Pre Test Meeting 3

An efficient allocation of resources maximizes

• consumer surplus.

• producer surplus.

• consumer surplus minus producer surplus.

• consumer surplus plus producer surplus.

Producing a quantity larger than the equilibrium

of supply and demand is inefficient because the

marginal buyer’s willingness to pay is

• negative.

• positive but less than the marginal seller’s cost.

• Zero

• positive and greater than the marginal seller’s

  cost.

The difference between the maximum amount a person is willing to pay for a good and its current market price is called…

• Excess demand

• Deadweight loss

• Excess supply

• Consumer surplus

If a policymaker wants to raise revenue by taxing

goods while minimizing the deadweight losses, he

should look for goods with _________ elasticities of

demand and _________ elasticities of supply.

• small; small

• large; large

• small; large

• large; small

The Laffer curve illustrates that, in some

circumstances, the government can reduce a tax on

a good and increase the

• price paid by consumers.

• equilibrium quantity.

• deadweight loss.

• government’s tax revenue.

A government price control policy that sets the market price below the equilibrium price is called…

• Price gouging

• Price floor

• Price ceiling

• Price standard

Situation where quantity demanded exceeds quantity supplied is called…

• Scarcity

• Shortage

• Surplus

• Recession

The nation of Openia allows free trade and exports

steel. If steel exports were prohibited, the price of

steel in Openia would be _________, benefiting steel

_________.

• higher; consumers

• lower; consumers

• higher; producers

• lower; producers

When the nation of Ectenia opens itself to world

trade in coffee beans, the domestic price of coffee

beans falls. Which of the following describes the

situation?

• Domestic production of coffee rises, and Ectenia

  becomes a coffee importer.

• Domestic production of coffee falls, and Ectenia

  becomes a coffee importer.

• Domestic production of coffee falls, and Ectenia

  becomes a coffee exporter.

• Domestic production of coffee rises, and Ectenia

  becomes a coffee exporter.

The goal of multilateral trade agreements is usually to

• equalize the level of tariffs across nations so no

  nation is disadvantaged relative to others.

• use targeted tariffs to ensure that nations

  produce those goods in which they have a

  comparative advantage.

• reduce tariffs in various nations simultaneously to

  blunt political pressure for protectionism.

• ensure that tariffs are used only to promote infant

  industries that will eventually become viable.