Question 1

Which of the following best defines consumer surplus?

Accepted Answer

The difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer pays.

Question 2

Suppose the demand for apartments in New York City is given by $$ Q_D = 4,750,000 - 1,000P $$ and the supply is $$ Q_S = -1,000,000 + 1,300P . $$What is the equilibrium price?

Accepted Answer

$$ P = 2,500 $$

Question 3

What is the economic surplus in a competitive market at equilibrium?

Accepted Answer

The sum of consumer surplus and producer surplus.

Question 4

If a government imposes a price ceiling below the equilibrium price, what is the most likely outcome?

Accepted Answer

A shortage of the good.

Question 5

A $$1.00-per-pack tax on cigarettes shifts the supply curve up by 1.00. If $$the equilibrium price before the tax was $$5.00, and after the tax consumers pay 5.90$$, what price do producers receive after paying the tax?

Accepted Answer

$$ 4.90 $$

Question 6

Which of the following statements about deadweight loss is correct?

Accepted Answer

Deadweight loss is the reduction in economic surplus resulting from a market not being in competitive equilibrium.

Question 7

If the government imposes a rent ceiling of $$1,500 in a market where the equilibrium rent is 2$$,500, what happens to the quantity of apartments supplied and demanded?

Accepted Answer

Quantity supplied decreases, quantity demanded increases.

Question 8

What determines the incidence of a tax in a market?

Accepted Answer

The relative slopes of the demand and supply curves.

Question 9

Suppose the area under the demand curve and above the price is $$ ½ (base)(height) . If $$the base is 2.25 million units and the height is $2,250, what is the consumer surplus?

Accepted Answer

$$ 2,531.25 $$ million

Question 10

Which of the following is a likely effect of a binding price floor in the wheat market?

Accepted Answer

A surplus of wheat.

Question 11

If the marginal benefit of the last unit produced is less than the marginal cost, what does this imply about the market?

Accepted Answer

Too many units are being produced, resulting in inefficiency.

Question 12

A black market is most likely to arise under which of the following conditions?

Accepted Answer

When the government imposes a price ceiling below equilibrium.

Question 13

If the government imposes a per-unit tax on a good, what happens to the supply curve?

Accepted Answer

It shifts upward by the amount of the tax.

Question 14

Which of the following best describes producer surplus?

Accepted Answer

The difference between the lowest price a firm would accept and the price it actually receives.

Question 15

If a minimum wage is set above the equilibrium wage, what is the likely result?

Accepted Answer

A surplus of labor (unemployment).

Question 16

Suppose a tax on gasoline causes the price consumers pay to rise by 8 cents and the price sellers receive to fall by 2 cents. What percentage of the tax is paid by consumers?

Accepted Answer

80%

Question 17

Which of the following is true about economic efficiency?

Accepted Answer

It is achieved when the sum of consumer and producer surplus is maximized.

Question 18

If the government imposes a rent ceiling and the new quantity supplied is 950,000 apartments, but the quantity demanded is 2,100,000, what is the resulting shortage?

Accepted Answer

1,150,000 apartments

Question 19

Which of the following is NOT a likely justification for government-imposed price controls?

Accepted Answer

To maximize economic efficiency.

Question 20

If the area of deadweight loss from rent control is $$1,495$$ million, what does this represent?

Accepted Answer

The loss in economic surplus due to the rent control.

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

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