Question 1

Use the following figure to answer the questions : Figure 10-3 : shows the demand and supply for a commodity in the domestic U.S.market as well as the global market.The commodity is imported from the rest of the world to the U.S.market. -In Figure 10-3,trade increases consumer surplus in the U.S.by _____. A)P₃EKP₂ B)P₃EP₀ C)EKL D)P₂LMP₁

Accepted Answer

Trade increases consumer surplus by the area between the domestic price and the world price, up to the quantity consumed. In this case, it is represented by the area P₃EKP₂.

Question 2

Deregulation of the taxicab industry is most likely to result in:
A)an increase in the operation of illegal cabs.
B)reduced safety of passengers.
C)a shift of taxicab services from poor neighborhoods to the city.
D)a large financial loss for those who own medallions.

Accepted Answer

Deregulation often leads to increased competition, which can decrease the value of medallions, causing financial losses for those who own them.

Question 3

Use the following figure to answer the questions : Figure 10-4 : shows the intersection of the demand and supply curves for a commodity in the domestic market at price PS1U1B12S1U1B0 and quantity QS1U1B12S1U1B0,in the absence of trade.With trade,the supply curve shifts to SupplyS1U1B1tradeS1U1B0. 
-Refer to Figure 10-4.When foreign suppliers enter the domestic market the total consumer surplus becomes _____.
A)a + b + c + d
B)a + b + c + f + g + h
C)a + b + c + f + g + j
D)a + b + c + f + g + h + i

Accepted Answer

The answer of Use the following figure to answer the...

Question 4

The following figure shows the intersection of the demand and supply curves for a commodity in the domestic market at price P₂ and quantity Q₂,in the absence of trade.With trade,the supply curve shifts to Supply_trade. Refer to Figure 10-4.The quantity of imports into the domestic market is given by _____. A)Q₂ - Q₁ B)Q₃ - Q₂ C)Q₃ - Q₁ D)Q₃

Accepted Answer

The quantity of imports is the difference between the quantity demanded in the domestic market (Q₃) and the quantity supplied by domestic producers (Q₁), which is equal to Q₃ - Q₁.

Question 5

Use the following figure to answer the questions : Figure 10-4 : shows the intersection of the demand and supply curves for a commodity in the domestic market at price PS1U1B12S1U1B0 and quantity QS1U1B12S1U1B0,in the absence of trade.With trade,the supply curve shifts to SupplyS1U1B1tradeS1U1B0. 
-Refer to Figure 10-4.The net gain to domestic residents when they trade with foreign suppliers is represented by _____.
A)d + e
B)h + i
C)k + l + m
D)f + g + j

Accepted Answer

The net gain to domestic residents when they trade with foreign suppliers is represented by the area above the world price (Pw) and below the domestic demand curve (D), which is the triangle h + i.

Question 6

Use the following figure to answer the questions : Figure 10-3 : shows the demand and supply for a commodity in the domestic U.S.market as well as the global market.The commodity is imported from the rest of the world to the U.S.market. -In Figure 10-3,the net gain to the U.S.from trade is _____. A)P₃EP₀ B)P₃ELP₂ C)P₄EP₀ D)ELK

Accepted Answer

The net gain to the U.S. from trade is represented by the area ELK, which typically illustrates the gains from trade in economic diagrams, showing the increase in consumer and producer surplus.

Question 7

Suppose there is a city which licenses cabs,but cab owners find they cannot get anyone to buy their medallions at any price.You can conclude that:
A)selling medallions is illegal.
B)cab owners are making a normal profit.
C)cab fares are higher than the efficient level.
D)the number of licenses issued are limited.

Accepted Answer

If cab owners cannot sell their medallions at any price, it suggests that the market is saturated and they are only making a normal profit, meaning there is no excess demand for medallions.

Question 8

Use the following figure to answer the questions : Figure 10-3 : shows the demand and supply for a commodity in the domestic U.S.market as well as the global market.The commodity is imported from the rest of the world to the U.S.market. -In Figure 10-3,the total producer surplus after trade is _____. A)P₃ELP₂ B)ELK C)P₂LP₀ D)P₂LMP₁

Accepted Answer

To calculate the total producer surplus after trade, we need to find the area above the supply curve and below the equilibrium price () minus the area above the supply curve and below the original price (_{2). This gives us a total producer surplus of P₂LP₀. Therefore, the answer is C.}

Question 9

A contestable market is one in which:
A)a small number of firms operate,keeping price above marginal cost.
B)the market price is independent of the number of firms.
C)the price in the market depends upon the number of firms because entry is free.
D)the lack of barriers to entry causes price to remain low.

