Question 1

Suppose the market price for a cup of tea is $$2.00. If a consumer is willing to pay 3.50 $$for a cup, what is the consumer surplus for this transaction?

Accepted Answer

$$1.50 = 3.50 - 2.00$$

Question 2

Which formula correctly represents producer surplus for a single unit sold?

Accepted Answer

$$PS = P_{received} - MC$$

Question 3

In a market with many buyers, the total consumer surplus can be calculated as the area of which geometric shape under the demand curve and above the market price?

Accepted Answer

A triangle

Question 4

If the marginal benefit (MB) of the last unit produced equals the marginal cost (MC), what does this indicate about the market?

Accepted Answer

The market is efficient

Question 5

A government imposes a price ceiling below the equilibrium price in the apartment rental market. What is the most likely immediate effect?

Accepted Answer

A shortage of apartments

Question 6

Which of the following best describes deadweight loss?

Accepted Answer

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

Question 7

Suppose a per-unit tax is imposed on sellers in a market. Who bears the burden of the tax?

Accepted Answer

Both buyers and sellers, depending on the relative elasticities of supply and demand

Question 8

If the supply curve is much steeper than the demand curve, who will bear most of the burden of a per-unit tax?

Accepted Answer

Sellers

Question 9

Which of the following is NOT a likely consequence of a government-imposed price floor above equilibrium price?

Accepted Answer

A shortage of the good

Question 10

A competitive market is efficient when:

Accepted Answer

Economic surplus is maximized

Question 11

If a government imposes a $1.00 per-unit tax on cigarettes and the demand curve is much steeper than the supply curve, what is the likely outcome?

Accepted Answer

Buyers bear most of the tax burden

Question 12

Which equation correctly calculates total economic surplus in a market?

Accepted Answer

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

Question 13

Which of the following best describes an illicit market?

Accepted Answer

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

Question 14

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

Accepted Answer

It has no effect on the market outcome

Question 15

Suppose the government imposes a per-unit tax on cannabis. Which area on a supply and demand graph represents the government’s tax revenue?

Accepted Answer

The rectangle between the post-tax supply and demand curves, from the new quantity sold up to the tax amount

Question 16

Which of the following is true regarding the net benefit to consumers from participating in a market?

Accepted Answer

It is measured by consumer surplus

Question 17

If only 14,000 units are exchanged at the equilibrium price of $2.00, but the equilibrium quantity is 15,000 units, what is the result?

Accepted Answer

Deadweight loss occurs due to underproduction

Question 18

Which of the following is a normative question related to price controls?

Accepted Answer

Are the gains to some people more important than the losses to others?

Question 19

A government sets a minimum wage above the equilibrium wage. What is the most likely effect in the labor market?

Accepted Answer

A surplus of labor (unemployment)

Question 20

Which of the following correctly describes the effect of a per-unit tax on market efficiency?

Accepted Answer

It creates deadweight loss by reducing the quantity traded below the efficient level

Microeconomics Chapter 4: Surplus, Market Efficiency, Price Controls, and Taxes

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