ECO/365 PRINCIPLES OF MICROECONOMICS The Latest Version A+ Study Guide
********************************************** ECO 365 Entire Course Link https://uopcourses.com/category/eco-365/ ********************************************** ECO 365 Week 2 Practice: Market Dynamics and Efficiency Quiz Complete the Week 2 Market Dynamics and Efficiency Quiz in McGraw-Hill ConnectÂŽ. These are randomized questions. Note: You have unlimited attempts available to complete practice assignments. The highest scored attempt will be recorded. These assignments have earlier due dates, so plan accordingly. Grades must be transferred manually to eCampus by your
instructor. Don't worry, this might happen after the due date. The monthly demand and supply schedules for new cars at a large California dealership are shown in the table below. Market for New Cars Quantity Price
Cars
of Quantity
of
(dollars) Demanded
Cars Supplied
$30,000 0
250
25,000
100
225
20,000
200
200
15,000
300
175
10,000
400
150
If the dealership is currently charging $25,000 for a new car, at the end of the month there will be: a shortage of 125 cars.
a surplus of 5,000 cars. a surplus of 125 cars. a shortage of 5,000 cars. neither a surplus nor a shortage; the market will be in equilibrium.
The demand and supply schedules for sunscreen at a small beach are shown below. Market for Sunscreen Quantity Quantity Price
of
of
(dollars Sunscreen Sunscreen per
Demanded Supplied
bottle)
(bottles)
(bottles)
$35
1,000
8,500
30
2,000
7,000
25
3,000
5,500
20
4,000
4,000
15
5,000
2,500
10
6,000
1,000
Instructions: Enter your answers as a whole number. a. If the price is $15 per bottle, how many bottles of sunscreen are demanded and supplied? Qd = Qs = In this case, there would be upward pressure on the price. b. What is the equilibrium price and quantity in the market for sunscreen? P= Q=
Use the following graph for the milk market to answer the question below.
There would be excess production of milk whenever the price is Multiple Choice
greater than $1.50 per gallon.
greater but not less than $2.00 per gallon. less than $1.50 per gallon.
less but not greater than $2.00 per gallon.
There is a surplus in a market for a product when Multiple Choice
quantity demanded is less than quantity supplied.
demand is less than supply. the current price is lower than the equilibrium price. quantity demanded is greater than quantity supplied.
Use the following table to answer the question below.
Quantity Demanded
perQuantity Supplied
Price per Unit
Year
per Year
$5
2,000
0
10
1,800
300
15
1,600
600
20
1,400
900
25
1,200
1,200
30
1,000
1,500
There will be a shortage whenever the price is Multiple Choice
equals $25. higher than $25.
higher than $30. lower than $25.
A decrease in demand and an increase in supply will Multiple Choice
decrease price and affect the equilibrium quantity in an indeterminate way.
decrease price and increase the equilibrium quantity. increase price and affect the equilibrium quantity in an indeterminate way. affect price in an indeterminate way and decrease the
equilibrium quantity.
There is an excess demand in a market for a product when Multiple Choice
quantity demanded is greater than quantity supplied.
supply is less than demand. the current price is higher than the equilibrium price. quantity demanded is less than quantity supplied.
In competitive markets, surpluses or shortages will Multiple Choice
cause shifts in the demand and supply curves that tend to eliminate the excess production or excess demand. cause changes in the quantities demanded and supplied that tend to intensify the excess production or excess demand. never exist because the markets are always at equilibrium. cause changes in the quantities demanded and supplied that tend to eliminate the excess production or excess demand.
There is a shortage in a market for a product when Multiple Choice
quantity demanded is lower than quantity supplied. supply is less than demand. demand is less than supply. the current price is lower than the equilibrium price.
Which of the following is an example of a price ceiling? Multiple Choice
Price supports for agricultural products. Subsidies for apartment rent in major cities. Limits on interest rates charged by credit card companies.
Minimum-wage laws for unskilled workers.
Assume that the graphs show a competitive market for the product stated in the question.
Select the graph above that best shows the change in the market
for
leather
coats
when
leather
become more fashionable among young consumers. Multiple Choice
graph (1)
graph (4)
coats
graph (3) graph (2)
In competitive markets, a surplus or shortage will Multiple Choice
never exist because the markets are always at equilibrium. cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage.
cause changes in the quantities demanded and supplied that tend to intensify the surplus or shortage.
cause shifts in the demand and supply curves that tend to eliminate the surplus or shortage.
Use the following graph for the milk market to answer the question below.
In this market, the equilibrium price is ____ and equilibrium quantity is ___ Multiple Choice
$1.50 per gallon; 28 million gallons.
$1.50 per gallon; 30 million gallons. $1.00 per gallon; 35 million gallons. $28 per gallon; 150 million gallons.
Use the following table to answer the question below.
