Question 1

If production is not at an efficient level,which of the following must be true?

Accepted Answer

A) Marginal social benefit exceeds marginal social cost. 
B) Marginal social cost exceeds marginal social benefit. 
C) Production will increase. 
D) Production will decrease. 
E) Total surplus is not maximized. 
A) Marginal social benefit exceeds marginal social cost. 
B) Marginal social cost exceeds marginal social benefit. 
C) Production will increase. 
D) Production will decrease. 
E) Total surplus is not maximized. E

Question 2

All of the following statements are true except:

Accepted Answer

A) An externality is a cost or a benefit that affects someone other than the seller or the buyer of a good. 
B) When an electric utility does not consider the cost of pollution when it decides how much power to produce,the result is overproduction. 
C) An electric utility creates an external cost by burning coal. 
D) All externalities create overproduction. 
E) An external cost creates overproduction. 
A) An externality is a cost or a benefit that affects someone other than the seller or the buyer of a good. 
B) When an electric utility does not consider the cost of pollution when it decides how much power to produce,the result is overproduction. 
C) An electric utility creates an external cost by burning coal. 
D) All externalities create overproduction. 
E) An external cost creates overproduction. D

Question 3

The market for strawberries is perfectly competitive.Joe and Haley each purchase 3 boxes of strawberries.Joe's demand is much more elastic than Haley's.Which statement is true?

Accepted Answer

A) Joe's consumer surplus exceeds Haley's. 
B) Haley's consumer surplus equals Joe's. 
C) Haley's consumer surplus exceeds Joe's. 
D) Joe receives no consumer surplus. 
E) Neither Joe nor Haley receive any consumer surplus. 
A) Joe's consumer surplus exceeds Haley's. 
B) Haley's consumer surplus equals Joe's. 
C) Haley's consumer surplus exceeds Joe's. 
D) Joe receives no consumer surplus. 
E) Neither Joe nor Haley receive any consumer surplus. C

Question 4

According to the "big tradeoff,"

Accepted Answer

A) income transfers reduce efficiency. 
B) efficiency requires income transfers. 
C) a more equally shared pie results in a larger pie. 
D) property rights and voluntary exchange insure equality of opportunity. 
E) income transfers should make the poorest person as well off as possible. 
A) income transfers reduce efficiency. 
B) efficiency requires income transfers. 
C) a more equally shared pie results in a larger pie. 
D) property rights and voluntary exchange insure equality of opportunity. 
E) income transfers should make the poorest person as well off as possible.

Question 5

Use the figure below to answer the following questions.   Figure 5.2.1
-Consider Figure 5.2.1.If the price is $4,what is the consumer surplus from the third unit of the good?

Accepted Answer

A) $0 
B) $1 
C) $2 
D) $3 
E) $4 
A) $0 
B) $1 
C) $2 
D) $3 
E) $4

Question 6

A supply curve is

Accepted Answer

A) the same as a production possibilities frontier. 
B) a marginal social benefit curve. 
C) a marginal benefit curve. 
D) a marginal cost curve. 
E) a downward-sloping curve. 
A) the same as a production possibilities frontier. 
B) a marginal social benefit curve. 
C) a marginal benefit curve. 
D) a marginal cost curve. 
E) a downward-sloping curve.

Question 7

Sally and Eric are the only people in an economy.Sally buys 3 bottles of water when the price is $2 a bottle and 4 bottles of water when the price is $1 a bottle.Eric buys 10 bottles of water when the price is $0.50 a bottle and 5 bottles of water when the price is $1 a bottle.In the market for water,the quantity demanded

Accepted Answer

A) increases as the price rises. 
B) is 4 bottles at a price of $1 a bottle. 
C) increases as the price falls. 
D) is 8 bottles at a price of $2 a bottle. 
E) is 15 bottles at a price of $0.50 a bottle. 
A) increases as the price rises. 
B) is 4 bottles at a price of $1 a bottle. 
C) increases as the price falls. 
D) is 8 bottles at a price of $2 a bottle. 
E) is 15 bottles at a price of $0.50 a bottle.

Question 8

A modified version of utilitarianism proposed by John Rawls could be summarized as

Accepted Answer

A) transfer everything to the poor. 
B) transfer everything to the rich. 
C) expand the size of government. 
D) minimize the size of government. 
E) make the poorest as well off as possible. 
A) transfer everything to the poor. 
B) transfer everything to the rich. 
C) expand the size of government. 
D) minimize the size of government. 
E) make the poorest as well off as possible.

