Question 1

Which of these is the BEST example of a pure public good?

Accepted Answer

A)   welfare programs
B)   highways
C)   mail delivery
D)   national defense

Question 2

(Figure: Determining Surplus)  In the graph, which shape represents producer surplus?

Accepted Answer

A)   the triangle hik
B)   the line ij
C)   the line hi
D)   the triangle jik

Question 3

On a graph with a demand curve, consumer surplus is the area:

Accepted Answer

A)   above the market price and below the demand curve.
B)   below the market price.
C)   above the market price.
D)   below the market price and above the demand curve.

Question 4

If a price ceiling is set above the equilibrium price:

Accepted Answer

A)   a surplus results in the market.
B)   no impact is felt in the market.
C)   a shortage occurs in the market.
D)   quantity supplied exceeds quantity demanded.

Question 5

Markets tend to produce:

Accepted Answer

A)   too much of a good exhibiting external costs.
B)   too much of a good exhibiting external benefits.
C)   the right amount of a good exhibiting external costs.
D)   the right amount of a good exhibiting external benefits.

Question 6

If a person gets a meningitis vaccination shot, there's a reduced chance that others around her will get meningitis. This is an example of:

Accepted Answer

A)   external cost.
B)   external benefit.
C)   common resource.
D)   public good.

Question 7

Markets tend to provide too little of products with external benefits.

Accepted Answer

A) True 
 B)False

Question 8

Producer surplus is the:

Accepted Answer

A)   difference between market price and the price at which firms would be willing to supply the product.
B)   surplus of revenue earned by suppliers over the costs incurred to produce the goods.
C)   difference between what consumers are willing to pay and the price sellers are willing to sell at.
D)   excess of actual revenue over revenue that should be earned.

Question 9

If the price of a good is higher than the equilibrium price:

Accepted Answer

A)   producers can gain at consumers' expense.
B)   consumers can gain at producers' expense.
C)   both producer surplus and consumer surplus increase.
D)   both producer surplus and consumer surplus decrease.

Question 10

(Figure: Understanding Surplus and Efficiency)  In the graph, what is the sum of consumer and producer surplus?

Accepted Answer

A)   $30
B)   $140
C)   $50
D)   $0

Question 11

When prices rise above equilibrium:

Accepted Answer

A)   producer surplus falls and consumer surplus falls.
B)   producer surplus falls and consumer surplus rises.
C)   producer surplus falls and it is uncertain what happens to consumer surplus.
D)   consumer surplus falls and it is uncertain what happens to producer surplus.

Question 12

If the price of a good falls below the equilibrium price:

Accepted Answer

A)   consumer surplus is decreased and deadweight loss is increased.
B)   consumer surplus is increased and deadweight loss is decreased.
C)   producer surplus is decreased and deadweight loss is increased.
D)   producer surplus is decreased and deadweight loss is decreased.

Question 13

(Figure: Determining Surplus and Loss)  Consider the graph. If the price is raised from $8 to $12, a surplus of:

Accepted Answer

A)   $80 is transferred from producers to consumers.
B)   $80 is transferred from consumers to producers.
C)   $140 is transferred from producers to consumers.
D)   $140 is transferred from consumers to producers.

Question 14

(Figure: Understanding Price Ceilings and Floors) In the graph, a price of $25 would allow for an effective price ceiling.

Accepted Answer

A) True 
 B)False

Question 15

Laissez-faire is a _____ term that means _____.

Accepted Answer

A)   French; "all else equal"
B)   French; "let it be"
C)   Spanish; "all else equal"
D)   Spanish; "let it be"

Question 16

(Figure: Understanding Surplus and Efficiency)  In the graph, what is the consumer surplus when the market price is $10?

Accepted Answer

A)   $30
B)   $40
C)   $60
D)   $20

Question 17

(Figure: Understanding Price Ceilings and Floors)  In the graph, if the government sets a price of $25, this is an example of an:

Accepted Answer

A)   effective price ceiling.
B)   effective price floor.
C)   efficient price ceiling.
D)   efficient price floor.

Question 18

Many communities require that an inspector evaluate a house before it can be sold. This requirement:

Accepted Answer

A)   creates an economic burden on both the buyer and seller.
B)   reduces the problem of asymmetric information.
C)   creates an externality.
D)   reduces market efficiency.

Question 19

(Figure: Understanding Price Ceilings and Floors)  In the graph, which price would allow for an effective price ceiling?

Accepted Answer

A)   $25
B)   $50
C)   $75
D)   $90

Question 20

If a price floor is set below the equilibrium price in the market, consumer surplus will be:

Accepted Answer

A)   higher than it would be without the price floor.
B)   lower than it would be without the price floor.
C)   the same as it would be without the price floor.
D)   impossible to calculate.

Exam 4: Markets and Government

(Figure: Understanding Price Ceilings and Floors) In the graph, which price would allow for an effective price ceiling?

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If a person gets a meningitis vaccination shot, there's a reduced chance that others around her will get meningitis. This is an example of:

Correct AnswerverifiedShow Answer

(Figure: Understanding Price Ceilings and Floors) In the graph, a price of $25 would allow for an effective price ceiling.

Correct AnswerverifiedShow Answer

(Figure: Determining Surplus and Loss) Consider the graph. If the price is raised from $8 to $12, a surplus of:

Correct AnswerverifiedShow Answer

(Figure: Understanding Price Ceilings and Floors) In the graph, if the government sets a price of $25, this is an example of an:

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If a price ceiling is set above the equilibrium price:

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Which of these is the BEST example of a pure public good?

Correct AnswerverifiedShow Answer

(Figure: Understanding Surplus and Efficiency) In the graph, what is the consumer surplus when the market price is $10?

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Laissez-faire is a _____ term that means _____.

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If the price of a good falls below the equilibrium price:

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Markets tend to provide too little of products with external benefits.

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If a price floor is set below the equilibrium price in the market, consumer surplus will be:

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Producer surplus is the:

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On a graph with a demand curve, consumer surplus is the area:

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Many communities require that an inspector evaluate a house before it can be sold. This requirement:

Correct AnswerverifiedShow Answer

Markets tend to produce:

Correct AnswerverifiedShow Answer

When prices rise above equilibrium:

Correct AnswerverifiedShow Answer

(Figure: Understanding Surplus and Efficiency) In the graph, what is the sum of consumer and producer surplus?

Correct AnswerverifiedShow Answer

(Figure: Determining Surplus) In the graph, which shape represents producer surplus?

Correct AnswerverifiedShow Answer

If the price of a good is higher than the equilibrium price:

Correct AnswerverifiedShow Answer

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Laissez-faire is a _ term that means _.

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