit smoking. Suppose the figure illustrates five consumers' willingness to pay for tobacco lozenges. If the price of a pack of tobacco lozenges is $5.505.50, what is the consumer surplus for these consumers? Consumer surplus is $______________
$5.50
Why is the supply curve referred to as a marginal cost curve?
A. It shows the willingness of firms to supply a product at different prices.
Black markets may arise
A. in reaction to binding price ceilings.
Marginal benefit is
A. the additional benefit from consuming one more unit.
Marginal cost is
A. the additional cost of producing one more unit.
Which of the following is the definition of consumer surplus?
A. the difference between the highest price a consumer is willing to pay and the price the consumer actually pays
Deadweight loss is
A. the reduction in economic surplus resulting from a market not being in competitive equilibrium.
When the government imposes price floors or price ceilings, which of the following occurs?
All of the above occurs. (Some people win, some people lose and there is a loss of economic efficiency)
A Wall Street Journal article noted that a study by the U.S. Congressional Budget Office "estimated raising the minimum wage to $10.10 an hour would reduce U.S. employment by 500,000 but lift 900,000 Americans out of poverty." The minimum wage might reduce employment because
B. employer costs would increase.
If San Francisco were to repeal its rent control law, the prices for short rentals in the city listed on Airbnb and other peer-to-peer sites would likely
B. fall because more housing units would become available as the average rent increased.
When a competitive market is in equilibrium, what is the economically efficient level of output?
B. the output level where marginal cost is equal to marginal benefit
When the government imposes price floors or price ceilings,
C. some people win, some people lose, and there is a loss of economic efficiency.
Refer to the graph. The graph shows the market demand for satellite television service. If the market price is $81, which consumers receive consumer surplus in this market?
C. those willing to pay more than $81
_____________ surplus is the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. This component of economic surplus is illustrated in the diagram by area _______________
Consumer, A
These estimates influence the normative analysis of the minimum wage because they
D. influence the judgement of policymakers and members of the general republic regarding this issue.
The minimum wage might raise some people out of poverty because
D. it would increase the incomes of people who had minimum wage jobs previously.
Consumer surplus is
D. the difference between the highest price a consumer is willing to pay and the price the consumer actually pays.
Producer surplus is
D. the difference between the lowest price a firm would be willing to accept and the price it actually receives.
Economic surplus is
D. the sum of consumer surplus and producer surplus.
Economic surplus in a market is the sum of _____ surplus and _____ surplus. In a competitive market, with many buyers and sellers and no government restrictions, economic surplus is at a _____ when the market is in _____.
D. consumer; producer; maximum; equilibrium
How does consumer surplus change as the equilibrium price of a good rises or falls? As the price of a good rises, consumer surplus ___________________, and as the price of a good falls, consumer surplus _____________________
Increases, decreases
How does producer surplus change as the equilibrium price of a good rises or falls? As the price of a good rises, producer surplus ________________, and as the price of a goodfalls, producer surplus ____________________
Increases, decreases
____________ surplus is the difference between the lowest price a firm would be willing to accept and the price it actually receives. This component of economic surplus is illustrated in the diagram by area ____________
Producer, B
Because economic surplus is the _________________ of the benefit to firms and the benefit to consumers, it is the best measure we have of the benefit to society from the production of a particular good or service. For this reason, it is appropriate to label economic surplus as _____________ surplus.
Sum, social