Quantity Demanded
perQuantity Supplied
Price per Unit
Year
per Year
$5
2,000
0
10
1,800
300
15
1,600
600
20
1,400
900
25
1,200
1,200
30
1,000
1,500
In this competitive market, the price and quantity will settle at
Multiple Choice
$20 and 900 units. $25 and 1,200 units.
$15 and 1,600 units. $10 and 1,800 units.
The additional benefit of producing one more roast beef sandwich at a local deli is $2. The additional cost of
producing one more roast beef sandwich is $3. To improve allocative efficiency: producers should produce at least one more roast beef sandwich because MB > MC. producers should produce at least one more roast beef sandwich because MC > MB. producers should not produce one more roast beef sandwich because MB > MC. producers should not produce one more roast beef sandwich because MC > MB.
The value that consumers get (from consuming a product) over and above what they actually paid for the product is called
Multiple Choice
consumer surplus.
consumer utility. consumption expenditures. consumer demand.
Consumer surplus Multiple Choice
is the difference between the maximum price consumers are willing to pay for a product and the lower equilibrium
price.
is the difference between the minimum price producers are willing to accept for a product and the higher equilibrium price. is the difference between the maximum price consumers are willing to pay for a product and the minimum price producers are willing to accept. rises as equilibrium price rises.
Charlie is willing to pay $10 for a T-shirt that is priced at $9. If Charlie buys the T-shirt, then his consumer surplus is Multiple Choice
$19. $1.
$90. $0.90.
If the equilibrium wage for fast-food restaurants is $8 and the government enforces a minimum wage of $15 Multiple Choice
workers will be able to find more jobs. overall, society will be better off.
workers will get paid less. fast-food restaurants will hire fewer workers.
The market supply curve indicates the Multiple Choice
total revenues that sellers would receive from selling various quantities of the product. minimum acceptable prices that sellers are willing to accept for the product.
maximum prices that buyers are willing and able to pay for the product.
total amount that buyers will pay in buying a given quantity of the product.
Charlie is willing to pay $10 for a T-shirt that is priced at $9. If Charlie buys the T-shirt, then his consumer surplus is Multiple Choice
$90. $1.
$19. $0.90.
Graphically, producer surplus is measured as the area Multiple Choice
under the demand curve and below the actual price. above the supply curve and below the actual price.
under the demand curve and above the actual price. above the supply curve and above the actual price.
Allocative efficiency occurs only at that output where
Multiple Choice
the combined amounts of consumer surplus and producer surplus are maximized.
consumer surplus exceeds producer surplus by the greatest amount. marginal benefit exceeds marginal cost by the greatest amount. the areas of consumer and producer surplus are equal.
A producer’s minimum acceptable price for a particular unit of a good Multiple Choice
must cover the wages, rent, and interest payments necessary to produce the good but need not include profit. equals the marginal cost of producing that particular unit.
is the same for all units of the good. will, for most units produced, equal the maximum that consumers are willing to pay for the good.
Productive efficiency occurs at the point where Multiple Choice
the production technique minimizes economic surplus. the production technique minimizes cost.
marginal benefit exceeds marginal cost by the greatest amount. consumer surplus exceeds producer surplus by the greatest amount.
The minimum acceptable price for a product that producer Sam is willing to receive is $15. The price he could get for the product in the market is $18. How much is Sam’s producer surplus? Multiple Choice
$45 $3
$270 $33
The difference between the maximum price a consumer is willing to pay for a product and the actual price the consumer pays is called Multiple Choice
market failure. consumer surplus.
consumer demand. utility.
Consumer surplus arises in a market because Multiple Choice
the market price is higher than what some consumers are willing to pay for the product. at the current market price, quantity supplied is greater than quantity demanded. at the current market price, quantity demanded is greater than quantity supplied.
the market price is below what some consumers are willing to pay for the product.
The difference between the actual price that a producer receives and the minimum acceptable price the producer is willing to accept is called the producer Multiple Choice
revenues. surplus.
costs.
utility.
In the market for a particular pair of shoes, Jena is willing to pay $75 for a pair while Jane is willing to pay $85 for a pair. The actual price that each has to pay for a pair of shoes is $65. What is the combined amount of consumer surplus for Jena and Jane? Multiple Choice
$130. $215. $30.
$10.
Producer surplus Multiple Choice
is the difference between the maximum price consumers are willing to pay for a product and the lower equilibrium price. rises as equilibrium price falls. is the difference between the maximum price consumers are willing to pay for a product and the minimum price producers are willing to accept. is the difference between the minimum price producers are willing to accept for a product and the higher equilibrium price.
The production of paper often creates a waste product that pollutes waterways. Assume the producer of paper does not directly pay to dispose of the waste in the water. In this case, the price of paper will be below the socially efficient price and the amount of paper produced will be above the socially efficient amount.
