$$\text{Consumer Surplus} = \frac{1}{2} \times (\text{Base}) \times (\text{Height})$$

Question 1

Which of the following best describes 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 a city is given by $$Q_D = 2000 - 2P$$ and the supply is $$Q_S = 4P. $$What is the equilibrium price?

Accepted Answer

$$P = 333.33$$

Question 3

Producer surplus is maximized when:

Accepted Answer

The market is in competitive equilibrium.

Question 4

A price ceiling set below the equilibrium price will most likely result in:

Accepted Answer

A shortage of the good.

Question 5

Deadweight loss is defined as:

Accepted Answer

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

Question 6

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 7

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

Accepted Answer

It depends on the relative slopes of the demand and supply curves.

Question 8

A price floor set above the equilibrium price in the wheat market will:

Accepted Answer

Cause a surplus of wheat.

Question 9

Economic efficiency in a market is achieved when:

Accepted Answer

The sum of consumer surplus and producer surplus is maximized.

Question 10

If the demand for gasoline is steep, who bears most of the burden of a gasoline tax?

Accepted Answer

Buyers

Question 11

Which of the following is an example of a price ceiling?

Accepted Answer

Rent control

Question 12

Suppose the government imposes a rent ceiling below the equilibrium rent. What is the likely outcome?

Accepted Answer

A shortage of apartments

Question 13

Which formula correctly represents the area of consumer surplus in a market with a linear demand curve?

Accepted Answer

$$	ext{Consumer Surplus} = \frac{1}{2} 	imes (	ext{Base}) 	imes (	ext{Height})$$

Question 14

In the case of Venezuela’s food market, what was a direct result of government-imposed price ceilings?

Accepted Answer

A thriving black market for food

Question 15

If a per-unit tax is imposed on sellers, what happens to the price buyers pay and the price sellers receive?

Accepted Answer

Buyers pay more, sellers receive less

Question 16

Which of the following statements about deadweight loss is correct?

Accepted Answer

Deadweight loss is zero at the competitive equilibrium.

Question 17

A black market is most likely to arise when:

Accepted Answer

There is a price ceiling below equilibrium.

Question 18

Which of the following best explains why the Social Security tax burden falls mostly on workers?

Accepted Answer

Workers are less sensitive to wage changes than employers.

Question 19

If the government wants to minimize the deadweight loss from a tax, it should:

Accepted Answer

Impose the tax on goods with inelastic demand or supply.

Question 20

Which of the following is NOT a likely effect of a government-imposed price floor?

Accepted Answer

A shortage of the good

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

Study Guide - Practice Questions