Question 1

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 2

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 3

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 4

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 5

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 6

An external cost

Accepted Answer

A) is a marginal benefit. 
B) results in underproduction. 
C) is a payment from the government to a producer. 
D) is a cost that affects someone other than the seller. 
E) is a payment from a producer to the government. 
A) is a marginal benefit. 
B) results in underproduction. 
C) is a payment from the government to a producer. 
D) is a cost that affects someone other than the seller. 
E) is a payment from a producer to the government.

Question 7

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 8

A consumer will buy a good when

Accepted Answer

A) consumer surplus is greater than or equal to the price. 
B) marginal benefit is positive. 
C) marginal benefit is greater than or equal to the price. 
D) consumer surplus is positive. 
E) consumer surplus is greater than producer surplus. 
A) consumer surplus is greater than or equal to the price. 
B) marginal benefit is positive. 
C) marginal benefit is greater than or equal to the price. 
D) consumer surplus is positive. 
E) consumer surplus is greater than producer surplus.

Question 9

Use the figure below to answer the following question.
   
Figure 5.3.4
-Refer to Figure 5.3.4.The graph shows the market for cell phones.When production is efficient, total surplus is ________ and the cost of producing the cell phones sold is ________.

Accepted Answer

A) $2,250; $2,250 
B) $2,250; $3,000 
C) $1,500; $750 
D) $750; $1,500 
E) $1,500; $2,250 
A) $2,250; $2,250 
B) $2,250; $3,000 
C) $1,500; $750 
D) $750; $1,500 
E) $1,500; $2,250

Question 10

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 11

Use the figure below to answer the following questions.
   
Figure 5.2.1
-Consider the demand curve in Figure 5.2.1.What is the value of the first unit of the good?

Accepted Answer

A) $10 
B) $9 
C) $8 
D) $5 
E) $4 
A) $10 
B) $9 
C) $8 
D) $5 
E) $4

Question 12

Producer surplus is

Accepted Answer

A) the value producers place on a good minus the price of the good. 
B) the price of the good minus the value producers place on it. 
C) zero if price equals marginal cost. 
D) greater the more elastic the supply of the good. 
E) equal to consumer surplus. 
A) the value producers place on a good minus the price of the good. 
B) the price of the good minus the value producers place on it. 
C) zero if price equals marginal cost. 
D) greater the more elastic the supply of the good. 
E) equal to consumer surplus.

Question 13

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 14

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 15

Bill and Ted each consume 15 chocolate bars at the current price.If Bill's demand for chocolate bars is more elastic than Ted's demand, then

Accepted Answer

A) Bill's willingness to pay for the last chocolate bar is greater than Ted's. 
B) Ted's willingness to pay for the last chocolate bar is greater than Bill's. 
C) Bill's consumer surplus is greater than Ted's. 
D) Ted's consumer surplus is greater than Bill's. 
E) Bill's consumer surplus equals Ted's. 
A) Bill's willingness to pay for the last chocolate bar is greater than Ted's. 
B) Ted's willingness to pay for the last chocolate bar is greater than Bill's. 
C) Bill's consumer surplus is greater than Ted's. 
D) Ted's consumer surplus is greater than Bill's. 
E) Bill's consumer surplus equals Ted's.

Question 16

Suppose the government places a tax on business profits so that businesses decrease production and generate a deadweight loss.Revenues from the tax are used to boost the incomes of the poor.The decision to levy the tax implies that in this case the government

Accepted Answer

A) values people but not businesses. 
B) values efficiency more than its view of fairness. 
C) profits from collecting taxes. 
D) values its view of fairness more than efficiency. 
E) is unaware of the deadweight loss it is creating. 
A) values people but not businesses. 
B) values efficiency more than its view of fairness. 
C) profits from collecting taxes. 
D) values its view of fairness more than efficiency. 
E) is unaware of the deadweight loss it is creating.

Question 17

Sam's demand curve for pizza

Accepted Answer

A) lies below his marginal benefit curve from pizza. 
B) lies above his marginal benefit curve from pizza. 
C) is the same as his marginal benefit curve from pizza. 
D) is the same as his marginal cost curve of pizza. 
E) lies below his marginal cost curve of pizza. 
A) lies below his marginal benefit curve from pizza. 
B) lies above his marginal benefit curve from pizza. 
C) is the same as his marginal benefit curve from pizza. 
D) is the same as his marginal cost curve of pizza. 
E) lies below his marginal cost curve of pizza.

