Question 1

When a market is efficient:

Accepted Answer

A) any additional changes to make someone better off will make someone else worse off. 
B) a central planner must be involved. 
C) total surplus is zero. 
D) any additional changes to make someone better off will reduce the deadweight loss. 
A) any additional changes to make someone better off will make someone else worse off. 
B) a central planner must be involved. 
C) total surplus is zero. 
D) any additional changes to make someone better off will reduce the deadweight loss. A

Question 2

Assume the market depicted in the graph is in equilibrium. If the market price is set to $14, which of the following statements is true?

Accepted Answer

A) Some consumers will gain surplus, but total surplus will fall. 
B) Some producers will gain surplus, but total surplus will fall. 
C) Some producers will lose surplus, but total surplus will rise. 
D) Some consumers will lose surplus, but total surplus will rise. 
A) Some consumers will gain surplus, but total surplus will fall. 
B) Some producers will gain surplus, but total surplus will fall. 
C) Some producers will lose surplus, but total surplus will rise. 
D) Some consumers will lose surplus, but total surplus will rise. B

Question 3

A market has four individuals, each considering buying a grill. Assume that grills come in only one size and model. Martina considers herself a grill-master, and finds a grill a necessity, so she is willing to pay $400 for a grill. Javier is a meat-lover, honing his grilling skills, and is willing to pay $350 for a grill. Kamal wants to impress his friends with his vegetable grilling skills and is willing to pay $320 for a grill. Lina loves grilled shrimp and thinks it might be cheaper in the long run if she grills her own shrimp instead of eating out at a restaurant, so she is willing to pay $200 for a grill.If the market price of grills falls from $375 to $330, which of the following statements is true?

Accepted Answer

A) Javier will join the market but will receive no consumer surplus. 
B) Javier and Kamal will join the market and together will receive $30 in consumer surplus. 
C) Martina will experience a decrease in consumer surplus of $45. 
D) Martina will experience an increase in consumer surplus of $45. 
A) Javier will join the market but will receive no consumer surplus. 
B) Javier and Kamal will join the market and together will receive $30 in consumer surplus. 
C) Martina will experience a decrease in consumer surplus of $45. 
D) Martina will experience an increase in consumer surplus of $45. D

Question 4

In a well-functioning competitive market, total surplus:

Accepted Answer

A) can never be zero. 
B) can never fall below zero. 
C) is always zero. 
D) is always below zero. 
A) can never be zero. 
B) can never fall below zero. 
C) is always zero. 
D) is always below zero.

Question 5

A market has four individuals, each considering buying a grill. Assume that grills come in only one size and model. Martina considers herself a grill-master, and finds a grill a necessity, so she is willing to pay $400 for a grill. Javier is a meat-lover, honing his grilling skills, and is willing to pay $350 for a grill. Kamal wants to impress his friends with his vegetable grilling skills and is willing to pay $320 for a grill. Lina loves grilled shrimp and thinks it might be cheaper in the long run if she grills her own shrimp instead of eating out at a restaurant, so she is willing to pay $200 for a grill.If the market price of grills is $300, what would total consumer surplus be?

Accepted Answer

A) $1,070 
B) $170 
C) $200 
D) $80 
A) $1,070 
B) $170 
C) $200 
D) $80

Question 6

When a market is missing:

Accepted Answer

A) deadweight loss will increase, but only if more units are exchanged. 
B) the government must create the market artificially. 
C) total surplus could increase through the creation of a new market. 
D) consumers' willingness to pay is too low to sustain the efficient quantity. 
A) deadweight loss will increase, but only if more units are exchanged. 
B) the government must create the market artificially. 
C) total surplus could increase through the creation of a new market. 
D) consumers' willingness to pay is too low to sustain the efficient quantity.

Question 7

According to the graph shown, if the market goes from equilibrium to having its price set at $10:

Accepted Answer

A)  area (C + 
E)  becomes deadweight loss. 
B)  area (
B)  transfers from consumer surplus to producer surplus. 
C)  $12 of surplus transfers from consumers to producers. 
D)  All of these are correct. 
A)  area (C + 
E)  becomes deadweight loss. 
B)  area (
B)  transfers from consumer surplus to producer surplus. 
C)  $12 of surplus transfers from consumers to producers. 
D)  All of these are correct.

