Question 1

Which of the following lead to an inefficient outcome?
I. Decreasing marginal social benefit
II. Taxes
III. High transactions cost

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 2

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 3

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 4

Which of the following can lead to an inefficient outcome?
I. Price regulations
II. Increasing marginal cost
III. Monopoly

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 5

The winner of the men's or women's tennis singles at the Canadian Open is paid twice as much as the runner-up, but it takes two players to have a singles final. This compensation arrangement is

Accepted Answer

A) always unfair. 
B) fair by the results view because the players make a salary that is higher than the average Canadian and fair by the rules view because the players agree to abide by the rules of tennis. 
C) fair by the results view because the prize money is not equally distributed, and fair by the rules view because the players voluntarily enter the tournament. 
D) always fair. 
E) fair by the rules view because the prize money is not equally distributed, and fair by the results view because the players voluntarily enter the tournament. 
A) always unfair. 
B) fair by the results view because the players make a salary that is higher than the average Canadian and fair by the rules view because the players agree to abide by the rules of tennis. 
C) fair by the results view because the prize money is not equally distributed, and fair by the rules view because the players voluntarily enter the tournament. 
D) always fair. 
E) fair by the rules view because the prize money is not equally distributed, and fair by the results view because the players voluntarily enter the tournament.

Question 6

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 7

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 8

The maximum price a consumer is willing to pay for a good is the

Accepted Answer

A) consumer surplus. 
B) value of the good. 
C) opportunity cost of producing the good. 
D) minimum supply-price. 
E) marginal cost of the good. 
A) consumer surplus. 
B) value of the good. 
C) opportunity cost of producing the good. 
D) minimum supply-price. 
E) marginal cost of the good.

Question 9

A market supply curve is

Accepted Answer

A) the horizontal sum of the individual supply curves. 
B) downward sloping. 
C) the vertical sum of the individual supply curves. 
D) downward sloping initially, and then upward sloping. 
E) represented by a line with a constant slope. 
A) the horizontal sum of the individual supply curves. 
B) downward sloping. 
C) the vertical sum of the individual supply curves. 
D) downward sloping initially, and then upward sloping. 
E) represented by a line with a constant slope.

Question 10

When a scarce resource is allocated to someone who is the winner, the method of resource allocation is

Accepted Answer

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

Question 11

Sunscreen factories are required to limit production to 100 bottles a day, which is less than the efficient quantity. The 100 bottles could be allocated to beachgoers by ________, which is ________ by the fair rules idea of fairness and ________ by the fair results idea of fairness.

Accepted Answer

A) first-come first-served; fair; unfair 
B) personal characteristics; fair; fair 
C) force; unfair; fair 
D) majority rule; fair; fair 
E) first-come first-served; fair; fair 
A) first-come first-served; fair; unfair 
B) personal characteristics; fair; fair 
C) force; unfair; fair 
D) majority rule; fair; fair 
E) first-come first-served; fair; fair

Question 12

Choose the correct statement.

Accepted Answer

A) Producer surplus is an external cost. 
B) Consumer surplus is an external benefit. 
C) A government subsidy paid to a producer is an external benefit. 
D) Consumer surplus is an external cost. 
E) Subsidies lead to overproduction. 
A) Producer surplus is an external cost. 
B) Consumer surplus is an external benefit. 
C) A government subsidy paid to a producer is an external benefit. 
D) Consumer surplus is an external cost. 
E) Subsidies lead to overproduction.

Question 13

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 14

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 15

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 16

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 17

If you increase your consumption of pop by one additional can a week, your marginal benefit from this last can is $1.00. For you, the ________ this last can of pop is $1.00

Accepted Answer

A) price of 
B) marginal cost of 
C) value from 
D) consumer surplus from 
E) producer surplus 
A) price of 
B) marginal cost of 
C) value from 
D) consumer surplus from 
E) producer surplus

Question 18

Sally and Eric are the only people in an economy. Sally buys 3 bottles of water when the price is $2 a bottle and 4 bottles of water when the price is $1 a bottle. Eric buys 10 bottles of water when the price is $0.50 a bottle and 5 bottles of water when the price is $1 a bottle. In the market for water, the quantity demanded

Accepted Answer

A) increases as the price rises. 
B) is 4 bottles at a price of $1 a bottle. 
C) increases as the price falls. 
D) is 8 bottles at a price of $2 a bottle. 
E) is 15 bottles at a price of $0.50 a bottle. 
A) increases as the price rises. 
B) is 4 bottles at a price of $1 a bottle. 
C) increases as the price falls. 
D) is 8 bottles at a price of $2 a bottle. 
E) is 15 bottles at a price of $0.50 a bottle.

Question 19

Adam earns $25,000 a year and Bob earns $45,000 a year, and they both have the same marginal benefit curve. According to the utilitarian view, if a dollar is transferred from Bob to Adam, then

Accepted Answer

A) the change in Adam's marginal benefit plus the change in Bob's marginal benefit equals zero. 
B) Adam's marginal benefit decreases by more than bob's marginal benefit increases. 
C) Adam's marginal benefit increases by more than Bob's marginal benefit decreases. 
D) the change in Adam's marginal benefit plus the change in Bob's marginal benefit is negative. 
E) Bob's marginal benefit increases because he is being kind to Adam. 
A) the change in Adam's marginal benefit plus the change in Bob's marginal benefit equals zero. 
B) Adam's marginal benefit decreases by more than bob's marginal benefit increases. 
C) Adam's marginal benefit increases by more than Bob's marginal benefit decreases. 
D) the change in Adam's marginal benefit plus the change in Bob's marginal benefit is negative. 
E) Bob's marginal benefit increases because he is being kind to Adam.

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 P₀, 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

Which of the following lead to an inefficient outcome? I. Decreasing marginal social benefit II. Taxes III. High transactions cost

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,

Overproduction of a good means that

Which of the following can lead to an inefficient outcome? I. Price regulations II. Increasing marginal cost III. Monopoly

The winner of the men's or women's tennis singles at the Canadian Open is paid twice as much as the runner-up, but it takes two players to have a singles final. This compensation arrangement is

In a command system, resources are allocated by

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?

The maximum price a consumer is willing to pay for a good is the

A market supply curve is

When a scarce resource is allocated to someone who is the winner, the method of resource allocation is

Sunscreen factories are required to limit production to 100 bottles a day, which is less than the efficient quantity. The 100 bottles could be allocated to beachgoers by ________, which is ________ by the fair rules idea of fairness and ________ by the fair results idea of fairness.

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 is P₀, then the value of the last unit consumed is

When the efficient quantity is produced

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

If you increase your consumption of pop by one additional can a week, your marginal benefit from this last can is $1.00. For you, the ________ this last can of pop is $1.00

Adam earns $25,000 a year and Bob earns $45,000 a year, and they both have the same marginal benefit curve. According to the utilitarian view, if a dollar is transferred from Bob to Adam, then

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

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Governments 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 Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

Macro Only: International Trade Policy

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Sunscreen factories are required to limit production to 100 bottles a day, which is less than the efficient quantity. The 100 bottles could be allocated to beachgoers by , which is by the fair rules idea of fairness and by the fair results idea of fairness.