Question 1

If a person gets a meningitis vaccination shot, there's a reduced chance that others around her will get meningitis. This is an example of a(n)

Accepted Answer

The reduced chance of others getting meningitis as a result of someone receiving a meningitis vaccination shot is a positive outcome or benefit that is external to the individual who received the shot. This aligns with the definition of an external benefit, making option B the correct answer.

Question 2

(Figure: Market in Equilibrium) The market in the figure is at equilibrium. If the price rises to $5, what happens to consumer surplus, producer surplus, and total surplus?

Accepted Answer

The answer of (Figure: Market in Equilibrium) The market in...

Question 3

(Figure: Determining Surplus 3) In the graph, consumer surplus is $60.

Accepted Answer

The graph shows that consumer surplus is the triangle above the equilibrium price and below the demand curve, which has an area of $60.

Question 4

Jonathan purchased coffee for $5 at Jennifer's coffee shop, although he was willing to pay $9. Jennifer was willing to accept $3 for the coffee. The results of this transaction are a consumer surplus of

Accepted Answer

Consumer surplus is the difference between what a consumer is willing to pay and what they actually pay. Jonathan was willing to pay $9 but paid $5, so his consumer surplus is $9 - $5 = $4. Producer surplus is the difference between the selling price and the minimum price at which a seller is willing to sell. Jennifer was willing to accept $3 but sold the coffee for $5, so her producer surplus is $5 - $3 = $2.

Question 5

According to economic theory, adequate information is not necessary for a market to work efficiently.

Accepted Answer

Adequate information is essential for a market to work efficiently because it allows consumers and producers to make informed decisions, leading to optimal allocation of resources.

Question 6

Car tracking GPS systems make it easier for police to catch a car thief who has stolen your car. These locks represent _____ to other car owners because they enable the police to capture a thief that might steal their cars.

Accepted Answer

Car tracking GPS systems provide an external benefit because it benefits other car owners by deterring car theft and increasing the likelihood of thieves being caught.

Question 7

The measure of society's benefits due to a market transaction is called

Accepted Answer

The measure of society's benefits due to a market transaction is called total surplus, which includes consumer surplus and producer surplus. Deadweight loss refers to the loss of total surplus due to market inefficiencies.

Question 8

Which good is typically considered to be a public good?

Accepted Answer

Clean air is typically considered to be a public good as it is non-excludable and non-rivalrous, meaning that once it is available, it is available to everyone and one person's use of it doesn't reduce its availability for others.

Question 9

(Figure: Determining Surplus 2) In the graph, producer surplus is equal to

Accepted Answer

The answer of (Figure: Determining Surplus 2) In the graph,...

Question 10

(Figure: Determining Surplus and Loss) Consider the graph. If the price is lowered from $8 to $5, consumer surplus

Accepted Answer

The answer of (Figure: Determining Surplus and Loss) Consider the...

Question 11

Markets tend to provide too little of products with external benefits.

Accepted Answer

Markets typically do not take into account the external benefits that a product may have on society or the environment, leading to underproduction of such products.

Question 12

The difference between market price and the price at which sellers would be willing to supply the product is

Accepted Answer

The price at which sellers would be willing to supply the product is the minimum price they would be willing to accept, also known as the supply curve. The market price is determined by the intersection of the demand and supply curves. If the market price is higher than the price at which sellers would be willing to supply the product, they will earn producer surplus, which is the difference between the market price and the minimum price they would accept. Therefore, the difference between market price and the price at which sellers would be willing to supply the product is producer surplus, not an externality, consumer surplus, or competition.

Question 13

An effective price ceiling leads to

Accepted Answer

An effective price ceiling results in the price of a good or service being set below the market equilibrium price. This leads to increased demand for the good or service (as it is cheaper) and decreased supply (as producers may not be willing to produce/sell at the lower price). As a result, quantity demanded exceeds quantity supplied, leading to a shortage in the market.

