Chapter 11: Quiz
1.In a competitive market, an efficient allocation of resources is characterized by
a.marginal value being greater than the price.
b.the absence of possibilities for mutually beneficial exchanges.
c.consumer surplus being equal to total expenditures.
d.surpluses of all goods.
2.A deadweight loss of consumer and/or producer surplus occurs when
a.marginal value and marginal cost are not equated.
b.there are no further opportunities for mutually benefits exchanges.
c.consumer surplus and producer surplus are equated.
d.none of the above.
3.Price controls
a.either increase consumer surplus or increase producer surplus.
b.always create shortages.
c.make non-price rationing necessary.
d.all of the above.
4.Holding equilibrium price and quantity constant, which of the following is true?
a.total gains from trade will be greater if demand and supply are more elastic.
b.producer surplus will be larger if demand is more inelastic.
c.consumer surplus will be larger if supply is more elastic.
d.consumer surplus will be larger if demand is more inelastic.
5.If demand is given by QD = 140 – P then, at a price of 70:
a.demand is elastic.
b.demand is inelastic.
c.consumer surplus is maximized.
d.none of the above.
6.In the long run in a perfectly competitive market, the burden of a per unit tax will be borne:
a.entirely by consumers.
b.entirely by producers.
c.by the party with the more elastic demand/supply curve.
d.by the government.
7.When a domestic market is opened up to international trade
a.the price paid by domestic consumers may fall.
b.losses by domestic producers will outweigh gains by domestic consumers.
c.the addition to domestic gains from trade will be represented by a rightward pointing arrow.
d.the imposition of a tariff will result in no dead weight loss.
8.When a tax is imposed, the excess burden of a tax is
a.the difference between consumer surplus lost and producer surplus lost.
b.the sum of the reductions in consumer surplus and producer surplus.
c.the difference between the reduction in gains from trade and the tax revenue collected.
d.larger when demand is more inelastic, other things being the same.
9.The excess burden or dead weight loss resulting from a specific tax will be minimized if:
a.the tax is imposed only on goods consumed by wealthy people.
b.the tax is imposed on goods for which demand is inelastic, such as drugs.
c.the tax is imposed on goods for which demand is elastic, such as imported cheese.
d.both a and b.
10.If demand is given by QD = 160 – 2P and supply is given by QS = P – 20:
a.if the market price is set by law at $70, consumers may wait in line to purchase the good.
b.the burden of a tax will be borne mostly by consumers.
c.a tax of $3 will lower the price received by the supplier by $2.
d.the dead weight loss from a tax of $12 will be $36.
11.In the opening of free trade, if world prices of a good are less than domestic prices of that same good,
a.domestic producers will experience a gain in surplus.
b.world prices will rise to the domestic price level.
c.the addition to domestic gains from trade will be larger when the difference between the world and domestic prices is larger.
d.the addition to domestic gains from trade will be larger when domestic demand is relatively inelastic.
12.Quotas that limit the quantity of imports of a foreign good provide an incentive for foreign suppliers to
I.provide lower-priced goods.
II.flood the market with low-priced products.
III.supply higher quality and higher-priced units.
IV.seek other open markets elsewhere.
Which of the above statements are true?
a.I and II
b.I and III
c.II and IV
d.II, III, and IV
e.III and IV
13.If price elasticity of demand is -0.5 and price elasticity of supply is 1.1 and a tax of $8/unit is applied to the market, the burden of the tax will be:
a.$1.00 per unit on the supplier.
b.$2.50 per unit on the supplier.
c.$4.00 per unit on both the consumer and on the supplier.
d.$6.00 per unit on the supplier.
e.$0.66 per unit on the supplier.
14.If supply and demand are given by QS = 2P – 20 and QD = 100 – P then:
a.consumer surplus at the equilibrium is $1400.
b.the burden of a per unit tax will be borne equally by consumers and producers.
c.a price ceiling of $25 will result in a dead weight loss of $500.
d.none of the above.