Question 1

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the size of the producers' surplus at P_F?

Accepted Answer

The producer surplus at P_F is the area between the supply curve and the price floor from the equilibrium quantity to the quantity supplied at the price floor. This corresponds to area 2 and area 3 in the graph. Area 4 is the deadweight loss caused by the price floor, and Area 5 does not correspond to any economic concept. Therefore, the size of the producers' surplus at P_F is area 2 + 3.

Question 2

Exhibit 4-9
 
-Refer to Exhibit 4-9. Suppose that the government imposes a price ceiling at a price of $10. The number of units that would be exchanged in this market would be

Accepted Answer

At a price of $10, the quantity supplied is 90 and the quantity demanded is 220. Since the price ceiling is below the equilibrium price, the quantity demanded exceeds the quantity supplied, leading to a shortage of 130 units. Therefore, only 90 units would be exchanged in this market.

Question 3

Someone says,"Even though the equilibrium wage rate is $7 an hour in the unskilled labor market,if we impose a minimum wage of $8 an hour,no one currently working will lose his or her job." This person must believe that the

Accepted Answer

The statement implies that firms are willing to hire the same quantity of workers at a higher wage, which is possible only if the demand curve for unskilled labor is perfectly elastic or vertical. If the demand curve were downward-sloping, some workers would be laid off to restore the equilibrium wage rate.

Question 4

Exhibit 4-9
 
-Refer to Exhibit 4-9. Suppose that the government imposes a price ceiling at a price of $15. The number of units that would be exchanged in this market would be

Accepted Answer

The answer of Exhibit 4-9
 
-Refer to Exhibit 4-9. Suppose...

Question 5

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What has happened to the producers' surplus as a result of the imposition of the price floor?

Accepted Answer

The answer of Exhibit 4-8
 
-Refer to Exhibit 4-8. Suppose...

Question 6

Exhibit 4-8
 
-Refer to Exhibit 4-8. If the wheat market is in competitive equilibrium the total surplus will equal

Accepted Answer

The answer of Exhibit 4-8
 
-Refer to Exhibit 4-8. If...

Question 7

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the size of the total surplus at P_F?

Accepted Answer

A price floor set above the equilibrium price results in a surplus, reducing total surplus to the sum of consumer and producer surplus that is realized, which is area 1 + 2 + 3.

Question 8

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What has happened to the consumers' surplus as a result of the imposition of the price floor?

Accepted Answer

A price floor set above the equilibrium price reduces consumer surplus because consumers have to pay a higher price, leading to a decrease in the quantity demanded. The loss in consumer surplus is represented by the areas that consumers no longer benefit from, which is area 2 + 4.

Question 9

Suppose that the price of butter is $3 per pound and the price of margarine is $2 per pound. If the price of butter rises to $3.60 and the price of margarine rises to $3,then the absolute price of butter has _______________ and the relative price of butter has _______________.

Accepted Answer

The absolute price of butter has risen from $3 to $3.60, indicating an increase in price. 
The relative price of butter has fallen because the price of margarine has increased at a faster rate compared to butter. In other words, the price of margarine has become relatively more expensive than butter, making butter the cheaper option relatively.

Question 10

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the size of the consumers' surplus at P_F?

Accepted Answer

The size of consumers' surplus at price P_F is given by area 1 in Exhibit 4-8. Therefore, the correct answer is D.

Question 11

At the minimum wage (set above the equilibrium wage),

Accepted Answer

At the minimum wage, the wage rate is set above the equilibrium wage, which means that employers have to pay higher wages than the market would dictate. This results in firms demanding fewer labor hours, as they are not able to afford the higher wages for every worker they would have hired at the equilibrium wage. This ultimately leads to fewer people working or fewer labor hours demanded than at the equilibrium wage. Therefore, option D is the correct answer.

Question 12

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the quantity of wheat purchased at P_F?

Accepted Answer

A price floor creates a situation where the price of a good cannot fall below a certain level. In the given graph, the price floor is set at PS1U1B1FS1U1B0, which is above the equilibrium price of PS1U1B0. As a result, the quantity of wheat purchased will be equal to the quantity supplied at PS1U1B11S1U1B0, which is QS1U1B11S1U1B0. Therefore, the correct answer is A) QS1U1B11S1U1B0.

