Question 1

Contests do a good job in resource allocation

Accepted Answer

A) under any circumstances. 
B) when the efforts of the players are easy to monitor and reward directly. 
C) when the efforts of the players are hard to monitor and reward directly. 
D) when the first-come, first-served allocation method has failed. 
E) only under a command system. 
A) under any circumstances. 
B) when the efforts of the players are easy to monitor and reward directly. 
C) when the efforts of the players are hard to monitor and reward directly. 
D) when the first-come, first-served allocation method has failed. 
E) only under a command system. C

Question 2

Which of the following can lead to an inefficient outcome?
I.Price regulations
II.Increasing marginal cost
III.Monopoly

Accepted Answer

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

Question 3

Sal likes to eat pizza.The ________ is the maximum amount that Sal is willing to pay for one more slice of pizza.

Accepted Answer

A) market price 
B) marginal cost 
C) consumer surplus 
D) marginal benefit 
E) producer surplus 
A) market price 
B) marginal cost 
C) consumer surplus 
D) marginal benefit 
E) producer surplus D

Question 4

If the owner of an apartment building rents only to married couples over the age of 30,the method of resource allocation is

Accepted Answer

A) majority rule. 
B) contest. 
C) personal characteristics. 
D) market price. 
E) force. 
A) majority rule. 
B) contest. 
C) personal characteristics. 
D) market price. 
E) force.

Question 5

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 6

Lotteries allocate resources to

Accepted Answer

A) those who work for the government. 
B) those who come up lucky in a gaming system. 
C) those who work for private firms. 
D) people who are employed by gaming corporations. 
E) those who are in command. 
A) those who work for the government. 
B) those who come up lucky in a gaming system. 
C) those who work for private firms. 
D) people who are employed by gaming corporations. 
E) those who are in command.

Question 7

Use the figure below to answer the following questions.
   
Figure 5.3.2
-Refer to Figure 5.3.2.If the level of output is 200 units,the deadweight loss is area

Accepted Answer

A) BCF. 
B) ACG. 
C) DCE. 
D) ACH. 
E) HCG. 
A) BCF. 
B) ACG. 
C) DCE. 
D) ACH. 
E) HCG.

Question 8

Bill and Ted each consume 15 chocolate bars at the current price.If Bill's demand for chocolate bars is more elastic than Ted's demand,then

Accepted Answer

A) Bill's willingness to pay for the last chocolate bar is greater than Ted's. 
B) Ted's willingness to pay for the last chocolate bar is greater than Bill's. 
C) Bill's consumer surplus is greater than Ted's. 
D) Ted's consumer surplus is greater than Bill's. 
E) Bill's consumer surplus equals Ted's. 
A) Bill's willingness to pay for the last chocolate bar is greater than Ted's. 
B) Ted's willingness to pay for the last chocolate bar is greater than Bill's. 
C) Bill's consumer surplus is greater than Ted's. 
D) Ted's consumer surplus is greater than Bill's. 
E) Bill's consumer surplus equals Ted's.

Question 9

Markets may not achieve an efficient allocation of resources when there are

Accepted Answer

A) public goods. 
B) external benefits. 
C) monopolies. 
D) subsidies. 
E) all of the above. 
A) public goods. 
B) external benefits. 
C) monopolies. 
D) subsidies. 
E) all of the above.

Question 10

When the cost of making income transfers is recognized,we recognize the big tradeoff between

Accepted Answer

A) efficiency and fairness. 
B) marginal benefit and marginal cost. 
C) value and marginal benefit. 
D) producer surplus and consumer surplus. 
E) deadweight loss and utilitarianism. 
A) efficiency and fairness. 
B) marginal benefit and marginal cost. 
C) value and marginal benefit. 
D) producer surplus and consumer surplus. 
E) deadweight loss and utilitarianism.

Question 11

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 12

Use the figure below to answer the following questions.
   
Figure 5.2.1
-Consider the demand curve in Figure 5.2.1.What is the value of the first unit of the good?

Accepted Answer

A) $10 
B) $9 
C) $8 
D) $5 
E) $4 
A) $10 
B) $9 
C) $8 
D) $5 
E) $4

Question 13

A negative externality results in

Accepted Answer

A) underproduction. 
B) zero production. 
C) overproduction. 
D) efficient production. 
E) zero deadweight loss. 
A) underproduction. 
B) zero production. 
C) overproduction. 
D) efficient production. 
E) zero deadweight loss.

