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Exam 5: Economic Efficiency,government Price Setting and Taxes

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Question 1

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Table 5.4 $\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Hourly Wage } \\\text { (dollars) }\end{array} & \begin{array} { c } \text { Quantity of } \\\text { Labour } \\\text { Supplied }\end{array} & \begin{array} { c } \text { Quantity of } \\\text { Labour } \\\text { Demanded }\end{array} \\\hline 7.50 & 530000 & 650000 \\\hline 8.50 & 550000 & 630000 \\\hline 9.50 & 570000 & 610000 \\\hline 10.50 & 590000 & 590000 \\\hline 11.50 & 610000 & 570000 \\\hline 12.50 & 630000 & 550000 \\\hline\end{array}$ Table 5-4 shows the demand and supply schedules for labour market in the city of Pixley. -Refer to Table 5.4.If a minimum wage of $11.50 an hour is mandated,the quantity of labour supplied is ________.

A) 40 000
B) 570 000
C) 610 000
D) 1 180 000

E) All of the above
F) None of the above

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Question 2

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Refer to Figure 5.2.What area represents the increase in producer surplus when the market price rises from P₁ to P₂?

A) B + D
B) A + C + E
C) C + E
D) A + B

E) A) and B)
F) All of the above

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Question 3

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Consumer surplus is the difference between the highest price someone is willing to pay for a product and the price he actually pays for the product.

Which term refers to a legally established minimum price that firms may charge?

Figure 5.5 Figure 5.5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1 000 per month. -Refer to Figure 5.5.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 dead-weight loss after the imposition of the price floor?

When the government taxes a good or service,it _________.

Which of the following is true in a competitive market equilibrium?

Figure 5.1 Figure 5.1 shows Arnold's demand curve for burritos. -Refer to Figure 5.1.What is Arnold's marginal benefit from consuming the third burrito?

Economic efficiency is a market outcome in which the marginal benefit of consumers is equal to the marginal cost of production,and the sum of consumer surplus and producer surplus is maximised.

Figure 5.5 Figure 5.5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1 000 per month. -Refer to Figure 5.5.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?

What is marginal cost?

To affect the market outcome,a price ceiling ________.

Table 5.1 $\begin{array} { | l | c | } \hline { \text { Consumer } } & \text { Willingness to Pay (dollars) } \\\hline \text { Tom } & 40 \\\hline \text { Dick } & 30 \\\hline \text { Harriet } & 25 \\\hline\end{array}$ -Refer to Table 5.1.The table above lists the highest prices three consumers,Tom,Dick,and Harriet,are willing to pay for a short-sleeved polo shirt.If the price of the shirts falls from $28 to $20,__________.

Table 5.2 $\begin{array} { | l | c | } \hline { \text { Consumer } } & \text { Willingness to Pay } \\\hline \text { Anya } & \$ 24 \\\hline \text { Easil } & \$ 20 \\\hline \text { Celeste } & \$ 15 \\\hline \text { Dralon } & \$ 12 \\\hline \text { Esther } & \$ 7 \\\hline\end{array}$ -Refer to Table 5.2.The table above lists the highest prices five consumers are willing to pay for a theatre ticket.If the price of one of the tickets is $18,________.

The area ________ the market supply curve and ________ the market price is equal to the total amount of producer surplus in a market.

The total amount of consumer surplus in a market is equal to the area below the demand curve.

Figure 5.1 Figure 5.1 shows Arnold's demand curve for burritos. -Refer to Figure 5.1.What is the total amount that Arnold is willing to pay for 3 burritos?

Figure 5.1 Figure 5.1 shows Arnold's demand curve for burritos. -Refer to Figure 5.1.If the market price is $2.00,what is the consumer surplus on the second burrito?

Rent control is an example of a price ceiling.

Figure 5.5 Figure 5.5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1 000 per month. -Refer to Figure 5.5.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 producer surplus after the imposition of the price floor?