Question 13

Exhibit 4-8
 
-Refer to Exhibit 4-8. If the wheat market is in competitive equilibrium the producers' surplus will equal

Accepted Answer

The answer of Exhibit 4-8
 
-Refer to Exhibit 4-8. If...

Question 14

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the change in the total surplus at the price floor,compared to at the equilibrium price?

Accepted Answer

At the price floor, the quantity supplied exceeds the quantity demanded, resulting in a surplus of wheat. This surplus creates deadweight loss (area 6), which causes a loss in total surplus. The gain from the higher price paid by producers (area 1 + 2 + 3) is offset by the loss from deadweight loss (area 4 + 5). Therefore, the overall change in total surplus is a loss equal to (area 4 + 5).

Question 15

If the minimum wage is set above the equilibrium wage,then

Accepted Answer

If the minimum wage is set above the equilibrium wage, it creates a situation of excess labor supply, meaning more people are willing to work at that wage than there are jobs available. This leads to a decrease in the quantity of labor demanded by employers and thus, fewer labor hours will be purchased at the minimum wage than at the equilibrium wage. Therefore, option D is the correct answer.

Question 16

Exhibit 4-8
 
-Refer to Exhibit 4-8. If the wheat market is in competitive equilibrium,the consumers' surplus will equal

Accepted Answer

Consumers' surplus is the difference between what consumers are willing to pay for a good and what they actually pay. In this case, the demand curve represents what consumers are willing to pay (the willingness to pay curve) and the equilibrium price represents what they actually pay. Thus, consumers' surplus is the area above the equilibrium price and below the willingness to pay curve. 
Area 1 represents what consumers pay for the first unit of wheat, area 2 represents what they pay for the second unit, and area 4 represents what they pay for the fourth unit. Thus, the sum of areas 1, 2, and 4 represents consumers' surplus in this market. Option B is the only choice that includes all of these areas. Options A, C, and D either leave out area 4 or include areas that are not part of consumers' surplus. Option E represents the producer surplus, not the consumers' surplus.

Question 17

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. How many fewer units of wheat will be sold at the price floor than at the equilibrium price?

Accepted Answer

The answer of Exhibit 4-8
 
-Refer to Exhibit 4-8. Suppose...

Question 18

If goods are not rationed according to price,if follows that

Accepted Answer

If goods are not rationed according to price, it means that a price mechanism is not being used to allocate the goods. However, some other mechanism will be needed to distribute the goods, such as first-come-first-served or some other form of rationing. Therefore, option B is the best choice. Option A is incorrect as it assumes that the goods will not be rationed at all, which is unlikely. Option C is incorrect as first-come-first-served is only one possible method of rationing. Option D is also not necessarily true, as there may be shortages instead of surpluses if a price mechanism is not used to allocate goods efficiently.

Question 19

In the market for a given product,when a price floor is set above the equilibrium price the result will be

Accepted Answer

When a price floor is set above the equilibrium price, it creates a situation where the quantity supplied exceeds the quantity demanded, resulting in a surplus. This surplus leads to deadweight loss, as some potential exchanges are not taking place and both consumers and producers are worse off. Therefore, the best choice is D, a deadweight loss.

Question 20

The minimum wage is an example of a

Accepted Answer

A price floor is a minimum price set by the government for a particular good or service. In the case of minimum wage, it is the lowest hourly rate that an employer is legally allowed to pay their employees.

Quiz 4: Prices: Free, Controlled, and Relative

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the size of the producers' surplus at P_F?

Exhibit 4-9 -Refer to Exhibit 4-9. Suppose that the government imposes a price ceiling at a price of $10. The number of units that would be exchanged in this market would be

Someone says,"Even though the equilibrium wage rate is $7 an hour in the unskilled labor market,if we impose a minimum wage of $8 an hour,no one currently working will lose his or her job." This person must believe that the

Exhibit 4-9 -Refer to Exhibit 4-9. Suppose that the government imposes a price ceiling at a price of $15. The number of units that would be exchanged in this market would be

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What has happened to the producers' surplus as a result of the imposition of the price floor?

