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Exam 4: Economic Efficiency, Government Price Setting, and Taxes

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Question 31

True/False

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Deadweight loss refers to a loss in revenue resulting from producers having to reduce their selling price to remain competitive.

A) True
B) False

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Question 32

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Figure 4-5 Figure 4-5 shows the market for apartments in Bay City.Recently,the government imposed a rent ceiling at R₀. -Refer to Figure 4-5.Suppose that instead of a price ceiling,the government imposed a price floor of R₁.What is the quantity of apartments demanded at the new price?

A) 0
B) Q₁
C) Q*
D) Q₀

E) A) and B)
F) A) and C)

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Question 33

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Figure 4-2 -Refer to Figure 4-2.What area represents the decrease in producer surplus when the market price falls from P₂ to P₁?

Article Summary Voters in California approved a $2 per pack tax increase on cigarettes,which went into effect on April 1,2017.Cigarette taxes are now $2.87 per pack in California,the ninth highest cigarette tax in the country.Approximately one-in-nine adults in California are smokers,and the tax increase is estimated to generate almost $1.4 billion in revenue during the first year,with the revenue designated for the state-run health care plan as well as various state-wide anti-smoking campaigns. Source: Andrew Blake,"Cigarette tax hike takes effect in California,costs surge by $2 per pack," Washington Times,April 1,2017. -Refer to the Article Summary.The additional tax of $2 per pack of cigarettes will have which of the following effects on the market for cigarettes in California?

Figure 4-1 Figure 4-1 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-1.What is the total amount that Kendra is willing to pay for 1 ice cream cone?

Figure 4-1 Figure 4-1 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-1.What is the total amount that Kendra is willing to pay for 3 ice cream cones?

Table 4-3 -Refer to Table 4-3.The table above lists the marginal cost of polo shirts by Marko's,a firm that specializes in producing men's clothing.If the market price of Marko's polo shirts is $30,Marko's will produce

Figure 4-5 Figure 4-5 shows the market for apartments in Bay City.Recently,the government imposed a rent ceiling at R₀. -Refer to Figure 4-5.Suppose that instead of a price ceiling,the government imposed a price floor of R₁.What is the area representing the portion of consumer surplus transferred to producers as a result of the price floor?

Economic efficiency is achieved when there is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and

Table 4-3 -Refer to Table 4-3.The table above lists the marginal cost of polo shirts by Marko's,a firm that specializes in producing men's clothing.If the market price of Marko's polo shirts is $30,producer surplus is

Table 4-2 -Refer to Table 4-2.The table above lists the highest prices five consumers are willing to pay for a concert ticket.If the price of one ticket falls from $50 to $20

What is marginal cost? Which curve is also referred to as the marginal cost curve?

Table 4-1 -Refer to Table 4-1.The table above lists the highest prices three consumers,Curly,Moe,and Larry,are willing to pay for a bottle of champagne.If the price of one of the bottles is $27 dollars,total consumer surplus will be

Suppose the demand curve for a product is downward sloping and the supply curve is upward sloping.If a unit tax is imposed in the market for this product

Figure 4-3 Figure 4-3 shows the market for granola.The market is initially in equilibrium at a price of P₁ and a quantity of Q₁.Now suppose producers decide to cut output to Q₂ in order to raise the price to P_2. -Refer to Figure 4-3.What area represents consumer surplus at the equilibrium price of P₁?

Figure 4-5 Figure 4-5 shows the market for apartments in Bay City.Recently,the government imposed a rent ceiling at R₀. -Refer to Figure 4-5.Suppose that instead of a price ceiling,the government imposed a price floor of R₁.What is the area representing consumer surplus after the imposition of the price floor?

The additional cost to a firm of producing one more unit of a good or service is the

Figure 4-1 Figure 4-1 shows Kendra's demand curve for ice cream cones. -Refer to Figure 4-1.If the market price is $3.00,what is the consumer surplus on the first ice cream cone?

If the price of garlic is represented by equation P = 25 - Q_D,then the corresponding quantity of garlic demanded is represented by the equation

Table 4-2 -Refer to Table 4-2.The table above lists the highest prices five consumers are willing to pay for a concert ticket.If the price of one ticket is $50