Question 8

Consider a market that is currently in equilibrium. If the demand curve shifts to the right and a new equilibrium is reached:

Accepted Answer

A) total surplus will increase. 
B) consumer surplus may increase or decrease. 
C) producer surplus will increase. 
D) producer surplus will decrease. 
A) total surplus will increase. 
B) consumer surplus may increase or decrease. 
C) producer surplus will increase. 
D) producer surplus will decrease.

Question 9

Assume the market depicted in the graph is in equilibrium. What is total surplus?

Accepted Answer

A) $160 
B) $180 
C) $320 
D) $360 
A) $160 
B) $180 
C) $320 
D) $360

Question 10

Assume there are three hardware stores, each willing to sell one standard model hammer in a given time period. House Depot could offer a hammer for a minimum of $7. Lace Hardware could offer a hammer for a minimum of $10. Bob's Hardware could offer a hammer for a minimum of $13.If the market price of hammers is $10, which of the following statements is true?

Accepted Answer

A) Only House Depot would have positive surplus by supplying hammers to the market. 
B) Only House Depot and Lace Hardware would have positive surplus by supplying hammers to the market. 
C) House Depot, Lace Hardware, and Bob's Hardware would all supply hammers to the market, but Bob's would have negative surplus. 
D) Only House Depot and Bob's Hardware would supply hammers to the market. 
A) Only House Depot would have positive surplus by supplying hammers to the market. 
B) Only House Depot and Lace Hardware would have positive surplus by supplying hammers to the market. 
C) House Depot, Lace Hardware, and Bob's Hardware would all supply hammers to the market, but Bob's would have negative surplus. 
D) Only House Depot and Bob's Hardware would supply hammers to the market.

Question 11

Assume the market depicted in the graph is in equilibrium. If the market goes from equilibrium to having its price set at $18:

Accepted Answer

A) consumer surplus will rise by $6,750. 
B) producer surplus will fall by $4,500. 
C) total surplus will rise by $2,250. 
D) total surplus will fall by $2,250. 
A) consumer surplus will rise by $6,750. 
B) producer surplus will fall by $4,500. 
C) total surplus will rise by $2,250. 
D) total surplus will fall by $2,250.

Question 12

Total surplus can be increased by:

Accepted Answer

A) policies that help people do business more efficiently. 
B) technologies that help people share more and better information. 
C) increasing the availability of accurate information. 
D) All of these can increase total surplus. 
A) policies that help people do business more efficiently. 
B) technologies that help people share more and better information. 
C) increasing the availability of accurate information. 
D) All of these can increase total surplus.

Question 13

Assume the market depicted in the graph is in equilibrium. What is total surplus?

Accepted Answer

A) $40 
B) $64 
C) $80 
D) $160 
A) $40 
B) $64 
C) $80 
D) $160

Question 14

Assume the market depicted in the graph is in equilibrium. Total surplus consists of area(s):

Accepted Answer

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

Question 15

Assume the market depicted in the graph is in equilibrium. What is consumer surplus?

Accepted Answer

A) $30 
B) $80 
C) $120 
D) $200 
A) $30 
B) $80 
C) $120 
D) $200

Question 16

For which of the following reasons might a market be missing?

Accepted Answer

A) Public policy prevents the market from existing. 
B) The production of a particular good is banned. 
C) Potential buyers and sellers lack accurate information. 
D) All of these are reasons why a market might be missing. 
A) Public policy prevents the market from existing. 
B) The production of a particular good is banned. 
C) Potential buyers and sellers lack accurate information. 
D) All of these are reasons why a market might be missing.

Question 17

According to the graph shown, if the market goes from equilibrium to having its price set at $10:

Accepted Answer

A) deadweight loss will become bigger than total surplus. 
B) consumer surplus will definitely fall. 
C) total surplus may rise or fall. 
D) $12 of surplus will be transferred from producers to consumers. 
A) deadweight loss will become bigger than total surplus. 
B) consumer surplus will definitely fall. 
C) total surplus may rise or fall. 
D) $12 of surplus will be transferred from producers to consumers.

