Question

34) A legal maximum price at which a good can be sold is a price: A) stabilization. B) floor. C) support. D) ceiling 35) When supply is more elastic than demand, A) producers carry the majority of the tax burden. B) producers and consumers camy an equal amount of the tax burden. C) producers carry all of the tax burden. D) consumers carry the majority of the tax burden. 36) Which is an example involving an external benefit? A) air pollution B) the pollution of a stream C) a nice garden in front of someone's house D) a person littering a public highway 37) Ideally, a market should maximize: A) government revenue. B) producer surplus. C) consumer surplus. D) social surplus. 38) An external benefit in a market will cause the market to produce: A) more than the same market would produce in the presence of a negative externality. B) less than is socially desirable. C) more than is socially desirable. D) the socially optimal equilibrium amount. meant to increase housing opportunities for lower income 39) Rent control is a price individuals. A) ceiling B) floor C) tax D) externality 40) In a market with external costs, the market price is: A) equal to the efficient equilibrium price. B) regulated by the government. C) lower than the efficient equilibrium price. D) higher than the efficient equilibrium price. Page 719

Answer 1

34.A legal maximum price at which a good can be sold is a price ceiling. Price ceiling is considered to be a type of price control as it prevent a price from rising above a certain level. The answer is D.

35. When supply is more elastic than demand, buyers bear most of the tax burden. when the demand is inelastic, buyers are not very responsive to price changes, and the quantity demanded remains relatively constant when the tax is introduced, then the seller passes the tax burden in the form of higher prices on customers.The answer is D.

36. An external benefit is a social benefit which occurs when producing a good causes a benefit to a third party. So, a nice garden in front of someone's house is an example involving an external benefit. The answer is C.

37. Ideally, a market should maximize social surplus. Social surplus is the combination of consumer surplus and producer surplus. The answer is D.