Question 18

In 2012, a severe drought led to an increase in the price of corn.Farmer Lyle was not affected by the drought.Comparing 2012 to the previous year in which there was no drought, Farmer Lyle's

Accepted Answer

A) consumer surplus increased. 
B) producer surplus increased. 
C) producer surplus increased and his consumer surplus increased. 
D) consumer surplus decreased and his producer surplus increased. 
E) supply of corn became perfectly elastic. 
A) consumer surplus increased. 
B) producer surplus increased. 
C) producer surplus increased and his consumer surplus increased. 
D) consumer surplus decreased and his producer surplus increased. 
E) supply of corn became perfectly elastic.

Question 19

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 20

Use the information below to answer the following questions.
Fact 5.3.1
Only 1 percent of the world supply of water is fit for human consumption. Some places have more water than they can use; some could use much more than they have. The 1 percent available would be sufficient if only it were in the right place.
-Refer to Fact 5.3.1.A free world market in water ________ achieve an efficient use of the world's water resources because ________.

Accepted Answer

A) would not; it is not profitable for the water-rich countries to ship water to the water-poor countries 
B) would; people in water-rich countries want to help people in water-poor countries 
C) would not; water-poor countries are not willing to pay market price for water 
D) would; the invisible hand leads the equilibrium price to equal the quantity at which marginal social benefit equals marginal social cost 
E) would not; water is vital for life so it must be allocated by a method other than market price 
A) would not; it is not profitable for the water-rich countries to ship water to the water-poor countries 
B) would; people in water-rich countries want to help people in water-poor countries 
C) would not; water-poor countries are not willing to pay market price for water 
D) would; the invisible hand leads the equilibrium price to equal the quantity at which marginal social benefit equals marginal social cost 
E) would not; water is vital for life so it must be allocated by a method other than market price

A market supply curve is

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

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?

An external cost

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

A consumer will buy a good when

Use the figure below to answer the following question. Figure 5.3.4 -Refer to Figure 5.3.4.The graph shows the market for cell phones.When production is efficient, total surplus is and the cost of producing the cell phones sold is .

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

Use the figure below to answer the following questions. Figure 5.2.1 -Consider the demand curve in Figure 5.2.1.What is the value of the first unit of the good?

Producer surplus is

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

Consumer surplus

Bill and Ted each consume 15 chocolate bars at the current price.If Bill's demand for chocolate bars is more elastic than Ted's demand, then

Suppose the government places a tax on business profits so that businesses decrease production and generate a deadweight loss.Revenues from the tax are used to boost the incomes of the poor.The decision to levy the tax implies that in this case the government

Sam's demand curve for pizza

In 2012, a severe drought led to an increase in the price of corn.Farmer Lyle was not affected by the drought.Comparing 2012 to the previous year in which there was no drought, Farmer Lyle's

Economists tend to

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

Filters

Exam 5: Efficiency and Equity

A market supply curve is

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

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?

An external cost

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

A consumer will buy a good when

Use the figure below to answer the following question. Figure 5.3.4 -Refer to Figure 5.3.4.The graph shows the market for cell phones.When production is efficient, total surplus is ________ and the cost of producing the cell phones sold is ________.

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

Use the figure below to answer the following questions. Figure 5.2.1 -Consider the demand curve in Figure 5.2.1.What is the value of the first unit of the good?

Producer surplus is

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

Consumer surplus

Bill and Ted each consume 15 chocolate bars at the current price.If Bill's demand for chocolate bars is more elastic than Ted's demand, then

Suppose the government places a tax on business profits so that businesses decrease production and generate a deadweight loss.Revenues from the tax are used to boost the incomes of the poor.The decision to levy the tax implies that in this case the government

Sam's demand curve for pizza

In 2012, a severe drought led to an increase in the price of corn.Farmer Lyle was not affected by the drought.Comparing 2012 to the previous year in which there was no drought, Farmer Lyle's

Economists tend to

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

Filters

Use the figure below to answer the following question. Figure 5.3.4 -Refer to Figure 5.3.4.The graph shows the market for cell phones.When production is efficient, total surplus is and the cost of producing the cell phones sold is .