MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Transcription

1 Chapter 4 practice Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Figure 4-6 Figure 4-6 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. 1) Refer to Figure 4-6. What area represents the deadweight loss after the imposition of the price floor? A) C + D B) C + D + F + G C) C + D + G D) F + G 2) The area the market supply curve and the market price is equal to the total amount of producer surplus in a market. A) below; above B) below; below C) above; above D) above; below 1) 2) 3) If the quantity of donuts supplied is represented by the supply equation Q S = P, then to solve for the price of donuts, the equation would be rewritten as A) P = 5Q S B) P = Q S. C) P = 0.2Q S + 3. D) P = Q S ) 1

2 Table 4-2 Consumer Willingness to Pay Anya $24 Basil 20 Celeste 15 Dralon 12 Esther 7 4) Refer to Table 4-2. The table above lists the highest prices five consumers are willing to pay for a theater ticket. If the price of one ticket falls from $25 to $10, A) consumer surplus decreases from $24 to $12. B) consumer surplus increases from $0 to $31. C) only three tickets will be sold. D) everyone will buy a ticket. 4) Figure 4-3 Figure 4-3 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. 5) Refer to Figure 4-3. What is the value of the deadweight loss at the equilibrium price of $15? 5) A) $0 B) $40 C) $60 D) $100 6) A tax that imposes a small excess burden relative to the tax revenue that it raises is 6) A) an efficient tax. B) a sin tax. C) a FICA tax. D) a payroll tax. 2

3 7) Consumer surplus in a market for a product would be equal to if the market price was zero. A) the area above the supply curve B) zero C) the area under the demand curve D) the area between the supply curve and the demand curve 8) Two economists from Northwestern University estimated the benefit households received from subscribing to broadband Internet service. The economists found that A) one month's benefit to consumers who subscribe to broadband Internet service is about $890 million. B) the average consumer of broadband Internet service received a marginal benefit equal to $36. C) most consumers of broadband Internet service were not willing to pay more than $36 per month. D) the consumer surplus from dial-up Internet service exceeded the consumer surplus from broadband Internet service. 7) 8) Table 4.7 Demand P = 50-2Q D Supply P = 35 + Q S Q D = P Q S = P ) Refer to Table 4-7. The equations above describe the demand and supply for Bubba's Fried Jellybeans. What are the equilibrium price and quantity (in thousands) for Bubba's Fried Jellybeans? A) $80 and 40 thousand B) $20 and 20 thousand C) $60 and 10 thousand D) $40 and 5 thousand 9) 3

4 Figure ) Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. If the price of pecans is $3 A) the quantity supplied is economically efficient but the quantity demanded is economically inefficient. B) the quantity supplied is less than the economically efficient quantity. C) economic surplus is maximized. D) not enough consumers want to buy pecans. 10) 4

5 Figure ) Refer to Figure Suppose the market is initially in equilibrium at price P1 and then the government imposes a tax on every unit sold. Which of the following statements best describes the impact of the tax? A) The consumer will bear a smaller share of the tax burden if the demand curve is D2. B) The consumer will bear a smaller share of the tax burden if the demand curve is D1. C) The consumer's share of the tax burden is the same whether the demand curve is D1 or D2. D) The consumer will bear the entire burden of the tax if the demand curve is D2 and the producer will bear the entire burden of the tax if the demand curve is D1. 11) 5

6 Figure 4-5 Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. 12) Refer to Figure 4-5. What is the value of producer surplus after the imposition of the ceiling? 12) A) $40,000 B) $100,000 C) $300,000 D) $430,000 Table 4.7 Demand P = 50-2Q D Supply P = 35 + Q S Q D = P Q S = P ) Refer to Table 4-7. The equations above describe the demand and supply for Bubba's Fried Jellybeans. The equilibrium price and quantity for Bubba's Fried Jellybeans are $40 and 5 thousand units. What is the value of economic surplus in this market? A) $5 thousand B) $12.5 thousand C) $25 thousand D) $37.5 thousand 14) Congress passed the in 1996, the purpose of which was to phase out price floors and return to a free market in agriculture A) Smoot-Hawley Act B) Rice and Beans Act C) Agribusiness Act D) Freedom to Farm Act 13) 14) 6

7 Figure 4-5 Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. 15) Refer to Figure 4-5. 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 portion of consumer surplus transferred to producers as a result of the price floor? A) $40,000 B) $100,000 C) $125,000 D) $140,000 15) 7

8 Answer Key Testname: 4 1) A 2) D 3) C 4) B 5) A 6) A 7) C 8) A 9) D 10) B 11) B 12) A 13) D 14) D 15) B 8