Exhibit 4-8 -Refer to Exhibit 4-8. If the wheat market is in competitive equilibrium the total surplus will equal

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the size of the total surplus at P_F?

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What has happened to the consumers' surplus as a result of the imposition of the price floor?

Suppose that the price of butter is $3 per pound and the price of margarine is $2 per pound. If the price of butter rises to $3.60 and the price of margarine rises to $3,then the absolute price of butter has _ and the relative price of butter has _.

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the size of the consumers' surplus at P_F?

At the minimum wage (set above the equilibrium wage) ,

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the quantity of wheat purchased at P_F?

Exhibit 4-8 -Refer to Exhibit 4-8. If the wheat market is in competitive equilibrium the producers' surplus will equal

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the change in the total surplus at the price floor,compared to at the equilibrium price?

If the minimum wage is set above the equilibrium wage,then

Exhibit 4-8 -Refer to Exhibit 4-8. If the wheat market is in competitive equilibrium,the consumers' surplus will equal

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. How many fewer units of wheat will be sold at the price floor than at the equilibrium price?

If goods are not rationed according to price,if follows that

In the market for a given product,when a price floor is set above the equilibrium price the result will be

The minimum wage is an example of a

Quiz 4: Prices: Free, Controlled, and Relative

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at PF. What is the size of the producers' surplus at PF?

Exhibit 4-9 -Refer to Exhibit 4-9. Suppose that the government imposes a price ceiling at a price of $10. The number of units that would be exchanged in this market would be

Someone says,"Even though the equilibrium wage rate is $7 an hour in the unskilled labor market,if we impose a minimum wage of $8 an hour,no one currently working will lose his or her job." This person must believe that the

Exhibit 4-9 -Refer to Exhibit 4-9. Suppose that the government imposes a price ceiling at a price of $15. The number of units that would be exchanged in this market would be

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at PF. What has happened to the producers' surplus as a result of the imposition of the price floor?

Exhibit 4-8 -Refer to Exhibit 4-8. If the wheat market is in competitive equilibrium the total surplus will equal

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at PF. What is the size of the total surplus at PF?

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at PF. What has happened to the consumers' surplus as a result of the imposition of the price floor?

Suppose that the price of butter is $3 per pound and the price of margarine is $2 per pound. If the price of butter rises to $3.60 and the price of margarine rises to $3,then the absolute price of butter has _______________ and the relative price of butter has _______________.

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at PF. What is the size of the consumers' surplus at PF?

At the minimum wage (set above the equilibrium wage) ,

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at PF. What is the quantity of wheat purchased at PF?

Exhibit 4-8 -Refer to Exhibit 4-8. If the wheat market is in competitive equilibrium the producers' surplus will equal

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at PF. What is the change in the total surplus at the price floor,compared to at the equilibrium price?

If the minimum wage is set above the equilibrium wage,then

Exhibit 4-8 -Refer to Exhibit 4-8. If the wheat market is in competitive equilibrium,the consumers' surplus will equal

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at PF. How many fewer units of wheat will be sold at the price floor than at the equilibrium price?

If goods are not rationed according to price,if follows that

In the market for a given product,when a price floor is set above the equilibrium price the result will be

The minimum wage is an example of a

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the size of the producers' surplus at P_F?

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What has happened to the producers' surplus as a result of the imposition of the price floor?

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the size of the total surplus at P_F?

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What has happened to the consumers' surplus as a result of the imposition of the price floor?

Suppose that the price of butter is $3 per pound and the price of margarine is $2 per pound. If the price of butter rises to $3.60 and the price of margarine rises to $3,then the absolute price of butter has _ and the relative price of butter has _.

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the size of the consumers' surplus at P_F?

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the quantity of wheat purchased at P_F?

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. What is the change in the total surplus at the price floor,compared to at the equilibrium price?

Exhibit 4-8 -Refer to Exhibit 4-8. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at P_F. How many fewer units of wheat will be sold at the price floor than at the equilibrium price?