Question 9

The price of pizza increases.Everything else remaining the same,the consumer surplus from pizza

Accepted Answer

A) increases. 
B) is greater than the producer surplus from pizza. 
C) is less than the producer surplus from pizza. 
D) does not change. 
E) decreases. 
A) increases. 
B) is greater than the producer surplus from pizza. 
C) is less than the producer surplus from pizza. 
D) does not change. 
E) decreases.

Question 10

Markets achieve an efficient allocation of resources when

Accepted Answer

A) public goods are produced. 
B) external benefits are present. 
C) the market is a monopoly. 
D) subsidies are paid to producers. 
E) marginal social benefit equals marginal social cost. 
A) public goods are produced. 
B) external benefits are present. 
C) the market is a monopoly. 
D) subsidies are paid to producers. 
E) marginal social benefit equals marginal social cost.

Question 11

Which of the following lead to an inefficient outcome? I.Decreasing marginal social benefit
II.Taxes
III.High transactions cost

Accepted Answer

A) I only 
B) II only 
C) I and III 
D) II and III 
E) I,II and III 
A) I only 
B) II only 
C) I and III 
D) II and III 
E) I,II and III

Question 12

Use the figure below to answer the following questions.   Figure 5.2.1
-Consider Figure 5.2.1.When the price is $4 a unit,what is the consumer surplus from the second unit of the good?

Accepted Answer

A) $7 
B) $3 
C) $4 
D) $1 
E) $10 
A) $7 
B) $3 
C) $4 
D) $1 
E) $10

Question 13

Restaurants don't use market price to allocate their tables because

Accepted Answer

A) they would have to watch the price of a table at other restaurants to keep competitive. 
B) restaurants would have to advertise the price. 
C) the price of a table would fluctuate hourly,customer uncertainty would deter patrons,and lower demand would bring lower profit. 
D) they would have to continually change the supply of tables to keep the price constant. 
E) the price of a table would eventually fall to zero and restaurants would incur a loss. 
A) they would have to watch the price of a table at other restaurants to keep competitive. 
B) restaurants would have to advertise the price. 
C) the price of a table would fluctuate hourly,customer uncertainty would deter patrons,and lower demand would bring lower profit. 
D) they would have to continually change the supply of tables to keep the price constant. 
E) the price of a table would eventually fall to zero and restaurants would incur a loss.

Question 14

Use the table below to answer the following question.
Table 5.2.4
  
-Table 5.2.4 shows the demand schedules for pizza for Abby and Barry who are the only buyers in the market.What is the marginal social benefit from the 45th slice of pizza?

Accepted Answer

A) $3.50 
B) $4.00 
C) $2.50 
D) $5.00 
E) $4.50 
A) $3.50 
B) $4.00 
C) $2.50 
D) $5.00 
E) $4.50

Question 15

Producer surplus is

Accepted Answer

A) the value producers place on a good minus the price of the good. 
B) the price of the good minus the value producers place on it. 
C) zero if price equals marginal cost. 
D) equal to marginal benefit minus marginal cost. 
E) equal to consumer surplus. 
A) the value producers place on a good minus the price of the good. 
B) the price of the good minus the value producers place on it. 
C) zero if price equals marginal cost. 
D) equal to marginal benefit minus marginal cost. 
E) equal to consumer surplus.

Question 16

What is the producer surplus for the market from the production of the 100th unit of a good?

Accepted Answer

A) the marginal cost of producing the 100th unit 
B) the marginal benefit from the 100th unit 
C) the opportunity cost of producing the 100th unit 
D) the marginal social benefit from the 100th unit minus the marginal cost of producing the 100th unit 
E) the price paid for the 100th unit minus the marginal social cost of producing the 100th unit 
A) the marginal cost of producing the 100th unit 
B) the marginal benefit from the 100th unit 
C) the opportunity cost of producing the 100th unit 
D) the marginal social benefit from the 100th unit minus the marginal cost of producing the 100th unit 
E) the price paid for the 100th unit minus the marginal social cost of producing the 100th unit

Question 17

The marginal cost of producing one more hot dog is $1.00.The price of a hot dog is $1.50.The producer surplus from selling one more hotdog is

Accepted Answer

A) $1.00. 
B) $1.50. 
C) $0.50. 
D) zero. 
E) $2.50. 
A) $1.00. 
B) $1.50. 
C) $0.50. 
D) zero. 
E) $2.50.

Question 18

Choose the correct statement.

