Question 1

The French term for "let it be" is

Accepted Answer

The correct French term for "let it be" is "laissez-faire". "Ceteris paribus" is a Latin term used in economics meaning "all other things being equal", "savoir faire" means "know-how" or "skill" in French, and "laissez-passer" means "let pass" or "permission to pass" in French.

Question 2

(Figure: Determining Surplus 2) In the graph, producer surplus is $15.

Accepted Answer

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

Question 3

Public goods are difficult to provide in the private market because they have the characteristics of

Accepted Answer

Public goods are characterized by nonrivalry and nonexclusivity, meaning one person's use of the good does not reduce its availability to others, and no one can be effectively excluded from using the good. This makes it difficult for private markets to provide and profit from these goods, leading to potential underprovision without government intervention.

Question 4

Since 2013, Venezuela has been experiencing shortages of food, new cars, secondhand cars, and other consumer goods. These shortages are partly the result of _____ on these goods.

Accepted Answer

Price ceilings, or government-mandated maximum prices, have been imposed on many consumer goods in Venezuela in an attempt to make them more affordable for the population. However, these price ceilings have led to a decrease in supply as producers find it unprofitable to sell their products at the mandated prices, resulting in shortages.

Question 5

Which statement explains why free markets fail to produce public goods?

Accepted Answer

Public goods suffer from the free rider problem, where individuals can benefit from the goods without paying for them. This creates a situation where consumers do not want to buy the products because they hope that someone else will buy it and they can benefit from it for free. This leads to underproduction of public goods in free markets.

Question 6

Which situation involves an external cost?

Accepted Answer

Alma experiences an external cost because she is bearing the cost of the noise pollution from the freeway, although she did not cause it.

Question 7

Price floors and price ceilings, although often inefficient, are an attempt by government to create equity or fairness in the market.

Accepted Answer

Price floors and price ceilings are often put in place by government to regulate prices and protect consumers or suppliers. They can help create more equal market conditions and prevent certain groups from being exploited or marginalized. However, they can also have negative consequences such as a shortage of goods or services or a surplus of supply, leading to inefficiency.

Question 8

If there is only one provider of electricity in a city, that market is likely to fail due to

Accepted Answer

Lack of competition in a market can lead to monopolistic behavior, high prices, and poor quality of service. Consumers do not have other options to choose from, which means that the single provider can charge high prices without fear of losing customers. This lack of competition can ultimately lead to market failure.

Question 9

When a scarce good or resource is consumed by the person who does not value it most, economists refer to the situation as

Accepted Answer

When a scarce good or resource is consumed by the person who does not value it most, it is considered a misallocation of resources. This is because the resource could have been put to better or more efficient use if it had been allocated to the person who values it the most. This concept is closely tied to the idea of efficient allocation of resources, which refers to the allocation of resources in a way that maximizes overall benefit or welfare.

Question 10

Suppose the actual price for good A is $20. John is willing to pay $30, Susie is willing to pay $28, Joseph is willing to pay $25, Jessica is willing to pay $23, and Jeremy is willing to pay $21. What is total consumer surplus?

Accepted Answer

The answer of Suppose the actual price for good A...

Question 11

Which of these is NOT a public good?

Accepted Answer

Shirts at a clothing store are a private good as they are excludable (can be denied to someone) and rival (one person consuming them reduces the availability to others). National defense, flood control projects, and environmental protection are public goods as they are non-excludable and non-rival.

Question 12

(Figure: Determining Surplus 6) Using the graph, we can calculate the maximum possible producer surplus as

Accepted Answer

The answer of (Figure: Determining Surplus 6) Using the graph,...

Question 13

The difference between what the market would be willing to pay and the market price is

Accepted Answer

Consumer surplus is the difference between the price a consumer is willing to pay for a product and the actual price they pay. It is a measure of the additional benefit or value that a consumer receives from a product beyond what they paid for it.

Question 14

Suppose that a customer's willingness-to-pay for a product is $79, and the seller's willingness-to-sell is $64. If the negotiated price is $68, how much is producer surplus?

Accepted Answer

Producer surplus is the difference between the price the seller actually receives and the minimum price they are willing to accept. In this case, it's $68 - $64 = $4.

Question 15

(Figure: Determining Surplus and Loss) In the graph, if the government sets a maximum price of $12, there is a shortage of 40 units.

Accepted Answer

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

Question 16

A price ceiling is _____ if it is set _____ the market price.

Accepted Answer

A price ceiling is only binding if it is set below the market price. If it is set above the market price, it has no impact on the market and is not binding. As for the choices C and D, efficiency is not determined by the placement of a price ceiling, but by the allocation of resources and the maximization of societal welfare.

Question 17

Which good is NOT typically considered to be a public good?

Accepted Answer

Bottled water is not typically considered to be a public good because it is a rival good, which means its consumption by one person reduces the amount available for others. Public goods, on the other hand, are non-rival and non-excludable, meaning their consumption by one person does not reduce its availability to others and it is difficult to exclude someone from using it. A lighthouse, national defense, and clean air are all examples of public goods.

Question 18

Implementing a price floor can cause

Accepted Answer

A price floor, when set above the equilibrium price, leads to a surplus because the quantity supplied exceeds the quantity demanded at that price.

Question 19

At times, there are conflicts between market outcomes that are efficient and outcomes that society deems fair.

Accepted Answer

This is true because market outcomes may not take into consideration certain social factors such as income inequality, access to healthcare and education, or environmental impacts. While the market may achieve efficiency in terms of producing and distributing goods and services, society may view those outcomes as unfair or unjust.

Question 20

In the market for designer jeans, surplus is transferred from producers to consumers when

Accepted Answer

The answer of In the market for designer jeans, surplus...

Quiz 4: Markets and Government