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 the supply curve $$Q_s = 15 + P$$, what is the consumer surplus at equilibrium?

Accepted Answer

$$25$$

Question 3

If a binding price ceiling is imposed below the equilibrium price, what will be the likely result in the market?

Accepted Answer

A shortage of the good

Question 4

Deadweight loss occurs in a competitive market when:

Accepted Answer

There is either underproduction or overproduction

Question 5

A price floor is effective only if it is set:

Accepted Answer

Above the equilibrium price

Question 6

Suppose the government imposes a price ceiling of $$4 in a market with Q_s = 100 + 100P$ and Q_d = 400 - 150P$. What is the quantity supplied at this price ceiling?

Accepted Answer

$$500$$

Question 7

Which of the following is NOT a likely consequence of a binding price ceiling?

Accepted Answer

Chronic excess supply

Question 8

If a nation imposes a tariff on an imported good, what is the most likely effect?

Accepted Answer

All of the above

Question 9

A government-imposed import quota will generally:

Accepted Answer

Decrease consumer surplus and increase producer surplus

Question 10

Suppose the supply and demand curves for a product are $$Q_s = 15 + P$$ and $$Q_d = 45 - 2P. $$What is the producer surplus at equilibrium?

Accepted Answer

$$12.5$$

Question 11

Which of the following is a source of market failure?

Accepted Answer

High transaction costs

Question 12

If the government introduces a $1,000 subsidy per unit for a product with inelastic demand, what is the likely effect?

Accepted Answer

The price paid by consumers will fall by less than $1,000, and producers will receive part of the benefit

Question 13

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

Accepted Answer

A surplus

Question 14

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

Accepted Answer

Starting to allow trade when the world price is greater than the domestic price

Question 15

If a tax is imposed on a market, what happens to consumer surplus, producer surplus, and government revenue?

Accepted Answer

Consumer surplus and producer surplus both decrease, and government revenue increases

Question 16

Suppose the supply and demand curves are $$Q_s = 100 + 100P$$ and $$Q_d = 400 - 150P. $$What is the equilibrium quantity?

Accepted Answer

$$Q = 280$$

Question 17

Which of the following best describes allocative efficiency?

Accepted Answer

The correct quantity of goods is being produced relative to other goods

Question 18

A government subsidy paid to producers will generally:

Accepted Answer

Decrease the market price and increase the quantity supplied

Question 19

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

Accepted Answer

It will have no effect

Question 20

Which of the following is true about deadweight loss?

Accepted Answer

It represents the loss of economic surplus when the market is not at equilibrium

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

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