Which of the following goods is nonrival? A visit to the doctor at her office A soccer match in a stadium
A pizza at a pizza parlor
A tuna in the ocean
Which of the following goods is both nonrival and nonexcludable? A hot dog at a hot dog stand A soccer match in a stadium The light from a lighthouse at a harbor entrance A tuna in the ocean
Texarkana Electric Company burns coal to heat the water that drives its electricity-producing turbines. The table below shows the marginal benefit of annual electricity consumption and the private marginal cost of annual electricity production. Marginal Cost and Marginal Benefit Quantity (millions of megawatts)
MBprivateMCprivateMCexternalMCsocial
1.0
$145
$85
$ 20
$ 105
2.0
130
90
20
110
3.0
115
95
20
115
4.0
100
100
20
120
5.0
85
105
20
125
6.0
60
110
20
130
Instructions: Enter your answers as a whole number. a. What is the (apparent) optimal amount of electricity for Texarkana Electric Company to produce each year?
4 million megawatts per year Now assume the production of each million megawatts of electricity also produces sulfur dioxide (a precursor to acid rain). The external cost of the sulfur dioxide is $20 per million megawatts of electricity production. b. Fill in the external marginal cost (MCexternal) and the social marginal cost (MCsocial) columns in the table above. c. What is the socially optimal amount of electricity for Texarkana to produce if all costs and benefits are considered? 3 million megawatts per year b. If electricity production triggers an external cost of sulfur dioxide of $20 per million megawatts, these external costs need to be added to private marginal cost in order to measure social marginal cost.
c. When Texarkana Electric Company produces 3.0 million megawatts per year, an optimum for society is reached because social marginal benefit equals social marginal cost.
If some activity creates external benefits as well as private benefits, then economic theory suggests that the activity ought to be Multiple Choice
left alone. taxed. prohibited. subsidized.
Where there are spillover (or external) benefits from having a particular product in a society, the government can make the quantity of the product approach the socially optimal level by doing the following except Multiple Choice
subsidizing the sellers of the product. providing the product itself. taxing the sellers of the product.
subsidizing the buyers of the product.
External benefits in consumption refer to benefits accruing to those Multiple Choice
who are consuming the product abroad. who bought and consumed the product. who are selling the product to the consumers. other than the ones who consumed the product.
When the production of a good generates external costs, a firm’s private supply curve will be Multiple Choice
vertical. horizontal. to the left of the social supply curve. to the right of the social supply curve.
A negative externality or spillover cost (additional social cost) occurs when Multiple Choice
the price of the good exceeds the marginal cost of producing it.
firms fail to achieve allocative efficiency. firms fail to achieve productive efficiency. the total cost of producing a good exceeds the costs borne by the producer.
If there are external benefits associated with the consumption of a good or service Multiple Choice
the private demand curve will overestimate the true demand curve. consumers will be willing to pay for all these benefits in private markets.
the market demand curve will be the vertical summation of the individual demand costs. the private demand curve will underestimate the true demand curve.
A public good Multiple Choice
is available to all and cannot be denied to anyone.
produces no positive or negative externalities. can be profitably produced by private firms. is characterized by rivalry and excludability.
If a good that generates negative externalities were priced to take these negative externalities into account, its Multiple Choice
price would remain constant and output would increase. price would increase, and its output would decrease.
price would decrease, and its output would increase. price would increase but its output would remain constant.
Use the following supply and demand graph for product X to answer the question below.
What would happen if the government taxed the producers of this product because it has negative externalities in production? Multiple Choice
supply would decrease
demand would decrease
supply would increase price would decrease
A positive externality or spillover benefit (additional social benefit) occurs when Multiple Choice
a firm does not bear all of the costs of producing a good or service. product differentiation increases the variety of products available to consumers. firms earn positive economic profits. the benefits associated with a product exceed those that
accrue for consumers.
What are the two characteristics that differentiate private goods from public goods? Multiple Choice
marginal cost and marginal benefit rivalry and excludability
ownership and usage negative externality and positive externality
A public good Multiple Choice
can
never
be
provided
by
a
nongovernmental
organization. generally results in substantial negative externalities. costs essentially nothing to produce and is thus provided by the government at a zero price. cannot be provided to one person without making it available to others as well.
The two main characteristics of a public good are
Multiple Choice
production at constant marginal cost and rising demand. nonrivalry and large negative externalities. nonexcludability and production at rising marginal cost. nonrivalry and nonexcludability.
If the consumption of a product or service involves external benefits, then the government can improve efficiency in the market by Multiple Choice
imposing a ive tax to for an overallocation of resources.
providing a subsidy to
for an overallocation of
resources. imposing a ive tax to
for an underallocation of
resources. providing a subsidy to
for an underallocation of
resources.
If one person’s consumption of a good does not preclude another’s consumption, the good is said to be Multiple Choice
excludable. nonrival in consumption.
rival in consumption. nonexcludable.