Question 1

Refer to the figure below.   If a price ceiling were imposed at point G, then producer surplus would be represented by the area ______.

Accepted Answer

A) DBC 
B) DGF 
C) 0GFQ2 
D) 0DFQ2 
A) DBC 
B) DGF 
C) 0GFQ2 
D) 0DFQ2

Question 2

An example of an implicit cost is:

Accepted Answer

A) interest paid on a bank loan used to purchase equipment. 
B) wages paid to a family member who works at the firm. 
C) the value of a spare bedroom turned into a home office. 
D) operating costs of a company-owned car. 
A) interest paid on a bank loan used to purchase equipment. 
B) wages paid to a family member who works at the firm. 
C) the value of a spare bedroom turned into a home office. 
D) operating costs of a company-owned car.

Question 3

The cumulative difference between the price producers actually receive for a good and the lowest price for which they would have been willing to sell it is called:

Accepted Answer

A) producer surplus. 
B) lost surplus. 
C) total economics surplus. 
D) consumer surplus. 
A) producer surplus. 
B) lost surplus. 
C) total economics surplus. 
D) consumer surplus.

Question 4

A market equilibrium is only efficient if:

Accepted Answer

A) the consumer surplus and the producer surplus associated with a given transaction are equal. 
B) consumer surplus and producer surplus are both zero. 
C) all relevant costs and benefits are reflected in the market supply and demand curves. 
D) output is distributed equitably among consumers. 
A) the consumer surplus and the producer surplus associated with a given transaction are equal. 
B) consumer surplus and producer surplus are both zero. 
C) all relevant costs and benefits are reflected in the market supply and demand curves. 
D) output is distributed equitably among consumers.

Question 5

The phrase "smart for one, but dumb for all" refers to the idea that the individual pursuit of self-interest:

Accepted Answer

A) only leads to an efficient outcome when everyone is well-informed. 
B) always leads to an efficient outcome. 
C) never leads to an efficient outcome. 
D) doesn't always lead to an efficient outcome. 
A) only leads to an efficient outcome when everyone is well-informed. 
B) always leads to an efficient outcome. 
C) never leads to an efficient outcome. 
D) doesn't always lead to an efficient outcome.

Question 6

Consumer surplus is the cumulative difference between:

Accepted Answer

A) consumers' incomes and consumers' expenditures. 
B) the amount consumers are willing to pay and the price they actually pay. 
C) the suggested retail price and the price consumers actually pay. 
D) consumers' savings and consumers' expenditures. 
A) consumers' incomes and consumers' expenditures. 
B) the amount consumers are willing to pay and the price they actually pay. 
C) the suggested retail price and the price consumers actually pay. 
D) consumers' savings and consumers' expenditures.

Question 7

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive.   The long-run equilibrium price in this industry is:

Accepted Answer

A) $15. 
B) $10. 
C) $5. 
D) $0. 
A) $15. 
B) $10. 
C) $5. 
D) $0.

Question 8

If an individual producer is willing to produce one unit of a good for $2.50 but is able to sell it for $7.50, then his or her producer surplus from the sale of that unit would be:

Accepted Answer

A) $10 
B) $7.50 
C) $5 
D) $6.25 
A) $10 
B) $7.50 
C) $5 
D) $6.25

Question 9

The figure below shows the supply and demand curves for jeans in Smallville.   Suppose jeans initially sell for $60 per pair. If the price of jeans falls to $40 per pair, then total economic surplus will increase by ______ per day.

Accepted Answer

A) $160 
B) $80 
C) $40 
D) $20 
A) $160 
B) $80 
C) $40 
D) $20

Question 10

Ingrid has been waiting for the show "Mamma Mia!" to come to town. When it finally does come, tickets cost $60. Ingrid's reservation price is $75. But when Ingrid tries to buy a ticket, they are sold out. Suppose Steven was able to purchase a ticket at the box office for $60. Steven's reservation price for the ticket is $65. If Steven attends "Mamma Mia!" and Ingrid does not, then this situation is:

Accepted Answer

A) inefficient because Steven and Ingrid could have made a mutually beneficial trade. 
B) efficient because Steven paid less for the ticket than his reservation price. 
C) efficient because Steven arrived at the ticket counter before the show was sold out. 
D) inefficient because Ingrid would have enjoyed the show too. 
A) inefficient because Steven and Ingrid could have made a mutually beneficial trade. 
B) efficient because Steven paid less for the ticket than his reservation price. 
C) efficient because Steven arrived at the ticket counter before the show was sold out. 
D) inefficient because Ingrid would have enjoyed the show too.

