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Microeconomics - Testbank 1 (Hubbard/O'Brien)Chapter 4 Economic Efficiency, Government Price Setting, and Taxes1) I f the current market price for a particular book is $30 a unit and a price ceiling is imposed at$20 per book, then:A) a price of $20 per book is the legally allowed maximum price of the book.B) t here will an increase in the quantity demanded of the book.C) a shortage of the book will develop at the ceiling price.D) a ll of these are correct.2) I f the current market price of beer is $10 per six pack and a price floor of $12 per six pack isimposed, then:A) $12 per six pack is the maximum legal price that can be charged.B) q uantity demand of beer will rise.C) t here will be a surplus of beer in the market at the price floor.D) a ll of the above.3) S ince a consumer's demand curve shows the maximum price a consumer will pay for eachunit of the good, it also shows the consumer's:A) t otal benefit.B) a verage benefit.C) m arginal benefit.D) p er capita benefit.4) M arginal benefit is:A) t he satisfaction from consuming a given amount of a good.B) t he additional satisfaction from consuming one more of a good.C) t he satisfaction from consuming a given amount of a good divided by the number ofgoods consumed.D) t he satisfaction from producing one more unit of a good.5) I f you would have been willing to pay $10 for a pizza and you only had to pay $8, what doesthe difference between $10 and $8 represent?A) M arginal benefitB) A verage benefitC) T otal benefitD) C onsumer surplus6) C onsumer surplus is equal to:A) t otal area under the demand curve.B) t otal area under the demand curve down to the market price.C) t he vertical distance from the demand curve down to the horizontal axis.D) t he area from the demand curve to the supply curve less than the equilibrium quantity.7) T he cost of producing one more unit of a good is:A) t otal cost.B) a verage cost.C) m arginal cost.D) i mpossible to find.8) T he supply curve of a producer shows:A) t he total profit the producer earns.B) t he total cost of producing the good.C) t he average cost of producing the good.D) t he marginal cost of producing the good.9) T he minimum price a firm will sell a unit of output for is equal to:A) t otal cost of production.B) a verage cost of production.C) m arginal cost of production.D) n one of these.10) I f a producer is willing to sell a unit of output at $15 and the market price is $20, the $5difference is:A) t otal profit.B) a verage profit.C) p roducer surplus.D) c onsumer surplus.11) T otal producer surplus in a market is equal to the:A) s elling price times the number of units sold.B) a rea underneath the demand curve to the number of units sold.C) a rea between the demand curve and the market supply curve.D) a rea between the market price and the market supply curve.12) C onsumer surplus can be defined as:A) n et benefit to consumers from participating in the market.B) m arginal benefit to consumers from participating in the market.C) a verage benefit to consumers from participating in the market.D) t otal benefit to consumers from participating in the market.13) E conomic efficiency is achieved when:A) t otal benefits received are equal to total costs.B) m arginal benefits received are equal to marginal costsC) a verage benefits received are equal to average costs.D) p artial benefits received equal to partial costs.14) I f extra benefit in a market equals $2.30 while extra cost equals $2.30, then economicefficiency:A) h as been achieved.B) h as not been achieved; less needs to be produced.C) h as not been achieved; more needs to be produced.D) c annot be achieved.15) E conomic surplus is equal to:A) c onsumers surplus minus producers surplus.B) c onsumers surplus plus producers surplus.C) c onsumers surplus times producers surplus.D) c onsumers surplus divided by producers surplus.16) W hen the market price is artificially kept too high, then:A) e conomic surplus is increased.B) c onsumer surplus is increased.C) a higher level of economic efficiency is achieved.D) a deadweight loss is incurred.17) W hat type of market automatically reaches economic efficiency?A) A market with a government mandated price floor.B) A market with a government mandated price ceiling.C) A competitive market with no government intervention.D) A ll of the above.18) T here is a deadweight loss:A) w hen the market is at the competitive equilibrium.B) w henever the market is forced away from the competitive equilibrium.C) w hen the market produces where marginal costs equal marginal benefit.D) w hen economic surplus is maximized.Refer to 4.1 for the questions below.Figure 4.119) I n figure 4.1, at equilibrium consumer surplus would be:A) X.B) X+Y+Z.C) A+B+C.D) C.20) I n figure 4.1, at equilibrium producer surplus would be:A) X.B) X+Y+Z.C) A+B+C.D) C.21) I n figure 4.1, an effective price floor would be:A) P1.B) P2.C) P3.D) a ll of the above.22) I n figure 