Question 14

(Figure: Determining Surplus and Loss) In the graph, producer surplus is _____ in equilibrium and _____ at a price of $12.

Accepted Answer

In equilibrium, producer surplus is equal to the area above the supply curve and below the market price. In this case, at an equilibrium price of $8, the producer surplus is $120. 
At a price of $12, producers would only be willing to supply a quantity of 2, while consumers would only demand a quantity of 6. This would result in a surplus of 4, causing the price to decrease back to the equilibrium price of $8. At a price of $12, producer surplus would only be equal to the area of the triangle above the supply curve and between a quantity of 0 and 2, which would be $170. Therefore, the best choice is C, with a producer surplus of $120 at equilibrium and $170 at a price of $12.

Question 15

(Figure: Determining Surplus and Loss) In the graph, $8 would allow for a binding price ceiling.

Accepted Answer

The answer of (Figure: Determining Surplus and Loss) In the...

Question 16

Markets tend to produce

Accepted Answer

Markets tend to produce too much of a good exhibiting external costs because the market price of the good does not reflect the full social cost, leading to an overallocation of resources towards its production and consumption.

Question 17

External costs increase deadweight loss, while external benefits reduce deadweight loss.

Accepted Answer

The answer of External costs increase deadweight loss, while external...

Question 18

(Figure: Determining Surplus and Loss) In the graph, if the government sets a minimum price of $12, there is a

Accepted Answer

The answer of (Figure: Determining Surplus and Loss) In the...

Question 19

Merchants' raising prices of necessary goods during a crisis or disaster is known as

Accepted Answer

Price gouging refers to the unethical practice of raising the prices of necessary goods, such as food, water, fuel or shelter, during a crisis or disaster. It takes advantage of the urgent needs of the affected people, causing them to pay much more than the actual value of the goods. This practice is illegal in many states and countries, and is considered an exploitative behavior that harms the vulnerable populations.

Question 20

One example of an external benefit is a homeowner planting a beautiful flower garden by the street.

Accepted Answer

The homeowner's flower garden not only beautifies their own property, but also enhances the aesthetic of the neighborhood and potentially increases property values for neighboring homes. This is an example of an external benefit to those around the homeowner.

Quiz 4: Markets and Government

If a person gets a meningitis vaccination shot, there's a reduced chance that others around her will get meningitis. This is an example of a(n)

(Figure: Market in Equilibrium) The market in the figure is at equilibrium. If the price rises to $5, what happens to consumer surplus, producer surplus, and total surplus?

(Figure: Determining Surplus 3) In the graph, consumer surplus is $60.

Jonathan purchased coffee for $5 at Jennifer's coffee shop, although he was willing to pay $9. Jennifer was willing to accept $3 for the coffee. The results of this transaction are a consumer surplus of

According to economic theory, adequate information is not necessary for a market to work efficiently.

Car tracking GPS systems make it easier for police to catch a car thief who has stolen your car. These locks represent _____ to other car owners because they enable the police to capture a thief that might steal their cars.

The measure of society's benefits due to a market transaction is called

Which good is typically considered to be a public good?

(Figure: Determining Surplus 2) In the graph, producer surplus is equal to

(Figure: Determining Surplus and Loss) Consider the graph. If the price is lowered from $8 to $5, consumer surplus

Markets tend to provide too little of products with external benefits.

The difference between market price and the price at which sellers would be willing to supply the product is

An effective price ceiling leads to

(Figure: Determining Surplus and Loss) In the graph, producer surplus is _ in equilibrium and _ at a price of $12.

(Figure: Determining Surplus and Loss) In the graph, $8 would allow for a binding price ceiling.

Markets tend to produce

External costs increase deadweight loss, while external benefits reduce deadweight loss.

(Figure: Determining Surplus and Loss) In the graph, if the government sets a minimum price of $12, there is a

Merchants' raising prices of necessary goods during a crisis or disaster is known as

One example of an external benefit is a homeowner planting a beautiful flower garden by the street.