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

Refer to the figure below. If a price ceiling were imposed at $4, total economic surplus would be ______, which is ______ less than when the market is unregulated market.

Adam Smiths theory of the invisible hand posits the actions of independent, self-interested buyers and sellers will ______ lead to the most efficient allocation of resources.

Professor Plum, who earns $100,000 per year, read in the paper today that the university pays its basketball coach one million dollars per year in exchange for his agreement to remain at the university for at least three more years. The coach earns more than Professor Plum because:

Last year Christine worked as a consultant. She hired an administrative assistant for $15,000 per year and rented office space (utilities included) for $3,000 per month. Her total revenue for the year was $100,000. If Christine hadn't worked as a consultant, she would have worked at a real estate firm earning $40,000 a year. For Christine to earn a normal profit as a consultant, her accounting profit would have to be ______.

Pat used to work as an aerobics instructor at the local gym earning $35,000 a year. Pat quit that job and started working as a personal trainer. Pat makes $50,000 in total annual revenue. Pat's only out-of-pocket costs are $12,000 per year for rent and utilities, $1,000 per year for advertising and $3,000 per year for equipment. Pat's accounting profit is _______, and Pat's economic profit is _______.

Which of the following describes a surplus-enhancing transaction?

Refer to the figure below. When the market is unregulated, consumer surplus is represented by the area:

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below. With no subsidy, what is producer surplus?

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below. If the government provides a subsidy of $500 per ton, then relative to before the subsidy, consumer surplus will ______ by ______ per day.

The figure below shows the supply and demand curves for oranges in Smallville. At a price of $4 per pound there will be an excess ______ of ______ pounds of oranges per day.

Economic theory assumes that a firm's goal is to:

The figure below shows the supply and demand curves for jeans in Smallville. The equilibrium price will NOT lead to the largest possible total economic surplus if:

Last year Christine worked as a consultant. She hired an administrative assistant for $15,000 per year and rented office space (utilities included) for $3,000 per month. Her total revenue for the year was $100,000. If Christine hadn't worked as a consultant, she would have worked at a real estate firm earning $40,000 a year. Last year, Christine's accounting profit was ______ and her economic profit was ______.

Angelina Jolie's economic rent from starring in a movie is equal to the difference between:

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. The long-run market equilibrium quantity in this industry is:

A price ceiling that is set above the equilibrium price will result in:

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below. With no subsidy, what is consumer surplus?

According to the theory of the invisible hand, if buyers and sellers are free to pursue their own self-interest, the result often will be:

If it is possible to make a change that will help some people without harming others, then the situation is:

Suppose several United States software design companies compete with each other in a perfectly competitive environment. If one company decides to move some of its offices to a low-wage country in order to reduce operating costs, then: