Question 1

The competitive equilibrium model gets its name from the

Accepted Answer

A)  fact that the number of participants eliminated from the market equals the number of new participants.
B)  competition between buyers and sellers,each trying to drive the other out of business.
C)  competition between buyers and sellers,which establishes a market price equating the amounts people wish to buy and sell.
D)  steady-state nature of the model,in which prices can never change.
E)  way that the government is trying to balance the market's supply and demand forces.F) None of the above
G) A) and D)

Question 2

The first theorem of welfare economics concerns the efficiency of competitive markets.

Accepted Answer

A) True 
 B)False

Question 3

The function of price in a market economy is to

Accepted Answer

A)  make producers wealthy at the expense of consumers.
B)  provide information to producers and consumers.
C)  provide a base on which government can build a tax system.
D)  prevent market adjustment from being necessary.
E)  cause consumers to be certain that they desire a product before they buy it.F) A) and E)
G) C) and D)

Question 4

For a given tax assessed on producers,market price changes the most if demand is perfectly inelastic and supply is perfectly elastic.

Accepted Answer

A) True 
 B)False

Question 5

Pareto efficiency occurs when there is no difference in the levels of income among individuals.

Accepted Answer

A) True 
 B)False

Question 6

Exhibit 7-2 
-Refer to Exhibit 7-2.What is the least cost for the production of 8 units of output?

Accepted Answer

$57 If Firm B produces 5 units and Firm ...

Question 7

A market

Accepted Answer

A)  must be located in a single centralized place where all buyers and sellers can meet together at once.
B)  generally fails to coordinate trading activity,as evidenced by the apparent chaos on Wall Street.
C)  cannot operate without direct government intervention in the conduct of trades.
D)  requires little communication.
E)  is a group of buyers and sellers buying and selling goods and services.F) C) and D)
G) A) and B)

Question 8

Exhibit 7-10 
-Refer to Exhibit 7-10.If the government imposed on consumers a tax of $3 per unit bought,the tax revenue would be

Accepted Answer

A)  $150.
B)  $120.
C)  $135.
D)  $180.
E)  $165.F) B) and E)
G) A) and C) A

Question 9

A tax on a good results in no deadweight loss if consumers and producers share the benefits of the tax revenues.

Accepted Answer

A) True 
 B)False

Question 10

Suppose Jack waits in line and gets in to see a movie he values at $6,while Sam,farther back in line,does not get to see the movie he values at $12 because the theater fills up.Which of the following statements is true?

Accepted Answer

A)  The movie theater management needs to install more seats.
B)  Pareto efficiency is a concept that is not applicable here.
C)  Pareto efficiency is achieved because Jack can tell Sam about the movie.
D)  Jack must have stolen his ticket from Sam.
E)  Pareto efficiency is not achieved.F) A) and E)
G) A) and D)

Question 11

Who are unambiguously worse off in the case of a price ceiling?

Accepted Answer

A)  Both buyers and sellers
B)  Buyers
C)  Sellers
D)  Neither buyers nor sellers
E)  Government officialsF) B) and E)
G) All of the above

Question 12

Exhibit 7-9 
-Exhibit 7-9 shows the effect of a tax on a market.The deadweight loss equals

Accepted Answer

A)  the combined area of C and D.
B)  the combined area of A and B.
C)  the combined area of E and F.
D)  area C minus area D.
E)  the combined area of A,B,C,D,E,and F.F) A) and D)
G) A) and C)

Question 13

Exhibit 7-2 
-Refer to Exhibit 7-2.What would be the total cost of Firm A and Firm B producing 4 units of output each? Is it possible to reduce this total cost and still produce the same total output? How?

Accepted Answer

$62; yes; Firm A produces less.

Firm A...

Question 14

A specific tax

Accepted Answer

A)  increases supply by shifting the curve up.
B)  is a tax that is paid only by producers.
C)  is a per-unit tax on a good.
D)  is a percentage tax on the total value of sales.
E)  is proportionate to the total value of a good sold.F) All of the above
G) A) and D)

Question 15

The first theorem of welfare economics states that

Accepted Answer

A)  government action is never Pareto efficient.
B)  Pareto efficiency is achieved in competitive markets.
C)  Pareto efficiency can be achieved only in competitive markets.
D)  Pareto efficiency is unattainable.
E)  government intervention is needed to achieve Pareto efficiency.F) A) and D)
G) A) and C)

Question 16

Define Pareto efficiency.

Accepted Answer

Pareto efficiency is achieved ...

Question 17

A price floor results in a decrease in deadweight loss.

Accepted Answer

A) True 
 B)False  False

Question 18

A tax on producers reduces producer surplus while consumer surplus remains the same.

Accepted Answer

A) True 
 B)False  False

Question 19

Exhibit 7-10 
-Refer to Exhibit 7-10.What would the new equilibrium quantity be if the government assessed on producers a tax of $3 per unit sold?

Accepted Answer

A)  55
B)  40
C)  50
D)  60
E)  45F) D) and E)
G) A) and B)

Question 20

Exhibit 7-7 1 to S2 by imposing a price ceiling at P3,then the consumer surplus A) increases by area C less area H. B) decreases by area C less area H. C) increases by area G less area I. D) decreases by area G less area I. E) remains constant." class="answers-bank-image d-inline" rel="preload" >
-Exhibit 7-7 shows the effects of a decrease in the oil supply due to a war in the Middle East.If the government reacts to the shift of the supply curve from S1 to S2 by imposing a price ceiling at P3,then the consumer surplus

Accepted Answer

A)  increases by area C less area H.
B)  decreases by area C less area H.
C)  increases by area G less area I.
D)  decreases by area G less area I.
E)  remains constant.F) A) and B)
G) A) and C)

Exam 7: The Interaction of People in Markets

The competitive equilibrium model gets its name from the

Correct AnswerverifiedShow Answer

The first theorem of welfare economics concerns the efficiency of competitive markets.

Correct AnswerverifiedShow Answer

The function of price in a market economy is to

Correct AnswerverifiedShow Answer

For a given tax assessed on producers,market price changes the most if demand is perfectly inelastic and supply is perfectly elastic.

Correct AnswerverifiedShow Answer

Pareto efficiency occurs when there is no difference in the levels of income among individuals.

Correct AnswerverifiedShow Answer

Exhibit 7-2 -Refer to Exhibit 7-2.What is the least cost for the production of 8 units of output?

Correct Answerverified$57 If Firm B produces 5 units and Firm ...View AnswerShow Answer

A market

Correct AnswerverifiedShow Answer

Exhibit 7-10 -Refer to Exhibit 7-10.If the government imposed on consumers a tax of $3 per unit bought,the tax revenue would be

Correct AnswerverifiedA

A tax on a good results in no deadweight loss if consumers and producers share the benefits of the tax revenues.

Correct AnswerverifiedShow Answer

Suppose Jack waits in line and gets in to see a movie he values at $6,while Sam,farther back in line,does not get to see the movie he values at $12 because the theater fills up.Which of the following statements is true?

Correct AnswerverifiedShow Answer

Who are unambiguously worse off in the case of a price ceiling?

Correct AnswerverifiedShow Answer

Exhibit 7-9 -Exhibit 7-9 shows the effect of a tax on a market.The deadweight loss equals

Correct AnswerverifiedShow Answer

Exhibit 7-2 -Refer to Exhibit 7-2.What would be the total cost of Firm A and Firm B producing 4 units of output each? Is it possible to reduce this total cost and still produce the same total output? How?

Correct Answerverified$62; yes; Firm A produces less. Firm A...View AnswerShow Answer

A specific tax

Correct AnswerverifiedShow Answer

The first theorem of welfare economics states that

Correct AnswerverifiedShow Answer

Define Pareto efficiency.

Correct AnswerverifiedPareto efficiency is achieved ...View AnswerShow Answer

A price floor results in a decrease in deadweight loss.

Correct AnswerverifiedFalse

A tax on producers reduces producer surplus while consumer surplus remains the same.

Correct AnswerverifiedFalse

Exhibit 7-10 -Refer to Exhibit 7-10.What would the new equilibrium quantity be if the government assessed on producers a tax of $3 per unit sold?

Correct AnswerverifiedShow Answer

Exhibit 7-7 -Exhibit 7-7 shows the effects of a decrease in the oil supply due to a war in the Middle East.If the government reacts to the shift of the supply curve from S1 to S2 by imposing a price ceiling at P3,then the consumer surplus

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
$57 If Firm B produces 5 units and Firm ...
View Answer

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
$62; yes; Firm A produces less.

Firm A...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Pareto efficiency is achieved ...
View Answer

Correct Answer
verified
False

Correct Answer
verified
False

Correct Answer
verified

Exhibit 7-7 -Exhibit 7-7 shows the effects of a decrease in the oil supply due to a war in the Middle East.If the government reacts to the shift of the supply curve from S₁ to S₂by imposing a price ceiling at P₃,then the consumer surplus

Correct Answer
verified