Question 18

A market to buy and sell organs:

Accepted Answer

A) would generate consumer surplus, but could never generate producer surplus. 
B) has been banned by public policy because its creation would cause excessive deadweight loss. 
C) would create surplus for those who would interact in it if it existed. 
D) has not been created because it would redistribute surplus from producers to consumers. 
A) would generate consumer surplus, but could never generate producer surplus. 
B) has been banned by public policy because its creation would cause excessive deadweight loss. 
C) would create surplus for those who would interact in it if it existed. 
D) has not been created because it would redistribute surplus from producers to consumers.

Question 19

Assume the market depicted in the graph is in equilibrium. What is producer surplus?

Accepted Answer

A) $360 
B) $40 
C) $160 
D) $120 
A) $360 
B) $40 
C) $160 
D) $120

Question 20

Assume the market depicted in the graph is in equilibrium. If the price is subsequently set at $28, which of the following statements is true?
I. Some producers will gain surplus.
II. All consumers will lose surplus.
III. Total surplus may increase or decrease.

Accepted Answer

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

When a market is efficient:

Assume the market depicted in the graph is in equilibrium. If the market price is set to $14, which of the following statements is true?

In a well-functioning competitive market, total surplus:

When a market is missing:

According to the graph shown, if the market goes from equilibrium to having its price set at $10:

Consider a market that is currently in equilibrium. If the demand curve shifts to the right and a new equilibrium is reached:

Assume the market depicted in the graph is in equilibrium. What is total surplus?

Assume the market depicted in the graph is in equilibrium. If the market goes from equilibrium to having its price set at $18:

Total surplus can be increased by:

Assume the market depicted in the graph is in equilibrium. What is total surplus?

Assume the market depicted in the graph is in equilibrium. Total surplus consists of area(s):

Assume the market depicted in the graph is in equilibrium. What is consumer surplus?

For which of the following reasons might a market be missing?

According to the graph shown, if the market goes from equilibrium to having its price set at $10:

A market to buy and sell organs:

Assume the market depicted in the graph is in equilibrium. What is producer surplus?

Assume the market depicted in the graph is in equilibrium. If the price is subsequently set at $28, which of the following statements is true? I. Some producers will gain surplus. II. All consumers will lose surplus. III. Total surplus may increase or decrease.

Economics and Life

Specialization and Exchange

Markets

Elasticity

Government Intervention

Consumer Behavior

Behavioral Economics: a Closer Look at Decision Making

Game Theory and Strategic Thinking

Information

Time and Uncertainty

The Costs of Production

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

The Facts of Production

International Trade

Externalities

Public Goods and Common Resources

Taxation and the Public Budget

Poverty, Inequality, and Discrimination

Political Choices

Public Policy and Choice Architecture

Filters

Exam 5: Efficiency

When a market is efficient:

Assume the market depicted in the graph is in equilibrium. If the market price is set to $14, which of the following statements is true?

In a well-functioning competitive market, total surplus:

When a market is missing:

According to the graph shown, if the market goes from equilibrium to having its price set at $10:

Consider a market that is currently in equilibrium. If the demand curve shifts to the right and a new equilibrium is reached:

Assume the market depicted in the graph is in equilibrium. What is total surplus?

Assume the market depicted in the graph is in equilibrium. If the market goes from equilibrium to having its price set at $18:

Total surplus can be increased by:

Assume the market depicted in the graph is in equilibrium. What is total surplus?

Assume the market depicted in the graph is in equilibrium. Total surplus consists of area(s):

Assume the market depicted in the graph is in equilibrium. What is consumer surplus?

For which of the following reasons might a market be missing?

According to the graph shown, if the market goes from equilibrium to having its price set at $10:

A market to buy and sell organs:

Assume the market depicted in the graph is in equilibrium. What is producer surplus?

Assume the market depicted in the graph is in equilibrium. If the price is subsequently set at $28, which of the following statements is true? I. Some producers will gain surplus. II. All consumers will lose surplus. III. Total surplus may increase or decrease.

Economics and Life

Specialization and Exchange

Markets

Elasticity

Government Intervention

Consumer Behavior

Behavioral Economics: a Closer Look at Decision Making

Game Theory and Strategic Thinking

Information

Time and Uncertainty

The Costs of Production

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

The Facts of Production

International Trade

Externalities

Public Goods and Common Resources

Taxation and the Public Budget

Poverty, Inequality, and Discrimination

Political Choices

Public Policy and Choice Architecture

Filters