Pindyck & Rubinfeld Quiz 9


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Note: There are 10 multiple choice questions below. Answer each question by clicking the appropriate button. When you have answered all of the questions, click the "Check Answers" button at the bottom of the page. Your score will be calculated, and you will see a list of the questions that you answered correctly, and those that you answered incorrectly. You may retake the quiz as often as you wish. Click the "Reset" button to clear all your answers before you retake the quiz.

  1. Consumer surplus measures

      the extra amount that a consumer must pay to obtain a marginal unit of a good or service.
      the excess demand that consumers have when a price ceiling holds prices below their equilibrium.
      the benefit that consumers receive from a good or service beyond what they pay.
      gain or loss to consumers from price fixing.

  2. When government intervenes in a competitive market by imposing an effective price ceiling, we would expect the quantity supplied to __________ and the quantity demanded to __________.

      fall; rise
      fall; fall
      rise; rise
      rise; fall

  3. Producer surplus is measured as the

      area under the demand curve above market price.
      entire area under the supply curve.
      area under the demand curve above the supply curve.
      area above the supply curve up to the market price.

  4. Price ceilings can result in a net loss in consumer surplus when the __________ curve is __________.

      demand; very elastic
      demand; very inelastic
      supply; very inelastic
      none of the above; price ceilings always increase consumer surplus

  5. Price ceilings

      cause quantity to be higher than in the market equilibrium.
      always increase consumer surplus.
      may decrease consumer surplus if demand is sufficiently elastic.
      may decrease consumer surplus if demand is sufficiently inelastic.

  6. Consider the following statements when answering this question
    I. Employers are always hurt by minimum wage laws.
    II. Workers always benefit from minimum wage laws.

      I and II are true.
      I is true, and II is false.
      I is false, and II is true.
      I and II are false.

  7. Under a binding price ceiling, what does the change in consumer surplus represent?

      The gain in surplus for those buyers who can still purchase the product at the lower price.
      The loss in surplus for those buyers who previously purchased some units of the good at the higher price, but these units are no longer produced at the lower price.
      The loss in surplus for those buyers who would like the purchase the excess demand created by the price ceiling policy.
      Both A and B are correct.
      Both A and C are correct.

  8. Having seen the quantity of drugs supplied by pharmaceutical companies in a competitive market, a government decides to force companies to sell exactly the same quantity of drugs at prevailing market prices. The government then forbids additional drug sales and allows doctors to prescribe the drugs at no cost to patients in need. This government scheme is

      efficient as the quantity of drugs traded is the same as under a free market.
      efficient as the price of drugs paid by the government is the same as under a free market.
      efficient as consumer surplus is maximized.
      likely to be inefficient as doctors are unlikely to prescribe drugs to the consumers who are willing to pay the most for the drugs.
      likely to be inefficient as drug producers have a captive buyer.

  9. Consider the following statements when answering this question
    I. Waiting lists for kidney transplants have been caused by a 1984 congressional law forbidding humans to sell their kidneys.
    II. Randomly choosing citizens to serve on juries is an efficient mechanism for selecting jurors.

      I and II are true.
      I is true, and II is false.
      I is false, and II is true.
      I and II are false.

  10. Which of the following is NOT true about price floors?

      Consumer surplus is always lower than it would be in the competitive equilibrium.
      Producer surplus could be lower, higher, or the same as it would be in competitive equilibrium.
      Producer surplus could be negative as the result of a price floor.
      Producers will often respond to a price floor by cutting production to the point at which price equals marginal cost.
      The total producer surplus depends on how producers respond to the price floor in determining their output level.

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