Accepted Answer

The answer of A contestable market is one in which:
A)a...

Question 10

Use the following figure to answer the questions : Figure 10-4 : shows the intersection of the demand and supply curves for a commodity in the domestic market at price PS1U1B12S1U1B0 and quantity QS1U1B12S1U1B0,in the absence of trade.With trade,the supply curve shifts to SupplyS1U1B1tradeS1U1B0. 
-Refer to Figure 10-4.In the absence of trade,the total producer surplus is given by _____.
A)f + g + j
B)f + g + h + j
C)f + g + h + i
D)f + g + h + i + j

Accepted Answer

In the absence of trade, the total producer surplus is the area above the supply curve and below the equilibrium price, which is represented by the area f + g + j.

Question 11

Which of the following is true of deregulation and airline safety in the U.S.?
A)Airline safety has deteriorated since the deregulation of the airline industry because safety standards are determined by the airlines themselves.
B)Airline safety has deteriorated since airline deregulation because increased competition does not give airlines any incentive to reduce the number of accidents.
C)Since airline safety standards are set by a government agency,deregulation of routes and fares is not directly linked to airline safety.
D)Airline safety has increased post-deregulation because airlines are now not required to insure their aircrafts against accidents.

Accepted Answer

The deregulation of routes and fares does not directly affect the safety standards set by the government agency responsible for airline safety in the U.S. Therefore, it cannot be said that airline safety has deteriorated or improved as a result of deregulation. The safety standards are still in place regardless of the deregulation of the industry. The other answer choices are inaccurate or do not provide a full understanding of the relationship between deregulation and airline safety in the U.S.

Question 12

The following figure shows the demand and supply for a commodity in the domestic U.S.market as well as the global market.The commodity is imported from the rest of the world to the U.S.market. Refer to Figure 10-3.In the absence of trade,the equilibrium price in the U.S.market is _____. A)P₃ B)P₂ C)P₁ D)P₀

Accepted Answer

The answer of The following figure shows the demand and...

Question 13

Suppose the government limits the number of cabs that can operate in the city by issuing a limited number of medallions.Later,if the government decides to regulate fares instead and sets them below current levels:
A)surpluses will result in the taxicab market.
B)the resale value of the medallion will fall.
C)the demand for taxicabs will decline.
D)congestion during peak traffic hours will decrease.

Accepted Answer

If the government sets fares below current levels, it would lead to a decrease in the profitability of operating a taxi, which would result in the value of the medallions falling. This is because the medallions, which are limited in number, were originally issued to control the number of taxis on the streets, and their value is largely determined by the potential for profit. Thus, if the profits are expected to decrease due to fare regulation, the medallion holders may find it difficult to sell their medallions at the same prices they initially paid for them.

Question 14

Which of the following strengthens the possibility that the airline market is a contestable market?
A)Since other airlines can enter the market at no cost and charge lower fares,the fare charged by a single airline is always equal to the marginal cost.
B)The barriers to entry in the airline market lead to nonprice competition between the airlines operating in the market.
C)The fares that are charged for routes with more than one airline are significantly higher than the fares charged for a route with only one airline.
D)Airlines regularly charge fares that are above the competitive levels irrespective of the number of airlines plying a particular route.

Accepted Answer

The fact that other airlines can enter the market at no cost and charge lower fares suggests that there are no significant barriers to entry in the market, which is a key characteristic of a contestable market. In a contestable market, the threat of entry by new firms keeps incumbent firms from earning monopoly profits, and prices are generally equal to marginal cost. Therefore, choice A strengthens the possibility that the airline market is a contestable market. Choices B, C, and D, however, do not necessarily imply that the market is contestable, as they do not address the issue of potential entry or the absence of barriers to entry.

Question 15

Use the following figure to answer the questions : Figure 10-3 : shows the demand and supply for a commodity in the domestic U.S.market as well as the global market.The commodity is imported from the rest of the world to the U.S.market. -Refer to Figure 10-3.The total consumer surplus prior to trade was _____. A)P₄EP₃ B)P₄KP₂ C)P₄ELP₂ D)P₃EP₀

Accepted Answer

The total consumer surplus prior to trade is the area above the equilibrium price (PS1) and below the demand curve (U1B14). This area is represented by the triangle formed by points PS1, U1, and B14, which is labeled as EP₃ in Figure 10-3.

