Homework:ASSESS Chapter 4 Homework

Economic efficiency is A. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum. B. a market outcome in which the marginal benefit to consumers of the last unit produced is greater than its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum. C. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is not at a maximum. D. a government outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

A. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

Black markets may arise A. in reaction to binding price ceilings. B. in reaction to​ non-binding price floors. C. in reaction to insufficient producer surplus. D. in reaction to excessive consumer surplus. E. both a and b.

A. in reaction to binding price ceilings.

Refer to the graph. After the government imposes a price of​ $3.50 in this​ market, area A represents A. the consumer surplus transferred to producers. B. a deadweight loss. C. total economic surplus. D. the producer surplus transferred to consumers.

A. the consumer surplus transferred to producers.

Cities like San Francisco and New York that require a driver to buy a​ city-issued taxi medallion before the driver can legally operate a taxi are shifting the supply curve for taxis to the left relative to where it would be without the requirement for a medallion. a. Briefly explain why the supply curve for taxi rides shifts to the left. What is the effect on the market price of taxi rides from the medallion​ requirement? The supply curve for taxi rides shifts to the left because A. the quantity of taxis available is lower because the city issues only a limited number of medallions. The equilibrium price for taxi rides will increase. B. consumer preferences for taking taxis is declining. The equilibrium price for taxi rides will increase. C. consumer preferences for taking taxis is declining. The equilibrium price for taxi rides will decrease. D. the quantity of taxis available is lower because the city issues only a limited number of medallions. The equilibrium price for taxi rides will decrease.

A. the quantity of taxis available is lower because the city issues only a limited number of medallions. The equilibrium price for taxi rides will increase.

In the diagram to the​ right, illustrating a binding price floor at P1​, the amount of consumer surplus transferred to producers is represented by area_________and the deadweight loss is equal to areas

B C and E

​"Rent controls, government farm​ programs, and other price ceilings and price floors are​ bad." This is an example of a A. normative statement. The statement is concerned with what is. B. normative statement. The statement is concerned with what should be. C. positive statement. The statement is concerned with what should be. D. positive statement. The statement is concerned with what is.

B. normative statement. The statement is concerned with what should be.

When the government imposes price floors or price​ ceilings, A. everyone​ wins, goods and services distribution is more​ just, and there is a loss of economic efficiency. B. some people​ win, some people​ lose, and there is a loss of economic efficiency. C. some people​ win, some people​ lose, and there is an increase in economic efficiency. D. everyone​ wins, goods and services distribution is more​ just, and there is an increase in economic efficiency.

B. some people​ win, some people​ lose, and there is a loss of economic efficiency.

When the government imposes price floors or price​ ceilings, A. everyone​ wins, goods and services distribution is more​ just, and there is an increase in economic efficiency. B. some people​ win, some people​ lose, and there is a loss of 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.

B. some people​ win, some people​ lose, and there is a loss of economic efficiency.

In the diagram to the​ right, illustrating a binding price ceiling at P3​, the amount of producer surplus transferred to consumers is represented by area_________and the deadweight loss is equal to areas

C B and D

Deadweight loss is the reduction in economic surplus resulting from a market not being in competitive equilibrium. In the diagram to the​ right, deadweight loss is equal to the​ area(s):

C & E

Deadweight loss is the reduction in economic surplus resulting from a market not being in competitive equilibrium. In the​ diagram, deadweight loss is equal to the​ area(s): A. B​ & D. B. A. C. C​ & E. D. ​A, B,​ & C.

C. C​ & E.

Consider the market for eggs illustrated in the figure to the right. Suppose the market is perfectly competitive and initially in equilibrium at a price of 5 cents and a quantity of 50​ (thousand). If the price were 3 cents instead of 5​ cents, then consumer surplus would A. increase by area C. B. decrease by area B. C. increase by area C and decrease by area E. D. decrease by areas B and F. E. increase by areas C and F. In​ turn, producer surplus would A. increase by areas B and E. B. increase by area B. C. decrease by area C. D. increase by areas C and F. E. decrease by areas C and F. ​Consequently, at a price of 3 ​cents, deadweight loss would equal A. areas​ B, C,​ E, and F. B. areas E and F. C. area F. D. no areas. E. area E.

C. increase by area C and decrease by area E. E. decrease by areas C and F. B. areas E and F.

______________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 to the right by area______________

Consumer A

Using the graph to the​ right, determine the effect on consumer surplus and producer surplus of a shift in the supply curve from S1 to S2. Consumer surplus increases by areas A. ABC. B. CD. C. ABCD. D. BCD. Producer surplus changes from areas A. BCD to areas FG. B. BE to areas FG. C. BE to areas EFG. D. BCD to areas EFG. Economic surplus changes from areas A. ABE to areas ABCDEFG. B. ABCD to areas CDEFG. C. ABEF to areas CDFG. D. ABCD to areas ABCDEG.

D. BCD. C. BE to areas EFG. A. ABE to areas ABCDEFG.

Why do some consumers tend to favor price controls while others tend to oppose​ them? A. Price ceilings generate shortages.​ Consequently, consumers surplus​ increases, but producer surplus decreases. B. Price floors generate shortages.​ Consequently, the consumers who obtain the product at a lower price​ win, but other consumers will lose because they would like to purchase the product but are unable to because of a shortage. C. Price ceilings generate surpluses.​ Consequently, consumers who obtain the product at a lower price​ win, but consumers who obtain the product at a higher price lose. D. Price ceilings generate shortages.​ Consequently, the consumers who obtain the product at a lower price​ win, but other consumers will lose because they would like to purchase the product but are unable to because of a shortage. E. None of the above.

D. Price ceilings generate shortages.​ Consequently, the consumers who obtain the product at a lower price​ win, but other consumers will lose because they would like to purchase the product but are unable to because of a shortage.

A black market is A. a market in which there is no deadweight loss. B. a market in which there are​ non-binding price controls. C. a market in which participants exchange goods and services without using money. D. a market in which buying and selling occur at prices that violate government price regulations. E. a market in which buying and selling occur at legal prices.

D. a market in which buying and selling occur at prices that violate government price regulations.

A black market is A. very similar to a​ "gray" market except that the goods and services exchanged are imported. B. a market in which buying and selling take place at prices consistent with government price regulations. C. a market in which all transactions involve activities​ (such illicit​ drugs, prostitution,​ etc.) many in the population find morally offensive. D. a market in which buying and selling take place at prices that violate government price regulations.

D. a market in which buying and selling take place at prices that violate government price regulations.

Economic efficiency is A. a government outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum. B. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is not at a maximum. C. a market outcome in which the marginal benefit to consumers of the last unit produced is greater than its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum. D. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

D. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

Refer to the graph. After rent control is​ imposed, area A represents A. a deadweight loss. B. the consumer surplus transferred from renters to landlords. C. a shortage of apartments. D. the producer surplus transferred from landlords to renters.

D. the producer surplus transferred from landlords to renters.

In the diagram to the​ right, marginal benefit________marginal cost at output level Upper Q 2This output level is considered economically______

Is less than Inefficient

A price ceiling is a legally determined____________price that sellers may charge. A price floor is a legally determined___________price that sellers may receive.

Max Min

Consumer and producer surplus measure the​ ________benefit rather than the​ _______ benefit.

Net Total

The graph to the right shows the market demand and supply for oranges. Assume that the market for oranges is perfectly competitive. Suppose the orange 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

__________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 to the right by area___________

Producer B

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​ __________.

consumer; producer;​ maximum; equilibrium