Question 1

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

Accepted Answer

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

Question 2

Economists tend to

Accepted Answer

A) agree about efficiency and about fairness. 
B) agree about efficiency but disagree about fairness. 
C) disagree about efficiency but agree about fairness. 
D) be more agreeable than philosophers about fairness. 
E) be more disagreeable than philosophers about fairness. 
A) agree about efficiency and about fairness. 
B) agree about efficiency but disagree about fairness. 
C) disagree about efficiency but agree about fairness. 
D) be more agreeable than philosophers about fairness. 
E) be more disagreeable than philosophers about fairness.

Question 3

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 4

Use the figure below to answer the following questions.
   
Figure 5.2.2
-Refer to Figure 5.2.2.If the price is P0,then the value of the last unit consumed is

Accepted Answer

A) P0. 
B) P1. 
C) equal to area A + B + C. 
D) 0. 
E) P1- P0. 
A) P0. 
B) P1. 
C) equal to area A + B + C. 
D) 0. 
E) P1- P0.

Question 5

The idea of fairness that has been developed to deal with the big tradeoff is the idea that ________.

Accepted Answer

A) fair distribution of the economic pie is the one that costs the richest person the least amount of money 
B) fair distribution of the economic pie is the one that makes everyone equal 
C) we should treat other people as we would like to be treated 
D) fair distribution of the economic pie is the one that makes the poorest person as well off as possible 
E) we need to make a bigger economic pie 
A) fair distribution of the economic pie is the one that costs the richest person the least amount of money 
B) fair distribution of the economic pie is the one that makes everyone equal 
C) we should treat other people as we would like to be treated 
D) fair distribution of the economic pie is the one that makes the poorest person as well off as possible 
E) we need to make a bigger economic pie

Question 6

Which of the following ideas describes the concept of "utilitarianism"?
I.Utilitarianism was introduced in the 1930s.
II.Utilitarians believed that a society should strive to make as many people as happy as possible.
III.Utilitarians claimed that taking money from rich people and giving it to poorer people would not make an economy better off.

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 7

Consider the market for hot dogs.If this market becomes a monopoly,then there will be

Accepted Answer

A) underproduction of hot dogs. 
B) overproduction of hot dogs. 
C) a deadweight loss in the market for hot dogs. 
D) an efficient quantity of hot dogs. 
E) both A and C are correct. 
A) underproduction of hot dogs. 
B) overproduction of hot dogs. 
C) a deadweight loss in the market for hot dogs. 
D) an efficient quantity of hot dogs. 
E) both A and C are correct.

Question 8

Use the table below to answer the following questions.
Table 5.2.1
  
-Refer to Table 5.2.1.If the price is $6 a unit,the producer surplus on the third unit is

Accepted Answer

A) $3. 
B) $6. 
C) $5. 
D) $4. 
E) $2. 
A) $3. 
B) $6. 
C) $5. 
D) $4. 
E) $2.

Question 9

The main idea of fairness is based on which of the following rules?
A.The state must enforce laws that establish and protect private property.
B.Goods and services that produce externalities must be owned by the state,monopolies must be eliminated,and common resources must follow the rules of the competitive market.
C.The state must enforce tax laws so that after taxes are paid and benefits are received,the gap between rich and poor is as small as possible.
D.Private property may be transferred from one person to another only by voluntary exchange.

Accepted Answer

A) Rules a and d. 
B) Rules b and d. 
C) Rules b and c. 
D) Rules a and c. 
E) The main idea of fairness is not based on any of these rules. 
A) Rules a and d. 
B) Rules b and d. 
C) Rules b and c. 
D) Rules a and c. 
E) The main idea of fairness is not based on any of these rules.

Question 10

Choose the statement or statements that are correct.
I.The value of one more unit of a good or service is its marginal benefit.
II.Marginal benefit equals the total amount we spend on a good or service.
III.Marginal benefit is the maximum amount willingly paid for another unit of a good or service.

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.

Question 11

Suppose that the Hot Dog House can produce hotdogs at a constant cost of $0.25 each.If the Hot Dog House sells hotdogs for $0.50 each,then the Hot Dog House

Accepted Answer

A) receives a producer surplus. 
B) will raise the price of hot dogs. 
C) will allow consumers to receive a consumer surplus. 
D) has no producer surplus. 
E) has an opportunity cost of $0.50 a hot dog. 
A) receives a producer surplus. 
B) will raise the price of hot dogs. 
C) will allow consumers to receive a consumer surplus. 
D) has no producer surplus. 
E) has an opportunity cost of $0.50 a hot dog.

