Exam 5: Efficiency and Equity

Competitive markets with no external costs or benefits and no government price ceilings, floors, taxes or subsidies ________ efficient. According to the "It's not fair if the rules aren't fair" idea of fairness, competitive markets ________ fair.

One of the problems associated with the utilitarianism is that it does not recognize that

Stefano has just completed an original oil painting. After considering the costs for brushes, paint, canvas, and the value of Stefano's labor time, the marginal cost of the painting is $1,000. Lucky Stefano. One art lover paid him $1,500. How much producer surplus did Stefano obtain?

Consider the market for hot dogs. As long as the marginal benefit of consuming hot dogs is greater than the price of hot dogs,

Market failure is the situation in which a market delivers an inefficient outcome.

Which of the following ideas describes the concept of "utilitarianism"? I. Utilitarianism gained popularity in the 1930s. II) Utilitarians believed that a society should use only competitive markets to allocate resources. III) Utilitarians claimed that taking money from rich people and giving it to poorer people would make the economy more fair.

-Maria helps tutor students taking economics. The equilibrium price for tutoring is $15 per hour. Maria has determined her opportunity cost per hour to be $6 for the first, $9 for the second, $12 for the third, $15 for the fourth, and $18 for the fifth. How many hours will Maria tutor? Why this amount of hours? What, if any, is Maria's producer surplus?

Bill Gates is a founder of Microsoft and the world's richest individual. Suppose Microsoft sells more software and Mr. Gates acquires another billion dollars in wealth. Simultaneously, suppose a burglar whose income is well below average broke into Bill Gates' house and stole a million dollars' worth of antiques. Using the "it's not fair if the rules aren't fair" approach to fairness, is Mr. Gates' acquisition of additional wealth fair? Is the (poor) thief's acquisition fair?

Buyers receive a consumer surplus when the price exceeds the marginal benefit.

Marginal cost is

The market demand curve for iPads is the ________ of all the individual demand curves for iPads.

In the competitive market for balloon rides, marginal social cost equals marginal social benefit when 3,000 balloon rides a day are taken and the price of a ride is $130. Which of the following statements is true?

-In the above figure, suppose that the government sets a limit to production at 10 units of output and the price rises to $4. In comparison to a competitive market the consumer surplus would fall by

At the quantity of 200 bushels of apples, the marginal social benefit of a bushel of apples is $100 and the marginal social cost is $50. To produce the efficient quantity of apples,

-The figure above shows the market for milk. If one firm owns all the milk outlets in the city and sells 100 gallons of milk,

-In the above figure, a price of $1.25 and a quantity of 5 million gallons of milk per day maximizes the

Adam makes $25,000 per year and Bob makes $45,000 a year, and they both have the same marginal benefit curve. According to the utilitarian view, if a dollar is transferred from Bob to Adam, then

-The figure above shows the market for coffee. If the efficient quantity of coffee is produced, the producer surplus is

-The figure above shows the market for milk. If the government pays the milk producers a subsidy and production increases to 300 gallons per day,

-The above figure shows the marginal social benefit and marginal social cost curves of doughnuts in the nation of Kaffenia. What is the marginal social cost to the economy of Kaffenia of producing the 300th dozen doughnuts each day?