Q: Producer surplus can be calculated using which formula?

$$PS = \frac{(P_{i,e} - P_{min}) \times Q_{i}}{2}$$

Question 1

Which of the following best describes a price ceiling?

Accepted Answer

A maximum price set below the equilibrium price, making it illegal to charge more than this price.

Question 2

Suppose the government sets a price floor for wheat at $$5 per bushel, but the equilibrium price is 3 $$per bushel. What is the likely outcome in the wheat market?

Accepted Answer

A surplus of wheat, as quantity supplied exceeds quantity demanded.

Question 3

Which of the following is NOT a non-price rationing mechanism used when there is excess demand?

Accepted Answer

Price rationing by market forces

Question 4

Consumer surplus is best represented by which area on a supply and demand graph?

Accepted Answer

The area below the demand curve and above the market price, up to the quantity exchanged.

Question 5

If the equilibrium price of a burger is $$1 and a consumer is willing to pay 8$$, what is the consumer surplus for this consumer?

Accepted Answer

$7

Question 6

Producer surplus can be calculated using which formula?

Accepted Answer

$$PS = \frac{(P_{i,e} - P_{min}) 	imes Q_{i}}{2}$$

Question 7

What is the economic effect of an effective price ceiling set below the equilibrium price?

Accepted Answer

It leads to a shortage, as quantity demanded exceeds quantity supplied.

Question 8

Deadweight loss (DWL) is most accurately described as:

Accepted Answer

The net loss in economic surplus resulting from market interventions such as price controls or taxes.

Question 9

If a tax of $$1 is imposed on cigarettes and the price paid by consumers rises from 4 to$$ $4.90, what is the tax incidence on consumers?

Accepted Answer

$0.90

Question 10

Which of the following statements about price floors is correct?

Accepted Answer

Price floors set a minimum price above equilibrium, leading to excess supply.

Question 11

In the context of rent control (a price ceiling), what is a likely unintended consequence?

Accepted Answer

A shortage of available apartments.

Question 12

Which of the following best explains why deadweight loss occurs when a price floor is imposed?

Accepted Answer

Some mutually beneficial trades between buyers and sellers do not occur.

Question 13

If the area below the demand curve and above the market price for 3 units is $15, what is the total consumer surplus?

Accepted Answer

$15

Question 14

Which of the following is true about the legal incidence of a tax?

Accepted Answer

It determines who is legally required to pay the tax, but not who actually bears the burden.

Question 15

A competitive market maximizes economic efficiency when:

Accepted Answer

$$MB = MC at $$equilibrium, maximizing total surplus.

Question 16

Which of the following is a real-world example of a price ceiling?

Accepted Answer

Rent control in New York City.

Question 17

If a price floor is set above the equilibrium price in the labor market, what is the likely result?

Accepted Answer

Unemployment due to excess supply of labor.

Question 18

Which of the following best describes producer surplus?

Accepted Answer

The difference between the lowest price a firm is willing to accept and the price it actually receives.

Question 19

When a tax is imposed on a good, who bears the burden of the tax?

Accepted Answer

Both consumers and producers, depending on the relative elasticities of supply and demand.

Question 20

Which of the following is a consequence of non-price rationing mechanisms such as queuing?

Accepted Answer

Time spent waiting has an opportunity cost for consumers.

Economic Efficiency, Government Price Setting, and Taxes: Microeconomics Study Notes

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