Exam 5: Efficiency and Equity

American Idol is a popular television program where contestants compete to win a $1 million record deal. To determine the winner, fans either dial the number or send a text message indicating their favorite contestant. The contestant with the highest number of texts and phone calls wins. How is the scarce resource in this example allocated?

At the beginning of World War II, a rationing system was established in the United States. Ration stamps or cards were issued for a variety of commodities such as canned milk and gasoline. Canned milk was only available to babies and small children. In this example, canned milk was allocated through

The Wii is a wildly popular home video game console released by Nintendo. The Wii system was first available in the U.S. in November, 2006 and has sold more than 30 million units as of August 2010. The Wii retails for $199. Suppose Ahmed is willing to pay $230, Lana is willing to pay $175, and Bodie is willing to pay $300 for a Wii. Who will purchase a Wii?

-The figure above shows the market for coffee. When the efficient quantity of coffee is produced, the marginal social cost of the last pound is

When less than the efficient amount of a good is produced, how does the marginal social benefit of the last unit produced compare to its marginal social cost?

The resource allocation method that is used to allocate scarce resources between private use and government use is

-The table gives the demand and supply schedules for milk in Cowburg. Assume that the only people who benefit from milk are the people who consume it and the only people who bear the cost of milk are the people who produce it. a) Draw the market demand and market supply curves. What are the equilibrium price and equilibrium quantity of milk? Is this equilibrium efficient? Explain. b) What is the maximum price that consumers are willing to pay for the 500th gallon? What is the minimum price that producers are willing to accept for the 500th gallon? Explain. c) Are 500 gallons a day less than or greater than the efficient quantity? Explain your answer. d) If the market for milk is efficient, what is the consumer surplus? Show it on your graph. What is the producer surplus? Show it on your graph. e) If farmers produce 500 gallons a day, is there a deadweight loss? If yes, what is it? Explain your answer using your graph.

In a competitive equilibrium, the total consumer surplus must equal the total producer surplus.

Joe is willing to pay $4 for his first slice of pizza and $3 for his second slice of pizza. If the price is $2, on his two slices of pizza Joe receives a total consumer surplus of

-The above figure shows the marginal social benefit and marginal social cost curves of coffee in the nation of Kaffenia. Which of the following would result in the quantity of coffee in Kaffenia differing from the efficient quantity?

-The figure above shows the market for milk. If the government pays the milk producers a subsidy and production increases to 300 gallons per day

-What area in the above figure is the producer surplus at the efficient quantity?

-The figure above shows the market for milk. The ________ price that producers must be offered to get them to produce 250 gallons of milk per day is ________.

When the Smiths were shopping for their present home, the asking price from the previous owner was $250,000.00. The Smiths had decided they would pay no more than $245,000.00 for the house. After negotiations, the Smiths actually purchased the house for $239,000.00. Therefore, the previous owner earned a producer surplus of

Hummel is a line of figurines based on the artistic style of German nun Maria Innocentia Hummel and have become a collector's item. The Hummel figurines are almost uniformly "cute." Lukas, Felix, Anya, and Hannah sell Hummel figurines through the internet. Their willingness to sell price for one figurine is: Lukas $240, Felix $180, Anya $150, Hannah $130. Suppose the price of a Hummel figurine is $150, who will sell their figurine?

Deadweight loss is

By reducing its output compared to a competitive market, a monopoly leads to

Which of the following is TRUE?

The value of one more unit of a good or service is the

The minimum supply-price is the same as