Question 11

The figure below depicts the short-run market equilibrium in a perfectly competitive market and the cost curves for a representative firm in that market. Assume that all firms in this market have identical cost curves.   A starting assumption about this industry was that all of the firms in the market had identical cost curves. This assumption is:

Accepted Answer

A) unrealistic because each firms is unique. 
B) realistic because any cost-saving innovation adopted by one firm will be quickly adopted by others. 
C) unrealistic because firms closely guard the details of their production processes. 
D) realistic because firms rarely seek out cost-saving innovations. 
A) unrealistic because each firms is unique. 
B) realistic because any cost-saving innovation adopted by one firm will be quickly adopted by others. 
C) unrealistic because firms closely guard the details of their production processes. 
D) realistic because firms rarely seek out cost-saving innovations.

Question 12

Which of the following is a characteristic of economic rent?

Accepted Answer

A) It equals economic profit minus accounting profit. 
B) It is driven towards zero by free entry. 
C) It can be positive, zero, or negative. 
D) It can never be negative. 
A) It equals economic profit minus accounting profit. 
B) It is driven towards zero by free entry. 
C) It can be positive, zero, or negative. 
D) It can never be negative.

Question 13

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive.   If S3 is the market supply curve, then each firm in this market will earn a economic loss of ______ per week.

Accepted Answer

A) $1,000 
B) $1,500 
C) $2,000 
D) $3,000 
A) $1,000 
B) $1,500 
C) $2,000 
D) $3,000

Question 14

Factors of production are the most likely to earn economic rent when they:

Accepted Answer

A) are used by many different firms. 
B) cannot easily be duplicated. 
C) are fixed in the short run. 
D) have high reservation prices. 
A) are used by many different firms. 
B) cannot easily be duplicated. 
C) are fixed in the short run. 
D) have high reservation prices.

Question 15

Free entry and exit of firms is a characteristic of:

Accepted Answer

A) all industries in the U.S.economy. 
B) perfectly competitive industries. 
C) centralized economies. 
D) industries in which firms are earning positive economic profit. 
A) all industries in the U.S.economy. 
B) perfectly competitive industries. 
C) centralized economies. 
D) industries in which firms are earning positive economic profit.

Question 16

Which of the following statements is true?

Accepted Answer

A) Accounting profit is always positive. 
B) Economic profit is always positive. 
C) Economic profit is greater than or equal to accounting profit. 
D) Accounting profit is greater than or equal to economic profit. 
A) Accounting profit is always positive. 
B) Economic profit is always positive. 
C) Economic profit is greater than or equal to accounting profit. 
D) Accounting profit is greater than or equal to economic profit.

Question 17

In a market with barriers to entry:

Accepted Answer

A) firms will earn zero economic profit in the long run. 
B) economic profit will not fall to zero in the long run. 
C) prices will direct productive resources toward underserved markets. 
D) the implications of Adam Smith's theory of the invisible hand can be expected to hold. 
A) firms will earn zero economic profit in the long run. 
B) economic profit will not fall to zero in the long run. 
C) prices will direct productive resources toward underserved markets. 
D) the implications of Adam Smith's theory of the invisible hand can be expected to hold.

Question 18

Consider a perfectly competitive industry in a long-run equilibrium. If a single firm in that industry discovers a significant cost-saving production technology, then:

Accepted Answer

A) all firms in the market will earn an economic profit in the short run. 
B) the rest of the industry will quickly adopt the new technology. 
C) the firm will earn an economic profit in the long run. 
D) all the firms in the market will earn an economic profit in the long run. 
A) all firms in the market will earn an economic profit in the short run. 
B) the rest of the industry will quickly adopt the new technology. 
C) the firm will earn an economic profit in the long run. 
D) all the firms in the market will earn an economic profit in the long run.

Question 19

Suppose your economics professor has an extra copy of textbook that he or she would like to give to a student in the class. Which of the following schemes is the most likely to result in an efficient outcome?

