Exam 5: Efficiency and Equity

The annual Great Sofa Round-up is a collaborative event between Colorado State University and the City of Fort Collins aims to help students and neighbors get rid of unwanted furniture, while giving people in need access to inexpensive sofas. Suppose on the day of the Round-up, your friends take their couches to the main parking lot on campus where the Round-up is held. Raj will not sell his couch for less than $30, Emily will not sell her couch for less than $50, Nara will not sell her couch for less than $20, Sergio just wants to get rid of his couch and he is willing to give it away for free. At the Round-up, potential buyers think that all the couches available are basically the same and they are willing to buy a couch for $50. What is the value of the market producer surplus?

In the market for CDs, the producer surplus will decrease if ________.

-The figure above shows Clara's demand for CDs. At a price of $20 for a CD, the value of Clara's total consumer surplus for all the CDs she buys is

Colorado State University allocates 10,000 tickets for each home game to students at no cost. Students are required to stand in line and prove they are a full time student to receive a free ticket. Community members can purchase season tickets or tickets to an individual game. How are football tickets allocated to community members?

Suppose a country produces only bikes and clothing. The country achieves an efficient allocation of resources when

-In the above figure, the second ton of wheat would be produced even though the producer surplus on it is zero if the price per ton of wheat was

Often politicians assert that a price, such as the price of gasoline or the rent for an apartment, is too high and that it is unfair for these prices to be so high. If these products are traded in competitive markets, what fairness rule are politicians using? Why?

At the current level of output, the marginal social benefit of pizza exceeds the marginal social cost of pizza. Compared to the allocatively efficient quantity, we are producing too ________ pizza and too ________ of other goods.

-Jason wants to hire Maria to tutor him in economics. Jason is willing to pay $30 for the first hour of tutoring, $25 for the second, $20 for the third, $15 for the fourth, and $10 for the fifth. Maria has an opportunity cost per hour of $6 for the first, $9 for the second, $12 for the third, $15 for the fourth, and $18 for the fifth. The initial equilibrium price for tutoring is $15 an hour and hence Maria tutors Jason for 4 hours. Now, Maria realizes that she is the only economics tutor because all the other tutors have graduated. Because she is the only tutor, she has a monopoly and, as a monopolist, Maria decides to charge a price of $25 instead of $15 an hour. a) At the price of $25 an hour, how many hours will Maria tutor Jason? b) At the initial equilibrium price of $15 an hour, what was Jason's total consumer surplus and Maria's total producer surplus? c) At the price of $25 an hour, what is Jason's total consumer surplus and Maria's total producer surplus? d) How does the sum of Jason's consumer surplus plus Maria's producer surplus compare at the initial equilibrium price of $15 an hour (part b) and at the new price of $25 an hour (part c)? Comment on any difference.

When allocating resources using market price,

-What area in the above figure is the consumer surplus at the efficient quantity?

An external benefit is a benefit that ________.

-In the above table, what is the maximum price that consumers are willing to pay for the 200th brownie?

-The above figure shows the marginal social benefit and marginal social cost curves of chocolate in the nation of Kaffenia. At Kaffenia's efficient quantity of chocolate

A person will choose to buy a good as long as

Joe is willing to pay $4 for his first slice of pizza and $3 for his second slice of pizza. If the price is $2, on his two slices of pizza Joe receives a total consumer surplus of

Jane is willing to pay $50 for a pair of shoes. The actual price of the shoes is $30. Her marginal benefit is

Resource use is efficient when

-In the above figure, what is the amount of consumer surplus at the efficient quantity?

The figure shows the competitive market for milk. -In the figure above, when the quantity of milk produced is 600 gallons per day, what is the deadweight loss?