Question 1

Suppose the market price for a good is $$4.00. The willingness to pay for five buyers is 8$$, $$6, 5$$, $$4, and 3. $$What is the total consumer surplus in this market?

Accepted Answer

$7.00

Question 2

Which of the following best describes the area representing producer surplus on a standard supply and demand graph?

Accepted Answer

The area below the price and above the supply curve

Question 3

A negative externality exists in the market for gasoline. Without government intervention, which of the following is true?

Accepted Answer

Marginal social cost exceeds marginal social benefit

Question 4

If the government imposes an excise tax of $$3 per unit on a good, and the price paid by consumers increases by 2 $$while the price received by producers falls by $1, which group bears the larger burden of the tax?

Accepted Answer

Consumers, because they pay a larger share of the tax

Question 5

A public good is characterized by which two properties?

Accepted Answer

Non-rival in consumption and non-excludable

Question 6

Suppose the marginal social benefit (MSB) of a good is $$50 and the marginal social cost (MSC) is 40 at $$the current quantity. What government policy would move the market toward the socially optimal quantity if this is a positive externality?

Accepted Answer

Provide a subsidy of $10 per unit

Question 7

If the opportunity cost of producing the 4th unit of fish is 9 coconuts, what is the opportunity cost formula for the nth unit of fish on a PPF?

Accepted Answer

$$Opportunity\ Cost = Quantity\ of\ Coconuts_{n-1} - Quantity\ of\ Coconuts_n$$

Question 8

Country A can produce 100 units of good X or 50 units of good Y. Country B can produce 80 units of good X or 40 units of good Y. What is Country A's opportunity cost of producing one unit of good X?

Accepted Answer

$$Opportunity\ Cost = 50 / 100 = 0.5$$ units\ of\ Y$

Question 9

If a price ceiling is set at $$10 in a market where the equilibrium price is 15$$, what is the likely result?

Accepted Answer

A shortage will occur

Question 10

Suppose the government sets a price floor at $$20 in a market where the equilibrium price is 15. $$What is the most likely consequence?

Accepted Answer

A surplus

Question 11

If the domestic price of a good is $$12 and the world price is 8$$, what will happen when the market opens to free trade?

Accepted Answer

The country will import the good

Question 12

A country imposes a tariff that raises the domestic price of an imported good from $$6 to 10. If $$domestic consumption falls from 75 to 50 units and domestic production rises from 20 to 25 units, how many units are imported after the tariff?

Accepted Answer

25 units

Question 13

Which of the following is a consequence of the free rider problem associated with public goods?

Accepted Answer

Private firms will not provide public goods

Question 14

If demand for a good is relatively inelastic, who bears the larger burden of an excise tax?

Accepted Answer

Consumers

Question 15

Suppose the marginal external benefit (MEB) of a vaccine is $15 per dose. What is the optimal government policy to achieve the socially optimal quantity?

Accepted Answer

Provide a subsidy of $15 per dose

Question 16

If the opportunity cost of producing 1 ton of steel is 2 tons of wheat in Country X, and 1 ton of wheat is 0.5 tons of steel in Country Y, which country has the comparative advantage in steel?

Accepted Answer

Country Y

Question 17

Which of the following is NOT a role of government in the U.S. economy?

Accepted Answer

Setting all prices in the market

Question 18

If a country specializes according to its comparative advantage and trades at a rate of 1 unit of good A for 3 units of good B, which of the following must be true?

Accepted Answer

The terms of trade must be between each country's opportunity cost

Question 19

Which of the following best describes deadweight loss from an excise tax?

Accepted Answer

The area representing lost consumer and producer surplus not recaptured by the government

Microeconomics Study Guide: Surplus, Government Actions, Externalities, Trade, and Production Possibilities

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