Multiple Choice

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Chapter 9

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Multiple Choice

Multiple Choice
This activity contains 20 questions.

Which of the following concepts is used by economists to measure the welfare effects of government policies on consumers?
Consumer surplus. Opportunity cost. Rationing. Economic rent.

When will a maximum price result in a loss of consumer surplus?

When demand is sufficiently inelastic. When demand is sufficiently elastic. Always. When maximum prices are imposed, it is the producers who always benefit, not the consumers. Never. Maximum prices are imposed in order to protect consumers.

If both supply and demand are highly inelastic, the imposition of a maximum price will have:
no deadweight loss. a small deadweight loss. a large deadweight loss. double deadweight loss.

Suppose the demand for natural gas can be expressed as Q = 30 6P and the supply can be expressed as Q = 10 + 4P where Q is measured in billion mcf and price is measured in $/mcf. What is the deadweight loss to society if government sets a price ceiling of $1/mcf?
$1.33 billion $2 billion $3.33 billion $6.67 billion

Suppose the demand for natural gas can be expressed as Q = 30 6P and the supply can be expressed as Q = 10 + 4P where Q is measured in billion mcf and price is measured in $/mcf. What is the net change in consumer surplus if government sets a price ceiling of $1/mcf?
Consumers lose $1.33 billion. Consumers gain $14 billion.

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Consumers gain $12.67 billion. Consumers lose $15.33 billion.

Suppose the demand for natural gas can be expressed as Q = 30 1P and the supply can be expressed as Q = 10 + 4P where Q is measured in billion mcf and price is measured in $/mcf. Do consumers benefit if government sets a price ceiling of $1/mcf?
No, because government regulations always injure consumers. Yes, because consumer surplus increases. Yes, because consumers will pay a lower price for natural gas. No, because consumer surplus decreases.

Suppose the demand for natural gas can be expressed as Q = 30 1P and the supply can be expressed as Q = 10 + 4P where Q is measured in billion mcf and price is measured in $/mcf. What is the net loss in producer surplus if government sets a price ceiling of $1/mcf?
$24 billion $18 billion $42 billion $60 billion

When the sum of producer surplus and consumer surplus is maximized, we say that:
the market may contain a negative externality. the market enjoys a positive externality. a market is in equilibrium but could benefit from price supports. the market is efficient and price signals are properly transmitted.

When will a minimum price benefit producers?

When neither producers nor consumers respond to imposed minimum prices. When quantity supplied equals quantity demanded at the minimum price. When producers don't change quantity supplied in response to an imposed minimum price. When producers move along the supply curve to a higher quantity supplied associated with the minimum price.

Fill in the blank. If the objective of price supports is to give farmers additional income, then price supports are ________ desirable than simply giving money directly to farmers.
more equally

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less

Suppose that statewide the demand for milk can be expressed as Q = 100 20P and supply can be expressed as Q = 30P where Q is measured as millions of gallons per week and P is measured as $/gallon. If the state's dairy board establishes a $3 per gallon price floor, and producers produce only enough milk to meet demand, what is the resulting deadweight loss to society?
$66.67 million $33.33 million $16.67 million $83.33 million

Suppose that statewide the demand for milk can be expressed as Q = 100 20P and supply can be expressed as Q = 30P where Q is measured as millions of gallons per week and P is measured as $/gallon. By how much are producers better off if the state's dairy board establishes a $3 per gallon price floor and producers stay on the supply curve?
$16.67 million $36.67 million $33.33 million $40 million

Suppose that statewide the demand for milk can be expressed as Q = 100 20P and supply can be expressed as Q = 30P where Q is measured as millions of gallons per week and P is measured as $/gallon. If the state's dairy board establishes a price support of $3 per gallon, how much milk must the state purchase?
50 million gallons per week 20 million gallons per week 30 million gallons per week 90 million gallons per week

Suppose that statewide the demand for milk can be expressed as Q = 100 20P and supply can be expressed as Q = 30P where Q is measured as millions of gallons per week and P is measured as $/gallon. If the state's dairy board establishes a price support of $3 per gallon, how large is the decrease in consumer surplus?
$20 million $40 million $10 million $50 million

Suppose that statewide the demand for milk can be expressed as Q = 100 20P and supply can be expressed as Q = 30P where Q is measured as millions of gallons per week and P is measured as $/gallon. What is the total cost to

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society of the state's dairy board's policy to establish a price support of $3 per gallon?
$0 $150 million $10 million $125 million

Suppose that statewide the demand for milk can be expressed as Q = 100 20P and supply can be expressed as Q = 30P where Q is measured as millions of gallons per week and P is measured as $/gallon. To maintain a price of $3 per gallon, the government will pay dairy farmers to limit output to 40 million gallons per week. How much must the government pay the dairy farmers?
$25 million $150 million $41.67 million $16.67 million

Which of the following barriers to trade generates larger government revenue?

Tariffs. Import quotas. Either quotas or tariffs. They generate the same amount of government revenue. Neither quotas nor tariffs. Neither generates government revenue.

Suppose that the domestic demand for cotton towels can be expressed as Q = 200 4P and the domestic supply can be expressed as Q = 16P. If the world price is $5 per towel, what must be the per unit tariff on towels to completely eliminate all imports?
$10 per towel $5 per towel $2.50 towel $1 per towel

Suppose that the domestic demand for cotton towels can be expressed as Q = 200 4P and the domestic supply can be expressed as Q = 16P. If the world price is $5 per towel, what is the net change in social welfare resulting from a $3 per unit tariff on towels?
210 $90 $120 $240

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Fill in the blanks. The burden of a tax will fall mostly on buyers when demand is relatively ___________ and supply is relatively __________.
inelastic...elastic. elastic...elastic. inelastic...inelastic None of the above.

Answer choices in this exercise appear in a different order each time the page is loaded.

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