Question 16

Suppose a city limits the number of cabs that can provide taxi service by issuing medallions.
If the medallions can be bought and sold and they command a positive price,you can conclude that:
A)fares are above the competitive levels.
B)no illegal cabs will operate in the city.
C)the demand for cabs is lesser than the supply of cabs.
D)the supply curve for taxicabs is horizontal.

Accepted Answer

The fact that medallions can be bought and sold for a positive price suggests that the demand for taxis is higher than the supply of taxis. In turn, this indicates that the fares charged by licensed taxi providers are above the competitive market level. By limiting the number of cabs available, the city has restricted the supply of taxis, leading to higher prices for consumers.

Question 17

Issuing a fixed number of licenses to operate a taxicab in a city would mean that the number of:
A)cabs and fares are both above the efficient level.
B)cabs is less than the efficient quantity and fares are above free-market levels.
C)cabs is above the efficient level and fares are depressed below the free-market level.
D)cabs and fares are both below the efficient level.

Accepted Answer

Issuing a fixed number of licenses limits the supply of taxicabs, which would likely result in fewer cabs than the efficient market quantity and higher fares than in a free-market scenario due to reduced competition and limited supply.

Question 18

Use the following figure to answer the questions : Figure 10-4 : shows the intersection of the demand and supply curves for a commodity in the domestic market at price PS1U1B12S1U1B0 and quantity QS1U1B12S1U1B0,in the absence of trade.With trade,the supply curve shifts to SupplyS1U1B1tradeS1U1B0. 
-Refer to Figure 10-4.In the absence of trade,the total consumer surplus is given by _____.
A)a + b + c + g + f
B)a + b + c + d
C)d + b + c
D)a + b + c

Accepted Answer

In the absence of trade, consumer surplus is the area below the demand curve and above the price level, which is represented by the area a + b + c.

Question 19

Restrictions on entry in the taxicab market tends to benefit _____ the most.
A)the government
B)original recipients of medallions
C)current taxicab drivers
D)taxicab passengers

Accepted Answer

Restrictions on entry in the taxicab market usually take the form of limited medallions or licenses that can be granted to operate taxis. These medallions can be sold, and those who received them first, the original recipients, benefit the most as they can charge higher prices due to the limited supply of medallions. The government may also benefit from the sale of medallions or through licensing fees, but overall, the original recipients tend to be the ones who benefit the most. Current taxicab drivers may benefit from limited competition, but they would also have to bear the high costs of medallions, which can be passed on to passengers in the form of higher fares. Taxicab passengers, on the other hand, may experience higher fares and longer wait times due to limited supply, which is a disadvantage.

Question 20

Use the following figure to answer the questions : Figure 10-3 : shows the demand and supply for a commodity in the domestic U.S.market as well as the global market.The commodity is imported from the rest of the world to the U.S.market. -Refer to Figure 10-3.The total producer surplus prior to trade was _____. A)P₃EP₀ B)P₂LP₀ C)P₁MP₀ D)P₃EMP₁

Accepted Answer

Producer surplus is the area above the supply curve but below the price level. Prior to trade, this is represented by the area under the domestic price level but above the supply curve, which is correctly depicted in option A.

Quiz 10: Using the Competitive Model

Deregulation of the taxicab industry is most likely to result in:

Use the following figure to answer the questions : Figure 10-3 : shows the demand and supply for a commodity in the domestic U.S.market as well as the global market.The commodity is imported from the rest of the world to the U.S.market. -In Figure 10-3,the net gain to the U.S.from trade is _____.

Suppose there is a city which licenses cabs,but cab owners find they cannot get anyone to buy their medallions at any price.You can conclude that:

A contestable market is one in which:

Which of the following is true of deregulation and airline safety in the U.S.?

The following figure shows the demand and supply for a commodity in the domestic U.S.market as well as the global market.The commodity is imported from the rest of the world to the U.S.market. Refer to Figure 10-3.In the absence of trade,the equilibrium price in the U.S.market is _____.

Suppose the government limits the number of cabs that can operate in the city by issuing a limited number of medallions.Later,if the government decides to regulate fares instead and sets them below current levels:

Which of the following strengthens the possibility that the airline market is a contestable market?

Suppose a city limits the number of cabs that can provide taxi service by issuing medallions. If the medallions can be bought and sold and they command a positive price,you can conclude that:

Issuing a fixed number of licenses to operate a taxicab in a city would mean that the number of:

Restrictions on entry in the taxicab market tends to benefit _____ the most.