Accepted Answer

A) Producer surplus is an external cost. 
B) Consumer surplus is an external benefit. 
C) A government subsidy paid to a producer is an external benefit. 
D) Consumer surplus is an external cost. 
E) Subsidies lead to overproduction. 
A) Producer surplus is an external cost. 
B) Consumer surplus is an external benefit. 
C) A government subsidy paid to a producer is an external benefit. 
D) Consumer surplus is an external cost. 
E) Subsidies lead to overproduction.

Question 19

In competitive equilibrium,which of the following statements is false?

Accepted Answer

A) Marginal social benefit equals marginal social cost. 
B) Willingness to pay equals marginal cost of production. 
C) The sum of consumer surplus and producer surplus is maximized. 
D) Deadweight loss is maximized. 
E) Resources are used efficiently to produce goods and services that people value most highly. 
A) Marginal social benefit equals marginal social cost. 
B) Willingness to pay equals marginal cost of production. 
C) The sum of consumer surplus and producer surplus is maximized. 
D) Deadweight loss is maximized. 
E) Resources are used efficiently to produce goods and services that people value most highly.

Question 20

As a method of resource allocation,force

Accepted Answer

A) plays a crucial negative role but not a positive role. 
B) plays a crucial positive role but not a negative role. 
C) plays a crucial role for both good and ill. 
D) is always better than majority rule. 
E) is always better than first-come,first-served. 
A) plays a crucial negative role but not a positive role. 
B) plays a crucial positive role but not a negative role. 
C) plays a crucial role for both good and ill. 
D) is always better than majority rule. 
E) is always better than first-come,first-served.

If production is not at an efficient level,which of the following must be true?

All of the following statements are true except:

The market for strawberries is perfectly competitive.Joe and Haley each purchase 3 boxes of strawberries.Joe's demand is much more elastic than Haley's.Which statement is true?

According to the "big tradeoff,"

Use the figure below to answer the following questions. Figure 5.2.1 -Consider Figure 5.2.1.If the price is $4,what is the consumer surplus from the third unit of the good?

A supply curve is

A modified version of utilitarianism proposed by John Rawls could be summarized as

The price of pizza increases.Everything else remaining the same,the consumer surplus from pizza

Markets achieve an efficient allocation of resources when

Which of the following lead to an inefficient outcome? I.Decreasing marginal social benefit II.Taxes III.High transactions cost

Use the figure below to answer the following questions. Figure 5.2.1 -Consider Figure 5.2.1.When the price is $4 a unit,what is the consumer surplus from the second unit of the good?

Restaurants don't use market price to allocate their tables because

Use the table below to answer the following question. Table 5.2.4 -Table 5.2.4 shows the demand schedules for pizza for Abby and Barry who are the only buyers in the market.What is the marginal social benefit from the 45th slice of pizza?

Producer surplus is

What is the producer surplus for the market from the production of the 100th unit of a good?

The marginal cost of producing one more hot dog is $1.00.The price of a hot dog is $1.50.The producer surplus from selling one more hotdog is

Choose the correct statement.

In competitive equilibrium,which of the following statements is false?

As a method of resource allocation,force

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, preferences, and Choices

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Filters

Exam 5: Efficiency and Equity

If production is not at an efficient level,which of the following must be true?

All of the following statements are true except:

The market for strawberries is perfectly competitive.Joe and Haley each purchase 3 boxes of strawberries.Joe's demand is much more elastic than Haley's.Which statement is true?

According to the "big tradeoff,"

Use the figure below to answer the following questions. Figure 5.2.1 -Consider Figure 5.2.1.If the price is $4,what is the consumer surplus from the third unit of the good?

A supply curve is

A modified version of utilitarianism proposed by John Rawls could be summarized as

The price of pizza increases.Everything else remaining the same,the consumer surplus from pizza

Markets achieve an efficient allocation of resources when

Which of the following lead to an inefficient outcome? I.Decreasing marginal social benefit II.Taxes III.High transactions cost

Use the figure below to answer the following questions. Figure 5.2.1 -Consider Figure 5.2.1.When the price is $4 a unit,what is the consumer surplus from the second unit of the good?

Restaurants don't use market price to allocate their tables because

Use the table below to answer the following question. Table 5.2.4 -Table 5.2.4 shows the demand schedules for pizza for Abby and Barry who are the only buyers in the market.What is the marginal social benefit from the 45th slice of pizza?

Producer surplus is

What is the producer surplus for the market from the production of the 100th unit of a good?

The marginal cost of producing one more hot dog is $1.00.The price of a hot dog is $1.50.The producer surplus from selling one more hotdog is

Choose the correct statement.

In competitive equilibrium,which of the following statements is false?

As a method of resource allocation,force

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, preferences, and Choices

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Filters