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Supposethattheequilibriumpriceinthemarketforwidgetsis$5.Ifalawreducedthemaximumlegalpriceforwidgetsto$4,anypossibleincreaseinconsumersurpluswouldbelargerthanthelossofproducersurplus.anypossibleincreaseinconsumersurpluswouldbesmallerthanthelossofproducersurplus.theresultingincreaseinproducersurpluswouldbelargerthananypossiblelossofconsumersurplus.theresultingincreaseinproducersurpluswouldbesmallerthananypossiblelossofconsumersurplus.ANS:BDIF:3REF:7-3NAT:AnalyticLOC:SupplyanddemandTOP:Consumersurplus|ProducersurplusMSC:AnalyticalSupposethattheequilibriumpriceinthemarketforwidgetsis$5.Ifalawincreasedtheminimumlegalpriceforwidgetsto$6,theresultingincreaseinconsumersurpluswouldbelargerthananypossiblelossofproducersurplus.theresultingincreaseinconsumersurpluswouldbesmallerthananypossiblelossofproducersurplus.anypossibleincreaseinproducersurpluswouldbelargerthanthelossofconsumersurplus.anypossibleincreaseinproducersurpluswouldbesmallerthanthelossofconsumersurplus.ANS:DDIF:3REF:7-3NAT:AnalyticLOC:SupplyanddemandTOP:Consumersurplus|ProducersurplusMSC:AnalyticalTotalsurplusinamarketwillincreasewhenthegovernmentimposesabindingpricefloororabindingpriceceilingonthatmarket.imposesataxonthatmarket.Bothaandbarecorrect.Neitheranorbiscorrect.ANS:DDIF:3REF:7-3NAT:AnalyticLOC:SupplyanddemandTOP:TotalsurplusMSC:ApplicativeTotalsurplusinamarketwillincreasewhenthegovernmentimposesataxonthatmarket.imposesabindingpriceflooronthatmarket.removesabindingpriceceilingfromthatmarket.Noneoftheaboveiscorrect.ANS:CDIF:3REF:7-3NAT:AnalyticLOC:SupplyanddemandTOP:TotalsurplusMSC:ApplicativeIfamarketisallowedtoadjustfreelytoitsequilibriumpriceandquantity,thenanincreaseindemandwillincreaseproducersurplus.reduceproducersurplus.notaffectproducersurplus.Anyoftheabovearepossible.ANS:ADIF:2REF:7-3NAT:AnalyticLOC:SupplyanddemandTOP:ProducersurplusMSC:ApplicativeIfamarketisallowedtomovefreelytoitsequilibriumpriceandquantity,thenanincreaseinsupplywillincreaseconsumersurplus.reduceconsumersurplus.notaffectconsumersurplus.Anyoftheabovearepossible.ANS:ADIF:2REF:7-3NAT:AnalyticLOC:SupplyanddemandTOP:ConsumersurplusMSC:ApplicativeAsimultaneousincreaseinboththedemandforMP3playersandthesupplyofMP3playerswouldimplythatboththevalueofMP3playerstoconsumersandthecostofproducingMP3playershasincreased.boththevalueofMP3playerstoconsumersandthecostofproducingMP3playershasdecreased.thevalueofMP3playerstoconsumershasdecreased,andthecostofproducingMP3playershasincreased.thevalueofMP3playerstoconsumershasincreased,andthecostofproducingMP3playershasdecreased.ANS:DDIF:2REF:7-3NAT:AnalyticLOC:SupplyanddemandTOP:EfficiencyMSC:InterpretiveRaisinbranandmilkarecomplementarygoods.Adecreaseinthepriceofraisinswillincreaseconsumersurplusinthemarketforraisinbrananddecreaseproducersurplusinthemarketformilk.increaseconsumersurplusinthemarketforraisinbranandincreaseproducersurplusinthemarketformilk.decreaseconsumersurplusinthemarketforraisinbranandincreaseproducersurplusinthemarketformilk.decreaseconsumersurplusinthemarketforraisinbrananddecreaseproducersurplusinthemarketformilk.ANS:BDIF:3REF:7-3NAT:AnalyticLOC:SupplyanddemandTOP:Consumersurplus|ProducersurplusMSC:ApplicativeCoffeeandteaaresubstitutes.Badweatherthatsharplyreducesthecoffeebeanharvestwouldincreaseconsumersurplusinthemarketforcoffeeanddecreaseproducersurplusinthemarketfortea.increaseconsumersurplusinthemarketforcoffeeandincreaseproducersurplusinthemarketfortea.decreaseconsumersurplusinthemarketforcoffeeandincreaseproducersurplusinthemarketfortea.decreaseconsumersurplusinthemarketforcoffeeanddecreaseproducersurplusinthemarketfortea.ANS:CDIF:3REF:7-3NAT:AnalyticLOC:SupplyanddemandTOP:Consumersurplus|ProducersurplusMSC:ApplicativePlayStationsandPlaySationgamesarecomplementarygoods.AtechnologicaladvanceintheproductionofPlayStationswillincreaseconsumersurplusinthemarketforPlayStationsanddecreaseproducersurplusinthemarketforPlayStationgames.increaseconsumersurplusinthemarketforPlayStationsandincreaseproducersurplusinthemarketforPlayStationgames.decreaseconsumersurplusinthemarketforPlayStationsandincreaseproducersurplusinthemarketforPlayStationgames.decreaseconsumersurplusinthemarketforPlayStationsanddecreaseproducersurplusinthemarketforPlayStationgames.ANS:BDIF:3REF:7-3NAT:AnalyticLOC:SupplyanddemandTOP:Consumersurplus|ProducersurplusMSC:ApplicativeSec04-Consumers,Producers,andtheEfficiencyofMarkets-ConclusionMULTIPLECHOICEWhichofthefollowingstatementsisnotcorrect?Aninvisiblehandleadsbuyersandsellerstoanequilibriumthatmaximizestotalsurplus.Marketpowercancausemarketstobeinefficient.Externalitiescancausemarketstobeinefficient.Theinvisiblehandcanremedymostifnotalltypesofmarketfailures.ANS:DDIF:2REF:7-4NAT:AnalyticLOC:SupplyanddemandTOP:Marketfailure|ExternalitiesMSC:InterpretiveInefficiencycanbecausedinamarketbythepresenceofmarketpower.externalities.imperfectlycompetitivemarkets.Alloftheabovearecorrect.ANS:DDIF:2REF:7-4NAT:AnalyticLOC:SupplyanddemandTOP:MarketfailureMSC:InterpretiveMernmentregulationsimposedonthesellersinamarket.abilityofmarketparticipantstoinfluenceprice.forcesofsupplyanddemandindeterminingequilibriumprice.ANS:CDIF:1REF:7-4NAT:AnalyticLOC:SupplyanddemandTOP:MarketpowerMSC:DefinitionalExternalitiesaresideeffectspassedontoapartyotherthanthebuyersandsellersinthemarket.sideeffectsofgovernmentinterventioninmarkets.externalforcesthatcausethepriceofagoodtobehigherthanitotherwisewouldbe.externalforcesthathelpestablishequilibriumprice.ANS:ADIF:1REF:7-4NAT:AnalyticLOC:Supplyandde

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