Exam 5: Efficiency and Equity

Meat at the supermarket has contributed to increase in food prices in 2010, and high feed and fuel prices mean that steak will likely cost a lot more this fall. The price of feed has increased 50 percent and hay has doubled from two years ago. Based on this information, which of the following is TRUE in the market for beef?

The big tradeoff is a tradeoff between

Allocating resources by the order of someone in authority is a ________ allocation method.

Total surplus is defined as

-A deadweight loss is created

If the marginal social cost of a television exceeds the marginal social benefit of a television, it would increase society's total surplus to decrease production of televisions.

When the efficient quantity of output is being produced and sold, the deadweight loss is maximized.

Utilitarianism argues that

-In the above figure, when the price of pretzels is $3.00 per pound, the total producer surplus from all the pretzels will be

In 2012 a severe drought raised the price of corn. For a farmer in Canada who harvested a normal crop because the farm was not affected directly by the drought, the increase in the price of corn

According to the "fair rules" view of fairness, are taxes fair? Explain.

All of the following statements about marginal benefit are correct EXCEPT the marginal benefit of a good

A contest is a good way to allocate scarce resources when

Competitive markets with no external costs or benefits and no government price ceilings, floors, taxes or subsidies ________ efficient. According to the "It's not fair if the rules aren't fair" idea of fairness, competitive markets ________ fair.

A market is allocatively efficient if

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. To receive a gasoline ration card, a person had to certify a need for gas. The ration cards ranged from the most limited A card which only allowed 3 to 4 gallons per week to the most generous X card, which allowed the carrier to buy an unlimited amount of gasoline. A government entity, the War Price and Rationing Board, decided who received and A or an X card. Gasoline cards were allocated through

-In the above figure, the efficient quantity of milk is

Explain the difference between the "fair rules" and the "fair results" guidelines for competitive market fairness.

-In the above figure, suppose that the government sets a limit to production at 10 units of output and the price rises to $4. In comparison to a competitive market the consumer surplus would fall by

Adam Smith argued that each person in a competitive market is led to promote the