Question 1

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 E

Question 2

Alvin Roth of Harvard University designed a system that matches donated kidneys to recipients waiting for such donations. This system takes into account the needs of each perspective recipient, their blood type, and the urgency of their case. Based on this information, this allocation method for kidneys is

Accepted Answer

A) first-come, first-served. 
B) force. 
C) personal characteristics. 
D) a contest. 
E) a lottery. 
A) first-come, first-served. 
B) force. 
C) personal characteristics. 
D) a contest. 
E) a lottery. C

Question 3

A contest allocates resources to

Accepted Answer

A) a winner or a group of winners. 
B) an athlete. 
C) a gambler. 
D) the government. 
E) private firms. 
A) a winner or a group of winners. 
B) an athlete. 
C) a gambler. 
D) the government. 
E) private firms. A

Question 4

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 5

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 6

When demand is perfectly elastic, then consumer surplus is

Accepted Answer

A) infinite. 
B) zero. 
C) 1.00. 
D) -1.00. 
E) between zero and 1.00. 
A) infinite. 
B) zero. 
C) 1.00. 
D) -1.00. 
E) between zero and 1.00.

Question 7

A modified version of utilitarianism proposed by John Rawls could be summarized as

Accepted Answer

A) transfer everything to the poor. 
B) transfer everything to the rich. 
C) expand the size of government. 
D) minimize the size of government. 
E) make the poorest as well off as possible. 
A) transfer everything to the poor. 
B) transfer everything to the rich. 
C) expand the size of government. 
D) minimize the size of government. 
E) make the poorest as well off as possible.

Question 8

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 9

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 10

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 11

When 2,000 hamburgers a day are produced, the marginal social benefit from the 2000th 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 2000th 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 12

Consumer surplus

Accepted Answer

A) will definitely be low for inexpensive goods. 
B) will definitely be high for inexpensive goods. 
C) will definitely be low for expensive goods. 
D) will definitely be high for expensive goods. 
E) may be low or high for any type of good, expensive or inexpensive, depending on the characteristics of demand. 
A) will definitely be low for inexpensive goods. 
B) will definitely be high for inexpensive goods. 
C) will definitely be low for expensive goods. 
D) will definitely be high for expensive goods. 
E) may be low or high for any type of good, expensive or inexpensive, depending on the characteristics of demand.

Question 13

A market demand curve is constructed by

Accepted Answer

A) adding the prices all consumers are willing to pay for any given quantity. 
B) determining the quantity supplied by all producers at all possible prices. 
C) subtracting the quantity supplied by all producers from the quantity demanded by all individuals at each price. 
D) adding the quantities demanded by all individuals at each price. 
E) subtracting the quantity demanded by all individuals from the quantity supplied by all producers at each price. 
A) adding the prices all consumers are willing to pay for any given quantity. 
B) determining the quantity supplied by all producers at all possible prices. 
C) subtracting the quantity supplied by all producers from the quantity demanded by all individuals at each price. 
D) adding the quantities demanded by all individuals at each price. 
E) subtracting the quantity demanded by all individuals from the quantity supplied by all producers at each price.

Question 14

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 15

The essence of philosopher Robert Nozick's proposal is that

Accepted Answer

A) fairness works on the basis of fair outcomes. 
B) fairness must be based on fairness of rules. 
C) involuntary exchange is fair. 
D) all of the above 
E) none of the above 
A) fairness works on the basis of fair outcomes. 
B) fairness must be based on fairness of rules. 
C) involuntary exchange is fair. 
D) all of the above 
E) none of the above

Question 16

Use the figure below to answer the following questions.
   
Figure 5.3.1
-Refer to Figure 5.3.1. If the price is $15 a unit,

Accepted Answer

A) production is efficient. 
B) marginal social benefit equals marginal social cost. 
C) deadweight loss is zero. 
D) the sum of consumer surplus and producer surplus is maximized. 
E) all of the above 
A) production is efficient. 
B) marginal social benefit equals marginal social cost. 
C) deadweight loss is zero. 
D) the sum of consumer surplus and producer surplus is maximized. 
E) all of the above

Question 17

Choose the correct statement.

Accepted Answer

A) The competitive market pushes the quantity produced to its efficient level. 
B) When the efficient quantity is produced in a competitive market, consumer surplus is maximized. 
C) Competitive equilibrium occurs when demand equals supply. 
D) When the efficient quantity is produced in a competitive market, producer surplus is maximized. 
E) When the efficient quantity is produced in a competitive market, producer surplus is minimized. 
A) The competitive market pushes the quantity produced to its efficient level. 
B) When the efficient quantity is produced in a competitive market, consumer surplus is maximized. 
C) Competitive equilibrium occurs when demand equals supply. 
D) When the efficient quantity is produced in a competitive market, producer surplus is maximized. 
E) When the efficient quantity is produced in a competitive market, producer surplus is minimized.

Question 18

Use the figure below to answer the following questions.
   
Figure 5.2.2
-Refer to Figure 5.2.2. If the price rises from P₀ to P₁, the change in 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 19

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 20

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.

Exam 5: Efficiency and Equity

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?

A contest allocates resources to

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?

It is efficient to produce an additional shirt if the

When demand is perfectly elastic, then consumer surplus is

A modified version of utilitarianism proposed by John Rawls could be summarized as

One big problem with the utilitarian ideal is that it

Economists tend to

Consumer surplus is

Consumer surplus

A market demand curve is constructed by

Marginal cost

The essence of philosopher Robert Nozick's proposal is that

Use the figure below to answer the following questions. Figure 5.3.1 -Refer to Figure 5.3.1. If the price is $15 a unit,

Choose the correct statement.

Use the figure below to answer the following questions. Figure 5.2.2 -Refer to Figure 5.2.2. If the price rises from P₀ to P₁, the change in consumer surplus is

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

Majority rule allocates resources in the way that

What Is Economics

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Governments Actions in Markets

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Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

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Perfect Competition

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Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

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Money, the Price Level, and Inflation

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