Question 1

An oil painting has a marginal cost of $1,000.The painting was bought for $1,500.How much producer surplus did the painter obtain?

Accepted Answer

A) $1,500 
B) $1,000 
C) $500 
D) zero 
E) cannot be determined from the information given 
A) $1,500 
B) $1,000 
C) $500 
D) zero 
E) cannot be determined from the information given

Question 2

Use the figure below to answer the following questions.
   
Figure 5.2.2
-Refer to Figure 5.2.2 If the price falls from P? to P?,then the change in consumer surplus is

Accepted Answer

A) A. 
B) A + B. 
C) A + B + C. 
D) B + C. 
E) A + B + D. 
A) A. 
B) A + B. 
C) A + B + C. 
D) B + C. 
E) A + B + D.

Question 3

In a command system,resources are allocated by

Accepted Answer

A) people who show interest to use the resources. 
B) people who are able to pay for the resources. 
C) market price. 
D) the order of someone in authority. 
E) those people who come first in line. 
A) people who show interest to use the resources. 
B) people who are able to pay for the resources. 
C) market price. 
D) the order of someone in authority. 
E) those people who come first in line.

Question 4

Overproduction of a good means that

Accepted Answer

A) deadweight loss has been eliminated. 
B) the sum of consumer surplus and producer surplus is greater than the sum for an efficient allocation. 
C) marginal social cost exceeds marginal social benefit. 
D) marginal social benefit exceeds marginal social cost. 
E) this is a public good. 
A) deadweight loss has been eliminated. 
B) the sum of consumer surplus and producer surplus is greater than the sum for an efficient allocation. 
C) marginal social cost exceeds marginal social benefit. 
D) marginal social benefit exceeds marginal social cost. 
E) this is a public good.

Question 5

At current output,the marginal social benefit from Furbys is greater than marginal social cost.To achieve an efficient allocation,which of the following must occur? (1)Furby output must increase.(2)Furby output must decrease.(3)the marginal social benefit of Furbys will rise.(4)the marginal social cost of Furbys will fall.

Accepted Answer

A) 1 and 3 
B) 1 and 4 
C) 2 and 3 
D) 2 and 4 
E) 1 only 
A) 1 and 3 
B) 1 and 4 
C) 2 and 3 
D) 2 and 4 
E) 1 only

Question 6

Consumer surplus is

Accepted Answer

A) the difference between the market price of the good and the cost of the good. 
B) greater on the last unit sold than on the first unit sold. 
C) greater on the first unit sold than on the last unit sold. 
D) equal to price multiplied by quantity sold. 
E) equal to the area below the demand curve. 
A) the difference between the market price of the good and the cost of the good. 
B) greater on the last unit sold than on the first unit sold. 
C) greater on the first unit sold than on the last unit sold. 
D) equal to price multiplied by quantity sold. 
E) equal to the area below the demand curve.

Question 7

Majority rule allocates resources in the way that

Accepted Answer

A) politicians choose. 
B) a majority of voters choose. 
C) democracies choose. 
D) all voters choose. 
E) the military chooses. 
A) politicians choose. 
B) a majority of voters choose. 
C) democracies choose. 
D) all voters choose. 
E) the military chooses.

Question 8

Consumer surplus is

Accepted Answer

A) the difference between the maximum price consumers are willing to pay and the minimum price producers are willing to accept. 
B) the excess of the benefit received from a good over the amount paid for it. 
C) the total value to consumers of a good. 
D) equal to the area under the demand curve. 
E) the total amount paid for a good. 
A) the difference between the maximum price consumers are willing to pay and the minimum price producers are willing to accept. 
B) the excess of the benefit received from a good over the amount paid for it. 
C) the total value to consumers of a good. 
D) equal to the area under the demand curve. 
E) the total amount paid for a good.

Question 9

When the efficient quantity is produced

Accepted Answer

A) marginal social benefit equals marginal social cost. 
B) the quantity demanded equals the quantity supplied. 
C) resources are used in the activities in which they are most highly valued. 
D) the sum of consumer surplus and producer surplus is maximized. 
E) all of the above. 
A) marginal social benefit equals marginal social cost. 
B) the quantity demanded equals the quantity supplied. 
C) resources are used in the activities in which they are most highly valued. 
D) the sum of consumer surplus and producer surplus is maximized. 
E) all of the above.

Question 10

Use the figure below to answer the following questions.
   
Figure 5.3.1
-Refer to Figure 5.3.1.If the quantity produced is 200,

Accepted Answer

A) a deadweight loss exists. 
B) the sum of consumer surplus and producer surplus is maximized. 
C) production is efficient. 
D) the sum of consumer surplus and producer surplus is zero. 
E) deadweight loss is minimized. 
A) a deadweight loss exists. 
B) the sum of consumer surplus and producer surplus is maximized. 
C) production is efficient. 
D) the sum of consumer surplus and producer surplus is zero. 
E) deadweight loss is minimized.