Question 14

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.
-Refer to Table 5.2.4.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

Use the table below to answer the following questions.
Table 5.2.1
  
-Table 5.2.1 gives information on marginal cost for the XYZ firm.If XYZ sells the first unit at a price of $6,what is the producer surplus on that unit?

Accepted Answer

A) $4 
B) $6 
C) $9 
D) $12 
E) $7 
A) $4 
B) $6 
C) $9 
D) $12 
E) $7

Question 16

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 17

Suppose the government places a tax on business profits so that businesses decrease production and generate a deadweight loss.Revenues from the tax are used to boost the incomes of the poor.The decision to levy the tax implies that in this case the government

Accepted Answer

A) values people but not businesses. 
B) values efficiency more than its view of fairness. 
C) profits from collecting taxes. 
D) values its view of fairness more than efficiency. 
E) is unaware of the deadweight loss it is creating. 
A) values people but not businesses. 
B) values efficiency more than its view of fairness. 
C) profits from collecting taxes. 
D) values its view of fairness more than efficiency. 
E) is unaware of the deadweight loss it is creating.

Question 18

When 2,000 hamburgers a day are produced,the marginal social benefit from the 2000?? hamburger is $1.50 and its marginal social cost is $1.00.And when 7,500 hamburgers a day are produced,the marginal social benefit from the 2000?? hamburger is $1.00 and its marginal social cost is $1.50.The efficient quantity of hamburgers is ________ a day

Accepted Answer

A) less than 2,000 
B) between 2,000 and 7,500 
C) more than 7,500 
D) zero 
E) 2,000 
A) less than 2,000 
B) between 2,000 and 7,500 
C) more than 7,500 
D) zero 
E) 2,000

Question 19

It is efficient to produce an additional shirt if the

Accepted Answer

A) marginal social benefit from producing the shirt exceeds zero. 
B) marginal social benefit of producing the shirt equals zero. 
C) consumer surplus from the additional shirt exceeds its producer surplus. 
D) marginal social benefit from producing the shirt is greater than the marginal social cost of producing it. 
E) producer surplus from the additional shirt exceeds its consumer surplus. 
A) marginal social benefit from producing the shirt exceeds zero. 
B) marginal social benefit of producing the shirt equals zero. 
C) consumer surplus from the additional shirt exceeds its producer surplus. 
D) marginal social benefit from producing the shirt is greater than the marginal social cost of producing it. 
E) producer surplus from the additional shirt exceeds its consumer surplus.

Question 20

If you increase your consumption of pop by one additional can a week,your marginal benefit from this last can is $1.00.For you,the ________ this last can of pop is $1.00

Accepted Answer

A) price of 
B) marginal cost of 
C) value from 
D) consumer surplus from 
E) producer surplus 
A) price of 
B) marginal cost of 
C) value from 
D) consumer surplus from 
E) producer surplus

Exam 5: Efficiency and Equity

Contests do a good job in resource allocation

Which of the following can lead to an inefficient outcome? I.Price regulations II.Increasing marginal cost III.Monopoly

Sal likes to eat pizza.The ________ is the maximum amount that Sal is willing to pay for one more slice of pizza.

If the owner of an apartment building rents only to married couples over the age of 30,the method of resource allocation is

Choose the correct statement.

Lotteries allocate resources to

Use the figure below to answer the following questions. Figure 5.3.2 -Refer to Figure 5.3.2.If the level of output is 200 units,the deadweight loss is area

Bill and Ted each consume 15 chocolate bars at the current price.If Bill's demand for chocolate bars is more elastic than Ted's demand,then

Markets may not achieve an efficient allocation of resources when there are

When the cost of making income transfers is recognized,we recognize the big tradeoff between

Use the figure below to answer the following questions. Figure 5.2.1 -Consider the demand curve in Figure 5.2.1.What is the value of the first unit of the good?

A negative externality results in

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. -Refer to Table 5.2.4.What is the marginal social benefit from the 45th slice of pizza?

Use the table below to answer the following questions. Table 5.2.1 -Table 5.2.1 gives information on marginal cost for the XYZ firm.If XYZ sells the first unit at a price of $6,what is the producer surplus on that unit?

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

Suppose the government places a tax on business profits so that businesses decrease production and generate a deadweight loss.Revenues from the tax are used to boost the incomes of the poor.The decision to levy the tax implies that in this case the government

It is efficient to produce an additional shirt if the

If you increase your consumption of pop by one additional can a week,your marginal benefit from this last can is $1.00.For you,the ________ this last can of pop is $1.00

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

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: The Keynesian Model

Canadian Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

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