4.1, with an effective price floor, quantity demanded would be:A) Q1.B) Q2.C) Q3.D) Q4.23) I n figure 4.1, with an effective price floor, quantity supplied would be:A) Q1.B) Q2.C) Q3.D) Q4.24) I n figure 4.1, with an effective price floor, there would be:A) a shortage of Q4-Q1.B) a surplus of Q4-Q1.C) a shortage of Q3-Q2.D) a surplus of Q3-Q2.25) I n figure 4.1, with an effective price floor, consumer surplus would be:A) X.B) X+Y+Z.C) A+B+C.D) C.26) I n figure 4.1, with an effective price floor, producer surplus would be:A) X.B) X+Y.C) Y+A+C.D) A+C.27) I n figure 4.1, the deadweight loss associated with an effective price floor would be:A) Z+B.B) Y+A.C) A+C.D) N+F.28) I n figure 4.1, due to the effective price floor consumers lose:A) Y+Z.B) X+Y+Z.C) A.D) N+F.29) I n figure 4.1, the net change for producers due to the effective price floor is:A) Y+Z.B) Y-B.C) Y+A+C.D) X+Y+A.30) S ome consumers lobby the government to convince law makers to impose price ceilings, sothat they can:A) b uy at prices lower than producer costs of production.B) r eceive a larger producer surplus.C) r eceive a larger consumer surplus.D) e arn more income.31) W hat causes a deadweight loss under a price floor?A) W ith a higher price, less is purchased, causing a loss in economic surplus.B) W ith a lower price, less is produced, causing a loss in economic surplus.C) P roducers have less incentive to produce.D) C onsumers have more incentive to buy.32) W ith a price ceiling what creates a deadweight loss?A) W ith a higher price, less is purchased, causing a loss in economic surplus.B) W ith a lower price, less is produced, causing a loss in economic surplus.C) P roducers have more incentive to produce.D) C onsumers have less incentive to buy.33) W hat causes producers to earn more income under a price floor even though less is produced?A) P roducers capture some former consumer surplus because of the higher price.B) C onsumers capture some former producer surplus because of the lower price.C) P roducers capture some former consumer surplus because of the lower price.D) C onsumers capture some former producer surplus because of the higher price.34) U nder a price ceiling what makes some consumers better off?A) P roducers capture some former consumer surplus because of the higher price.B) C onsumers capture some former producer surplus because of the higher price.C) P roducers capture some former consumer surplus because of the lower price.D) C onsumers capture some former producer surplus because of the lower price.35) T he minimum wage is an example ofA) a competitive equilibrium price.B) a price ceiling.C) a price floor.D) a tax on a market.36) T he minimum wage law has which of the following effects?A) W orkers are willing to offer a larger quantity of labor for sale.B) E mployers are willing to hire a smaller quantity of labor.C) A surplus of labor at the minimum wage creates higher unemployment.D) A ll of these are effects of the minimum wage.37) A n example of a price ceiling would be:A) r ent controls.B) f arm price supports.C) a minimum wage law.D) a ll of the above are price ceilings.38) P eople who are able to rent apartments benefit from rent controls because:A) t here are more apartments to rent.B) t he lower rent lets them captured some producer surplus.C) t hey find that their apartments are kept in better shape.D) i t is easier to find an apartment in a desireable location.39) P rice ceilings invariably create shortages which means:A) t he good under the price ceiling has become more scarce.B) a t the price ceiling, quantity demanded is greater than quantity supplied.C) a t the price ceiling, quantity supplied is greater than quantity demanded.D) t he good under the price ceiling has become more plentiful.40) A black market is:A) w hen buying and selling is at prices that violates government price regulations.B) w hen quantity demanded is greater than quantity supplied.C) w hen quantity supplied is greater than quantity demanded.D) w hen economic surplus is very low.41) W hich of the following is the result from government intervention in the free market?A) S ome people lose.B) T here is a loss of economic efficiency.C) S ome people win.D) A ll of these occur because of government intervention.42) W hat does tax incidence refer mean?A) W hich government agency actually receives the tax revenue.B) W ho sends the tax money into the government.C) W hat commodity is being taxed.D) W ho actually bears the burden of the tax.43) C onsumers pay 100% of a new sales tax on a good:A) a lways.B) w hen demand is horizontal.C) n ever as the tax is on the seller.D) w hen the demand curve is vertical.44) I f a tax is imposed on the producer:A) m ore of the incidence will fall on the producer.B) m ore of the incidence will fall on the consumer.C) m ore of the incidence will fall on the government.D) w hat party the incidence of the tax falls on will be no different than if the tax wasimposed on the consumer.。