QUESTION 1 The difference between the amount that the buyer is willing to pay and the amount that the buyer actually pays is? Producer surplus. Consumer surplus. O Total surplus None of the above. QUESTION 2 The difference between the price that the sales price and the price at which manufacturer is willing to sell is? O Producer surplus. Consumer surplus. Total surplus O None of the above. QUESTION 3 Which of the following is true? Total surplus is consumer surplus plus producer surplus. O We can define efficiency as the maximum of total surplus which is found at equilibrium in a competitive market. O Price ceilings have no impact on total surplus. O Price floors have no impact on total surplus. QUESTION 4 Efficient markets: O Minimize consumer and producer surplus. O Can exist in the presence of price ceilings and price floors. Can provide fairness in the distribution of benefits. O Maximize consumer and producer surplus.QUESTION 5 Which of the following can be said about price ceilings? A price ceiling is a legally imposed maximum price. The quantity demanded will exceed the quantity supplied so that there will be shortages. A price ceiling must be binding. O A price ceiling may make goods or services unavailable. QUESTION 6 A price floor, a legally imposed a minimum price, such as the minimum wage will which of the following effects? O Quantity supplied will exceed the quantity demanded. As a result of surpluses of labor produced by a price floor a black market for labor may result from undocumented immigrants. Price floors may cause businesses to cut staff or close. Price floors may raise the price of goods and services. )All of the above. QUESTION 7 Efficient markets may cause which of the following problems. O Optimum consumer surplus. O Optimum producer surplus. Unfairness in distribution of benefits among members of society. O A situation in which markets adjust to surpluses or shortages. QUESTION 8 Price gouging laws may have the effect of producing shortages of gasoline, generators and plywood in the wake of a hurricane: Demand for these items drops as people from the area where the hurricane strikes leave before they come ashore. O Demand for these items increases but sellers are not willing to sell because they cannot raise their prices due to the price gouging law. We are willing to impose price gouging laws knowing that they will produce shortages because allowing the market to set price will mean that only wealthy people can get access to gasoline, generators and plywood so we are willing to trade equity for efficiency. O B and C.QUESTION 9 Rent control laws in New York City have had the following effect over 50 years? The number of rental units put on the market has failed to meet demand for rentals. O Many landlords failed to provide necessary upkeep such that the housing stock declined. O Many renters passed rental units to children, grandchildren and friends to prevent rent increases. Many couples continued to stay in four and five bedroom units rather than move to one and two bedroom units after their children left because it would be more expensive to rent a one or two bedroom unit. QUESTION 10 Which of the following describes the trade-off between efficiency and equity? O Without minimum wages, many workers could not earn a living wage. People are more important than economic efficiency. O Economists oppose price controls because they produce inefficiency while governments control prices as a result of political pressure. O Price controls may result in black-market activity. QUESTION 11 Pizza costs three dollars per slice, a Robert Morris student is willing to pay six dollars for the first slice, five dollars for the second, four dollars for the third, three dollars for the fourth and less thereafter: O The total consumer surplus is six dollars. O The total consumer surplus is five dollars. O The total consumer surplus is four dollars. O The total consumer surplus is three dollars. QUESTION 12 Suppose for the previous question that the price of pizza drops to two dollars a slice: O Consumer surplus will rise to seven dollars. Consumer surplus will rise to eight dollars. O Consumer surplus will rise to nine dollars. O Consumer surplus will rise to $10.QUESTION 13 A Robert Morris student is willing to pay $45 for a pair of good earbuds and finds them for sale for $30, the student's friend really likes them and offers to buy them for $60, the first student agrees. O Consumer surplus from the first purchase is $10 and producer surplus from the second sale is $10. Consumer surplus from the first purchase is $15 and producer surplus from the second sale is $20. O Consumer surplus from the first purchase is $20 and producer surplus from the second sale is $30. O Consumer surplus from the first purchase is $15 and producer surplus from the second sale is $30. QUESTION 14 a New England journal of Medicine article shows that consumption of blueberries will reduce the incidence of cancer such that demand for blueberries increases, some consumers are willing to pay more than the price increase O Consumer surplus decreases and producer surplus decreases. Consumer surplus increases and producer surplus increases. Consumer surplus increases and producer surplus decreases. O Consumer surplus decreases and producer surplus increases. QUESTION 15 The average price of rentals without rent control is $800 per month, pro rent control candidates win election and take control of city council whereupon they impose a $550 per month limit on rents: The action is unlikely to have any impact on the availability of rentals since price ceiling is nonbinding. The city is likely to see a substantial shortage of rental units. Since the ordinance has substantial increased demand for rental units we can expect construction of a number of them. O Since demand for rental units is likely to exceed supply landlords will have incentives to invest in improving the units that are available. QUESTION 16 Pennsylvania regulates the price of milk and the regulated price is binding, this is likely to have the following effect? O The price of milk will be higher than it would have been without the law. O The amount of milk consumed will drop. There will be a surplus of milk. O All of the above. QUESTION 17 The federal government buys surplus cheese to subsidize farmers, which of the following might be a correct statement? Since this is a subsidy, not a price ceiling or a price floor, the practice will have little effect on the market. The practice is an attempt at providing equity since the government distributes surplus cheese to nonprofit organizations. Government purchases of cheese will raise prices in the market contributing to continued surplus production and continued subsidies. O All of the aboveQUESTION 18 An economlst might favor income subsidies as a way of improving equity over price controls because: C) Poor people would be better off if they were able to choose how to spend the money rather than tying relief efforts to a particular good or service with price controls Q Income subsidies would provide less distortion to markets than price controls. C) Income subsidies would avoid the negative impact on producer and consumer surplus that price controls impose. C} All of the above. QUESTION 19 The Green Bay Packers have a 50 year waiting list {one fan was put on the waiting list at age 2 and nally could purchase season tickets just alter he had turned 51). what might we say about this? Q We should probably look for a blackmarket in Packers season tickets. C) The Green Bay Packers have effectively placed a binding price ceiling on the sale of season tickets leading to high demand with limited availability. 0 The Packers are maximizlng their revenue by keeping season tickets in short supply. C)- NFL clubs don't pay much attention to season ticket prices slnce they derive most of their revenue from television rights. QUESTION 20 5000 people in the United States die each year for lack of a kidney donor. which ofthe following would be correct? C) Part ofthe reason for the shortage of kidneys is the legal ban on sale of body parts. C) Sale of body parts could produce in equity because only wealthy people or people with health insurance could pay for them. C)- Aban on sale of body parts as produce a black-market for them. C)- All of the above