Accepted Answer

A) Randomly selecting one student to receive the textbook. 
B) Auctioning off the textbook to the highest bidder. 
C) Letting students take turns using the textbook. 
D) Giving the textbook to the student who has the lowest midterm score. 
A) Randomly selecting one student to receive the textbook. 
B) Auctioning off the textbook to the highest bidder. 
C) Letting students take turns using the textbook. 
D) Giving the textbook to the student who has the lowest midterm score.

Question 20

If resources are misallocated in a perfectly competitive market, then in the long run profit opportunities will:

Accepted Answer

A) bring about a more efficient allocation of resources. 
B) bring about a less efficient allocation of resources. 
C) not bring about a reallocation of resources unless there is government regulation. 
D) not bring about a reallocation of resources unless firms are subsidized. 
A) bring about a more efficient allocation of resources. 
B) bring about a less efficient allocation of resources. 
C) not bring about a reallocation of resources unless there is government regulation. 
D) not bring about a reallocation of resources unless firms are subsidized.

Refer to the figure below. If a price ceiling were imposed at point G, then producer surplus would be represented by the area ______.

An example of an implicit cost is:

The cumulative difference between the price producers actually receive for a good and the lowest price for which they would have been willing to sell it is called:

A market equilibrium is only efficient if:

The phrase "smart for one, but dumb for all" refers to the idea that the individual pursuit of self-interest:

Consumer surplus is the cumulative difference between:

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. The long-run equilibrium price in this industry is:

If an individual producer is willing to produce one unit of a good for $2.50 but is able to sell it for $7.50, then his or her producer surplus from the sale of that unit would be:

The figure below shows the supply and demand curves for jeans in Smallville. Suppose jeans initially sell for $60 per pair. If the price of jeans falls to $40 per pair, then total economic surplus will increase by ______ per day.

Which of the following is a characteristic of economic rent?

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. If S3 is the market supply curve, then each firm in this market will earn a economic loss of ______ per week.

Factors of production are the most likely to earn economic rent when they:

Free entry and exit of firms is a characteristic of:

Which of the following statements is true?

In a market with barriers to entry:

Consider a perfectly competitive industry in a long-run equilibrium. If a single firm in that industry discovers a significant cost-saving production technology, then:

Suppose your economics professor has an extra copy of textbook that he or she would like to give to a student in the class. Which of the following schemes is the most likely to result in an efficient outcome?

If resources are misallocated in a perfectly competitive market, then in the long run profit opportunities will:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

Externalities and Property Rights

The Economics of Information

Labor Markets, Poverty, and Income Distribution

The Environment, Health, and Safety

Public Goods and Tax Policy

Filters

Exam 7: Efficiency, Exchange, and the Invisible Hand in Action

Refer to the figure below. If a price ceiling were imposed at point G, then producer surplus would be represented by the area ______.

An example of an implicit cost is:

The cumulative difference between the price producers actually receive for a good and the lowest price for which they would have been willing to sell it is called:

A market equilibrium is only efficient if:

The phrase "smart for one, but dumb for all" refers to the idea that the individual pursuit of self-interest:

Consumer surplus is the cumulative difference between:

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. The long-run equilibrium price in this industry is:

If an individual producer is willing to produce one unit of a good for $2.50 but is able to sell it for $7.50, then his or her producer surplus from the sale of that unit would be:

The figure below shows the supply and demand curves for jeans in Smallville. Suppose jeans initially sell for $60 per pair. If the price of jeans falls to $40 per pair, then total economic surplus will increase by ______ per day.

Which of the following is a characteristic of economic rent?

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. If S3 is the market supply curve, then each firm in this market will earn a economic loss of ______ per week.

Factors of production are the most likely to earn economic rent when they:

Free entry and exit of firms is a characteristic of:

Which of the following statements is true?

In a market with barriers to entry:

Consider a perfectly competitive industry in a long-run equilibrium. If a single firm in that industry discovers a significant cost-saving production technology, then:

Suppose your economics professor has an extra copy of textbook that he or she would like to give to a student in the class. Which of the following schemes is the most likely to result in an efficient outcome?

If resources are misallocated in a perfectly competitive market, then in the long run profit opportunities will:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

Externalities and Property Rights

The Economics of Information

Labor Markets, Poverty, and Income Distribution

The Environment, Health, and Safety

Public Goods and Tax Policy

Filters