$$\text{Tax Revenue} = \text{Tax per unit} \times \text{Quantity sold}$$

Question 1

Suppose the demand and supply for a product are given by $$Q_d = 45 - 2P$$ and $$Q_s = 15 + P. $$What is the equilibrium price in this market?

Accepted Answer

$$P = 15$$

Question 2

Given the demand curve $$Q_d = 45 - 2P$$ and supply curve $$Q_s = 15 + P$$, what is the consumer surplus at equilibrium?

Accepted Answer

$$CS = 225$$

Question 3

If a binding price ceiling is imposed below the equilibrium price, what is the most likely outcome in the market?

Accepted Answer

A shortage of the good

Question 4

Deadweight loss occurs in a market when:

Accepted Answer

There is underproduction or overproduction

Question 5

A price floor set above the equilibrium price will result in:

Accepted Answer

A surplus

Question 6

Suppose the government imposes a $1,000 tariff on imported goods. What is the effect on consumer surplus?

Accepted Answer

Consumer surplus decreases

Question 7

If the supply curve is perfectly inelastic and the demand curve is elastic, who receives the greater benefit from a subsidy?

Accepted Answer

Sellers

Question 8

Which of the following is NOT a common problem associated with price ceilings?

Accepted Answer

Increase in supply

Question 9

A government quota limiting imports will most likely:

Accepted Answer

Increase producer surplus

Question 10

If a tax is imposed on a market, the total tax revenue collected is calculated as:

Accepted Answer

$$	ext{Tax Revenue} = 	ext{Tax per unit} 	imes 	ext{Quantity sold}$$

Question 11

Suppose $$Q_d = 1000 - 100P$$ and $$Q_s = 150 + 150P. If a $$price ceiling of $4 is set, what is the quantity supplied?

Accepted Answer

$$Q_s = 750$$

Question 12

Which of the following trade policies would benefit domestic producers, hurt domestic consumers, and decrease the amount of trade?

Accepted Answer

A tariff on an imported good

Question 13

At equilibrium, marginal benefit to the consumer equals marginal cost to the producer. This condition achieves:

Accepted Answer

Allocative efficiency

Question 14

If a price ceiling is set above the equilibrium price, what is the effect on the market?

Accepted Answer

It will have no impact

Question 15

Which of the following is a source of market failure?

Accepted Answer

High transaction costs

Question 16

If the government introduces a $1,000 subsidy per unit produced and the demand for the product is inelastic, the subsidy will:

Accepted Answer

Decrease the price paid by consumers by less than $1,000

Question 17

Which of the following statements is true regarding the effects of a binding price floor?

Accepted Answer

It results in a surplus

Question 18

If a tax causes the market-clearing quantity to fall to $$Q_1$$, what is the deadweight loss?

Accepted Answer

The area between the supply and demand curves from $$Q_1 to$$ $$Q^*$$

Question 19

A voluntary export restraint (VER) is:

Accepted Answer

An agreement between two countries to limit the amount traded

Question 20

Which of the following best describes productive efficiency?

Accepted Answer

Producing goods at the lowest possible cost

Analysis of Competitive Markets: Surplus, Efficiency, Price Controls, and Government Intervention

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