Question 1

The two big approaches to thinking about fairness are

Accepted Answer

A) it's not fair if my income is less than yours and it's not fair if my opportunities in life are less than yours. 
B) it's not fair if the result isn't fair and it's not fair if the rules aren't fair. 
C) the fairness of democracy and the fairness of central planning. 
D) the fairness of income equality and the fairness of educational equality. 
E) it's not fair if you are treated unkindly and it's not fair if you treat someone unkindly. 
A) it's not fair if my income is less than yours and it's not fair if my opportunities in life are less than yours. 
B) it's not fair if the result isn't fair and it's not fair if the rules aren't fair. 
C) the fairness of democracy and the fairness of central planning. 
D) the fairness of income equality and the fairness of educational equality. 
E) it's not fair if you are treated unkindly and it's not fair if you treat someone unkindly.

Question 2

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 3

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

Question 4

The demand curve for a good is the same as the

Accepted Answer

A) marginal cost curve of that good. 
B) marginal benefit curve for that good. 
C) consumer surplus curve of that good. 
D) production possibilities frontier (PPF). 
E) producer surplus from that good. 
A) marginal cost curve of that good. 
B) marginal benefit curve for that good. 
C) consumer surplus curve of that good. 
D) production possibilities frontier (PPF). 
E) producer surplus from that good.

Question 5

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 6

Suppose the market for diamonds is a monopoly. We can expect

Accepted Answer

A) underproduction of diamonds. 
B) overproduction of diamonds. 
C) marginal social benefit to equal marginal social cost in the diamond market. 
D) an efficient quantity of diamonds. 
E) the allocation of diamonds to be first-come, first-served. 
A) underproduction of diamonds. 
B) overproduction of diamonds. 
C) marginal social benefit to equal marginal social cost in the diamond market. 
D) an efficient quantity of diamonds. 
E) the allocation of diamonds to be first-come, first-served.

Question 7

Producer 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 amount received from the sale of a good or service over the cost of producing it. 
C) equal to the marginal cost of production. 
D) equal to the area under the supply curve. 
E) the total amount paid for the 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 amount received from the sale of a good or service over the cost of producing it. 
C) equal to the marginal cost of production. 
D) equal to the area under the supply curve. 
E) the total amount paid for the good.

Question 8

Restaurants don't use market price to allocate their tables because

Accepted Answer

A) they would have to watch the price of a table at other restaurants to keep competitive. 
B) restaurants would have to advertise the price. 
C) the price of a table would fluctuate hourly, customer uncertainty would deter patrons, and lower demand would bring lower profit. 
D) they would have to continually change the supply of tables to keep the price constant. 
E) the price of a table would eventually fall to zero and restaurants would incur a loss. 
A) they would have to watch the price of a table at other restaurants to keep competitive. 
B) restaurants would have to advertise the price. 
C) the price of a table would fluctuate hourly, customer uncertainty would deter patrons, and lower demand would bring lower profit. 
D) they would have to continually change the supply of tables to keep the price constant. 
E) the price of a table would eventually fall to zero and restaurants would incur a loss.

Question 9

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 10

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.

Question 11

A used truck has a sticker price of $21,000. Arthur decided that he would pay no more than $19,500 for this truck. He bought the truck for $19,250. Arthur obtained a consumer surplus of

Accepted Answer

A) $21,000. 
B) $19,500. 
C) $19,250. 
D) $1,750. 
E) $250. 
A) $21,000. 
B) $19,500. 
C) $19,250. 
D) $1,750. 
E) $250.

Question 12

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 13

The market for strawberries is perfectly competitive. Joe and Haley are consuming the same amount of strawberries, but Joe's demand is much more elastic than Haley's. Which statement is true?

Accepted Answer

A) Joe's consumer surplus exceeds Haley's. 
B) Haley's consumer surplus equals Joe's. 
C) Haley's consumer surplus exceeds Joe's. 
D) In comparing consumer surpluses, no statement can be made. 
E) Any comparison of consumer surplus depends on the price of strawberries. 
A) Joe's consumer surplus exceeds Haley's. 
B) Haley's consumer surplus equals Joe's. 
C) Haley's consumer surplus exceeds Joe's. 
D) In comparing consumer surpluses, no statement can be made. 
E) Any comparison of consumer surplus depends on the price of strawberries.