Question 11

When a market price allocates a scarce resource

Accepted Answer

A) everyone in the economy can use the resource. 
B) only those who show interest can use the resource. 
C) willingness-to-pay is not an issue. 
D) ability to pay for the resource is less important than willingness-to-pay. 
E) only those who are willing and able to pay get the resource. 
A) everyone in the economy can use the resource. 
B) only those who show interest can use the resource. 
C) willingness-to-pay is not an issue. 
D) ability to pay for the resource is less important than willingness-to-pay. 
E) only those who are willing and able to pay get the resource.

Question 12

Marginal cost

Accepted Answer

A) is always less than price. 
B) can be negative. 
C) is the minimum price a producer must receive to induce him to offer one more unit of a good or service for sale. 
D) is greater than price. 
E) decreases as more of a good or service is produced. 
A) is always less than price. 
B) can be negative. 
C) is the minimum price a producer must receive to induce him to offer one more unit of a good or service for sale. 
D) is greater than price. 
E) decreases as more of a good or service is produced.

Question 13

The marginal cost of producing an additional basket of tomatoes is $5.00.The consumer is willing to pay a maximum of $9.00 for an additional basket.A farmer sells a basket of tomatoes for $6.00 each.The farmer receives a producer surplus from selling an additional basket of tomatoes equal to

Accepted Answer

A) $1.00. 
B) $3.00. 
C) $4.00. 
D) $5.00. 
E) $9.00. 
A) $1.00. 
B) $3.00. 
C) $4.00. 
D) $5.00. 
E) $9.00.

Question 14

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 15

Deadweight loss is

Accepted Answer

A) borne entirely by consumers. 
B) gained by producers. 
C) the social loss from inefficiency. 
D) not a problem with overproduction. 
E) all of the above. 
A) borne entirely by consumers. 
B) gained by producers. 
C) the social loss from inefficiency. 
D) not a problem with overproduction. 
E) all of the above.

Question 16

When a deadweight loss occurs in a market,we can be certain that

Accepted Answer

A) taxes have been imposed in the market. 
B) the market is a monopoly. 
C) there is underproduction in the market. 
D) the entire economy experiences a loss. 
E) both A and C. 
A) taxes have been imposed in the market. 
B) the market is a monopoly. 
C) there is underproduction in the market. 
D) the entire economy experiences a loss. 
E) both A and C.

Question 17

An oil painting has an opportunity cost of $1,000.The painting was purchased for $1,500.How much consumer surplus did the buyer obtain?

Accepted Answer

A) $1,500 
B) $1,000 
C) $500 
D) zero 
E) cannot be determined from the information given 
A) $1,500 
B) $1,000 
C) $500 
D) zero 
E) cannot be determined from the information given

Question 18

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 19

Use the figure below to answer the following questions.
   
Figure 5.2.2
-Refer to Figure 5.2.2 If the price is P?,consumer surplus is

Accepted Answer

A) A. 
B) B plus C. 
C) D plus E. 
D) A plus B plus C. 
E) A plus B plus C plus D plus E. 
A) A. 
B) B plus C. 
C) D plus E. 
D) A plus B plus C. 
E) A plus B plus C plus D plus E.

Question 20

A monopoly leads to

Accepted Answer

A) overproduction. 
B) underproduction. 
C) efficient production. 
D) maximization of consumer surplus. 
E) zero deadweight loss. 
A) overproduction. 
B) underproduction. 
C) efficient production. 
D) maximization of consumer surplus. 
E) zero deadweight loss.

Exam 5: Efficiency and Equity

An oil painting has a marginal cost of $1,000.The painting was bought for $1,500.How much producer surplus did the painter obtain?

Use the figure below to answer the following questions. Figure 5.2.2 -Refer to Figure 5.2.2 If the price falls from P? to P?,then the change in consumer surplus is

In a command system,resources are allocated by

Overproduction of a good means that

Consumer surplus is

Majority rule allocates resources in the way that

Consumer surplus is

When the efficient quantity is produced

Use the figure below to answer the following questions. Figure 5.3.1 -Refer to Figure 5.3.1.If the quantity produced is 200,

When a market price allocates a scarce resource

Marginal cost

The marginal cost of producing an additional basket of tomatoes is $5.00.The consumer is willing to pay a maximum of $9.00 for an additional basket.A farmer sells a basket of tomatoes for $6.00 each.The farmer receives a producer surplus from selling an additional basket of tomatoes equal to

According to the "big tradeoff,"

Deadweight loss is

When a deadweight loss occurs in a market,we can be certain that

An oil painting has an opportunity cost of $1,000.The painting was purchased for $1,500.How much consumer surplus did the buyer obtain?

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?

Use the figure below to answer the following questions. Figure 5.2.2 -Refer to Figure 5.2.2 If the price is P?,consumer surplus is

A monopoly leads to

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