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

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Question 21

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To affect the market outcome, a price ceiling

A) must be set below the black market price.
B) must be set below the legal price.
C) must be set below the price floor.
D) must be set below the equilibrium price.

E) A) and D)
F) All of the above

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Question 22

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What is producer surplus? What does producer surplus measure?

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Producer surplus is the difference betwe...

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Question 23

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In the economic sense, almost everything is scarce.________ of a good or service occurs when the quantity demanded is greater than the quantity supplied at the current market price.

The city of Lloydminster sits on top of the Saskatchewan-Alberta border.Half of the city is in Saskatchewan and the other half in Alberta.Assume that Saskatchewan enacts a rent control law that puts a ceiling on rents well below their equilibrium market value.Predict the impact of this law on the competitive equilibrium rent in the part of Lloydminster that is in Alberta. a.Illustrate your answer with one demand and supply graph for the apartment market in the Saskatchewand side Lloydminster and another demand and supply graph for the apartment market in the Alberta side of Lloydminster. b.Make sure that your graphs clearly show (1)the initial equilibrium before the rent control in both markets and (2)what happens after the imposition of rent control. c.Clearly show any shifts in the demand or supply curves, and the movement along the curves for each market. d.Label your graphs fully and provide written explanation for your graphs.

In order to be binding, a price ceiling

Which term refers to a legally established minimum price that firms may charge?

Figure 4.1 Figure 4.1 shows Arnold's demand curve for burritos. -Refer to Figure 4.1.If the market price is $1.00, what is the maximum number of burritos that Arnold will buy?

Suppose a price floor on sparkling wine is proposed by the Health Minister of the country of Vinyardia.What will be the likely effect on the market for sparkling wine in Vinyardia?

Economists refer a to a market where buying and selling take place at prices that violate government price regulations as

Table 4.2 $\begin{array}{|l|c|}\hline \begin{array}{c}\text { The Lethbridge }\\\text { Kid's Cowboy } \\\text { Hats }\end{array} & \begin{array}{c}\text { Marginal Cost } \\\text { (dollars) }\end{array} \\\hline \text { Ist hat } & \$ 24 \\\hline \text { 2nd hat } & 30 \\\hline \text { 3rd hat } & 38 \\\hline \text { 4th hat } & 46\\\hline\end{array}$ -Refer to Table 4.2.The table above lists the marginal cost of cowboy hats by The Lethbridge Kid, a firm that specializes in producing western wear.If the price of cowboy hats increases from $38 to $46

When a competitive equilibrium is achieved in a market

The actual division of the burden of a tax between buyers and sellers in a market is called

Employees are officially responsible for paying 40 percent of the premiums for employment insurance.When studying the actual distribution of the cost of the program, economists find

Economic efficiency in a competitive market is achieved when

Lucinda buys a new GPS system for $250.She receives consumer surplus of $75 from the purchase.How much does Lucinda value her GPS system?

Figure 4.6 Figure 4.6 shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf. -Refer to Figure 4.6.What area represents consumer surplus after the imposition of the price floor?

Payroll deductions imposed on ________ is used to fund Employment Insurance.

If the demand curve for a product is vertical, any tax increase on the product is paid for entirely by the consumer.

A tax that imposes a small excess burden relative to the tax revenue that it raises is

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