Question 12

What method of resource allocation depends on willingness-to-pay and ability-to-pay?

Accepted Answer

A) command 
B) lottery 
C) market price 
D) first-come, first-served 
E) force 
A) command 
B) lottery 
C) market price 
D) first-come, first-served 
E) force

Question 13

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

Question 14

Use the information below to answer the following question.
   
Figure 5.3.3
-Consider the demand and supply curves in Figure 5.3.3.If the market is at the competitive equilibrium,which area in the diagram indicates producer surplus?

Accepted Answer

A) ABC 
B) AEC 
C) EBC 
D) 0BCD 
E) 0ECD 
A) ABC 
B) AEC 
C) EBC 
D) 0BCD 
E) 0ECD

Question 15

A new car has a sticker price of $35,000.Fred decided that he would pay no more than $32,000 for this car.He bought the car for $31,000.Fred obtained a consumer surplus of

Accepted Answer

A) $35,000. 
B) $32,000. 
C) $4,000. 
D) $3,000. 
E) $1,000. 
A) $35,000. 
B) $32,000. 
C) $4,000. 
D) $3,000. 
E) $1,000.

Question 16

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 17

One big problem with the utilitarian ideal is that it

Accepted Answer

A) ignores fairness. 
B) ignores equality. 
C) ignores the costs of making income transfers. 
D) all of the above. 
E) none of the above. 
A) ignores fairness. 
B) ignores equality. 
C) ignores the costs of making income transfers. 
D) all of the above. 
E) none of the above.

Question 18

The symmetry principle is based on

Accepted Answer

A) the idea that income should be redistributed from the rich to the poor. 
B) the idea that people in similar situations should be treated similarly. 
C) the fact that taxes create a deadweight loss. 
D) the idea that markets operate fairly. 
E) the idea that there is symmetry between buyers and sellers in a market. 
A) the idea that income should be redistributed from the rich to the poor. 
B) the idea that people in similar situations should be treated similarly. 
C) the fact that taxes create a deadweight loss. 
D) the idea that markets operate fairly. 
E) the idea that there is symmetry between buyers and sellers in a market.

Question 19

Charlene is willing to pay $5.00 for a sandwich.If the price of a sandwich is ________,Charlene ________.

Accepted Answer

A) $4.00;does not receive any consumer surplus 
B) $4.00;receives a consumer surplus 
C) $6.00;receives a consumer surplus 
D) $6.00;receives a marginal cost 
E) $4.00;receives a producer surplus 
A) $4.00;does not receive any consumer surplus 
B) $4.00;receives a consumer surplus 
C) $6.00;receives a consumer surplus 
D) $6.00;receives a marginal cost 
E) $4.00;receives a producer surplus

Question 20

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.

Exam 5: Efficiency and Equity

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

Economists tend to

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

Use the figure below to answer the following questions. Figure 5.2.2 -Refer to Figure 5.2.2.If the price is P0,then the value of the last unit consumed is

The idea of fairness that has been developed to deal with the big tradeoff is the idea that ________.

Consider the market for hot dogs.If this market becomes a monopoly,then there will be

Use the table below to answer the following questions. Table 5.2.1 -Refer to Table 5.2.1.If the price is $6 a unit,the producer surplus on the third unit is

Choose the statement or statements that are correct. I.The value of one more unit of a good or service is its marginal benefit. II.Marginal benefit equals the total amount we spend on a good or service. III.Marginal benefit is the maximum amount willingly paid for another unit of a good or service.

Suppose that the Hot Dog House can produce hotdogs at a constant cost of $0.25 each.If the Hot Dog House sells hotdogs for $0.50 each,then the Hot Dog House

What method of resource allocation depends on willingness-to-pay and ability-to-pay?

All of the following statements are true except ________.

Use the information below to answer the following question. Figure 5.3.3 -Consider the demand and supply curves in Figure 5.3.3.If the market is at the competitive equilibrium,which area in the diagram indicates producer surplus?

A new car has a sticker price of $35,000.Fred decided that he would pay no more than $32,000 for this car.He bought the car for $31,000.Fred obtained a consumer surplus of

A supply curve is

One big problem with the utilitarian ideal is that it

The symmetry principle is based on

Charlene is willing to pay $5.00 for a sandwich.If the price of a sandwich is ________,Charlene ________.

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

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

Filters

Use the figure below to answer the following questions. Figure 5.2.2 -Refer to Figure 5.2.2.If the price is P₀,then the value of the last unit consumed is

Charlene is willing to pay $5.00 for a sandwich.If the price of a sandwich is ,Charlene .