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Exam 4: Markets and Government

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Question 41

Multiple Choice

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If a price floor is set above the market price,it is:

A) effective.
B) efficient.
C) ineffective.
D) not possible to enforce.

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Question 42

Multiple Choice

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Use the following to answer questions Figure: Determining Surplus and Loss -(Figure: Determining Surplus and Loss) In the graph,which price would allow for an effective price floor?

A) $0
B) $5
C) $8
D) $12

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Question 43

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Use the following to answer questions Figure: Determining Surplus and Loss -(Figure: Determining Surplus and Loss) In the graph,producer surplus is _____ in equilibrium and _____ at a price of $5.

A $2 maximum price on a gallon of gasoline would be an example of a price floor.

A market with external costs:

Use the following to answer questions Figure: Understanding Surplus and Efficiency -(Figure: Understanding Surplus and Efficiency) In the graph,what is the efficient level of output?

Use the following to answer questions Figure: Determining Surplus and Loss -(Figure: Determining Surplus and Loss) Consider the graph.If the price is lowered from $8 to $5,producer surplus:

Which is one of the four major reasons why markets fail?

Jonathan purchased coffee for $5 at Jennifer's coffee shop;however,he was willing to pay $9.Jennifer was willing to accept $3 for the coffee.The results of this transaction are a consumer surplus of:

Total producer surplus for an entire market equals the area under the demand curve and above the equilibrium price.

A good example of a government imposed price floor is:

Laws used to keep market prices from falling are called:

What characteristics distinguish a public good from a private good? Give an example.Why are many public goods provided by government?

Suppose the market price is $5.There are three consumers in the market.The consumer who purchases the first unit of output is willing to pay $12;the consumer purchasing the second unit of output is willing to pay $8;and the consumer buying the third unit of output is willing to pay $7.Total consumer surplus is:

Give an example of an action that has an external cost.Explain why markets don't provide the optimal quantity of goods that have external costs.

Use the following to answer questions Figure: Determining Surplus and Loss -(Figure: Determining Surplus and Loss) Consider the graph.If the price is raised from $8 to $12,producer surplus:

Use the following to answer questions Figure: Determining Total Surplus -(Figure: Determining Total Surplus) In the graph,total consumer surplus is shown by area:

An economist says,"An effective price ceiling creates a shortage." In this context,the term effective means:

Use the following to answer questions Figure: Determining Surplus and Loss -(Figure: Determining Surplus and Loss) In the graph,which price would NOT allow for an effective price ceiling?

Consumer surplus is defined as the: