Question 1

Suppose the market for a good is described by the following equations: $$Q_S = 45 + 2P$$ and $$Q_D = 55 - P. $$What is the equilibrium price and quantity in this market?

Accepted Answer

$$P = 3.33, Q = 51.67$$

Question 2

Which of the following best describes consumer surplus?

Accepted Answer

The area below the demand curve and above the market price

Question 3

A binding price ceiling is set in a market. Which of the following outcomes is most likely?

Accepted Answer

A shortage will occur because quantity demanded exceeds quantity supplied

Question 4

If a price floor is set at $$130 in a market where the equilibrium price is 100$$, what will be the effect?

Accepted Answer

There will be a surplus

Question 5

Which of the following equations correctly represents economic surplus?

Accepted Answer

$$Economic\ Surplus = Consumer\ Surplus + Producer\ Surplus$$

Question 6

What is the deadweight loss in a market?

Accepted Answer

The reduction in economic surplus resulting from a market not being in equilibrium

Question 7

If the government imposes a tax on gasoline of $0.184 per gallon and 435 million gallons are sold per day, what is the daily tax revenue?

Accepted Answer

$$80,040,000$$

Question 8

Which of the following statements about price ceilings is TRUE?

Accepted Answer

A price ceiling set below equilibrium price is binding

Question 9

What is the effect of a binding minimum wage (price floor) on the labor market?

Accepted Answer

It creates a surplus of labor (unemployment)

Question 10

Which area on a supply and demand graph represents producer surplus at equilibrium?

Accepted Answer

The area above the supply curve and below the market price

Question 11

Suppose the demand curve for a good is $$Q_D = 55 - P. $$What is the choke price (the price at which quantity demanded is zero)?

Accepted Answer

$$P = 55$$

Question 12

If a tax is imposed on a good, which of the following is TRUE?

Accepted Answer

There is a deadweight loss unless the tax revenue exceeds the loss in surplus

Question 13

Which of the following best describes a black market?

Accepted Answer

A market where goods are sold at prices that violate government price regulations

Question 14

If the area under the demand curve and above the price line is $$1,334.89$$ and the area above the supply curve and below the price line is $$161.07$$, what is the economic surplus?

Accepted Answer

$$1,495.96$$

Question 15

Which of the following is TRUE about economic efficiency in a competitive market?

Accepted Answer

It is maximized when marginal benefit equals marginal cost

Question 16

If a price ceiling is set at $$70 in a $$market with an equilibrium price of $$100$$, what will happen?

Accepted Answer

There will be a shortage

Question 17

Which of the following is the correct formula for calculating the area of a triangle, as used to find consumer or producer surplus?

Accepted Answer

$$Area = base 	imes height 	imes 0.5$$

Question 18

What is the main purpose of a price ceiling?

Accepted Answer

To help consumers by lowering the price they pay

Question 19

Which of the following best describes marginal benefit (MB)?

Accepted Answer

The additional benefit to a consumer from consuming one more unit

Question 20

If a price floor is non-binding, what does this mean?

Accepted Answer

It is set below the equilibrium price and has no effect on the market

chapter 4 microecon

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