Question 14

At West, a restaurant in Vancouver, reservations are essential. At Cibo, a restaurant in downtown Vancouver, reservations are recommended. At Vij's, a restaurant near the University of British Columbia, reservations are not accepted. West allocates scarce table resources by ________, Cibo allocates scarce table resources by ________, and Vij's allocates scarce table resources by ________.

Accepted Answer

A) market price; market price and force; force 
B) personal characteristics; personal characteristics and first-come, first-served; first-come, first-served 
C) a command system; a combination of a command system and first-come, first-served; first-come, first-served 
D) first-come, first-served; first-come, first-served; first-come, first-served 
E) personal characteristics; personal characteristics; first-come, first-served 
A) market price; market price and force; force 
B) personal characteristics; personal characteristics and first-come, first-served; first-come, first-served 
C) a command system; a combination of a command system and first-come, first-served; first-come, first-served 
D) first-come, first-served; first-come, first-served; first-come, first-served 
E) personal characteristics; personal characteristics; first-come, first-served

Question 15

If production is not at an efficient level, which of the following must be true?

Accepted Answer

A) Marginal social benefit exceeds marginal social cost. 
B) Marginal social cost exceeds marginal social benefit. 
C) Production will increase. 
D) Production will decrease. 
E) none of the above 
A) Marginal social benefit exceeds marginal social cost. 
B) Marginal social cost exceeds marginal social benefit. 
C) Production will increase. 
D) Production will decrease. 
E) none 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

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 18

In the Canadian economy, the command system

Accepted Answer

A) is not used at all. 
B) is used occasionally inside firms and government departments. 
C) is used only by private companies. 
D) is used extensively in place of markets. 
E) is used extensively inside firms and government departments. 
A) is not used at all. 
B) is used occasionally inside firms and government departments. 
C) is used only by private companies. 
D) is used extensively in place of markets. 
E) is used extensively inside firms and government departments.

Question 19

Market demand is the

Accepted Answer

A) sum of the prices that each individual is willing to pay for each quantity demanded. 
B) sum of the quantity demanded by each individual at each price. 
C) sum of the consumer surplus of each individual. 
D) difference between the maximum amount each individual is willing to pay for a good and the market price. 
E) difference between the market price and the maximum amount each individual is willing to pay for a good. 
A) sum of the prices that each individual is willing to pay for each quantity demanded. 
B) sum of the quantity demanded by each individual at each price. 
C) sum of the consumer surplus of each individual. 
D) difference between the maximum amount each individual is willing to pay for a good and the market price. 
E) difference between the market price and the maximum amount each individual is willing to pay for a good.

Question 20

The price of pizza increases. Everything else remaining the same, the consumer surplus from pizza

Accepted Answer

A) increases. 
B) is greater than the producer surplus from pizza. 
C) is less than the producer surplus from pizza. 
D) does not change. 
E) decreases. 
A) increases. 
B) is greater than the producer surplus from pizza. 
C) is less than the producer surplus from pizza. 
D) does not change. 
E) decreases.

Exam 5: Efficiency and Equity

The two big approaches to thinking about fairness are

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?

Deadweight loss is

The demand curve for a good is the same as the

Lotteries allocate resources to

Suppose the market for diamonds is a monopoly. We can expect

Producer surplus is

Restaurants don't use market price to allocate their tables because

A negative externality results in

A monopoly leads to

A used truck has a sticker price of $21,000. Arthur decided that he would pay no more than $19,500 for this truck. He bought the truck for $19,250. Arthur obtained a consumer surplus of

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

The market for strawberries is perfectly competitive. Joe and Haley are consuming the same amount of strawberries, but Joe's demand is much more elastic than Haley's. Which statement is true?

If production is not at an efficient level, which of the following must be true?

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

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

In the Canadian economy, the command system

Market demand is the

The price of pizza increases. Everything else remaining the same, the consumer surplus from pizza

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