Question 1

Which of the following is an example in which "the big tradeoff" can occur?

Accepted Answer

A)  The government redistributes income from the rich to the poor. 
B)  Ford increases the price of a pickup truck. 
C)  A basketball player signs a $5 million contract. 
D)  A college lowers tuition. 
E)  The price of personal computers falls year after year. 
A)  The government redistributes income from the rich to the poor. 
B)  Ford increases the price of a pickup truck. 
C)  A basketball player signs a $5 million contract. 
D)  A college lowers tuition. 
E)  The price of personal computers falls year after year.

Question 2

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

Accepted Answer

A)  first-come, first-served 
B)  market price 
C)  contest 
D)  majority rule 
E)  command 
A)  first-come, first-served 
B)  market price 
C)  contest 
D)  majority rule 
E)  command

Question 3

When economists refer to "the invisible hand," what do they mean?

Accepted Answer

In his book,Wealth of Nations,Adam Smith

Question 4

Which of the following is true? When there are no externalities,public goods,common resources,taxes or subsidies,then
i.allocative efficiency occurs when marginal benefit exceeds marginal cost by as much as possible.
ii.an a competitive equilibrium,resource allocation is efficient.
iii.fair rules require income transfers from the rich to the poor.

Accepted Answer

A)  only ii 
B)  only i 
C)  only iii 
D)  i and ii 
E)  i and iii 
A)  only ii 
B)  only i 
C)  only iii 
D)  i and ii 
E)  i and iii

Question 5

Suppose the price of a scooter is $200 and Cora Lee is willing to pay $250.Cora Lee's

Accepted Answer

A)  consumer surplus from that scooter is $200. 
B)  consumer surplus from that scooter is $50. 
C)  marginal benefit from that scooter is $100. 
D)  consumer surplus from that scooter is $150. 
E)  consumer surplus from that scooter is $250. 
A)  consumer surplus from that scooter is $200. 
B)  consumer surplus from that scooter is $50. 
C)  marginal benefit from that scooter is $100. 
D)  consumer surplus from that scooter is $150. 
E)  consumer surplus from that scooter is $250.

Question 6

-In the above figure,if the quantity is restricted to 500,000 and the price is allowed to rise to set the quantity demanded equal to the quantity supplied,then area C + area E is equal to

Accepted Answer

A)  deadweight loss. 
B)  consumer surplus. 
C)  total surplus. 
D)  producer surplus. 
E)  total revenue. 
A)  deadweight loss. 
B)  consumer surplus. 
C)  total surplus. 
D)  producer surplus. 
E)  total revenue.

Question 7

The price of a cowboy hat is $100.Willie can produce a hat at a marginal cost of $130,Waylon can produce at a marginal cost of $100,and Merle can produce at a marginal cost of $85.Which of the following statements is correct?

Accepted Answer

A)  The sum of producer surplus is $15. 
B)  All three of these sellers will gain producer surplus from selling a hat. 
C)  The sum of producer surplus is $30. 
D)  Willie's producer surplus is $30. 
E)  The sum of producer surplus is $45. 
A)  The sum of producer surplus is $15. 
B)  All three of these sellers will gain producer surplus from selling a hat. 
C)  The sum of producer surplus is $30. 
D)  Willie's producer surplus is $30. 
E)  The sum of producer surplus is $45.

Question 8

The figure above shows the demand curve for pizza and the market price of pizza.
-In the figure above,how much do the consumers pay in total for the quantity of pizza they buy per day?

Accepted Answer

A)  $100,000 
B)  $150,000 
C)  $125,000 
D)  $50,000 
E)  None of the above answers is correct. 
A)  $100,000 
B)  $150,000 
C)  $125,000 
D)  $50,000 
E)  None of the above answers is correct.

Question 9

Which of the following leads to a deadweight loss?
i.overproduction
ii.underproduction
iii.taxes
iv.monopoly

Accepted Answer

A)  ii only 
B)  iii and iv 
C)  i and ii 
D)  i, ii, iii, and iv 
E)  i, ii, and iii 
A)  ii only 
B)  iii and iv 
C)  i and ii 
D)  i, ii, iii, and iv 
E)  i, ii, and iii

Question 10

When a society achieves allocative efficiency,it

Accepted Answer

A)  is not achieving production efficiency. 
B)  is producing that combination of goods and services that society values most highly. 
C)  might or it might not be producing at a point on society's PPF. 
D)  is producing a combination of goods and services whose marginal cost exceeds their marginal benefit. 
E)  is producing the combination of goods and services for which marginal benefit exceeds marginal cost by as much as possible. 
A)  is not achieving production efficiency. 
B)  is producing that combination of goods and services that society values most highly. 
C)  might or it might not be producing at a point on society's PPF. 
D)  is producing a combination of goods and services whose marginal cost exceeds their marginal benefit. 
E)  is producing the combination of goods and services for which marginal benefit exceeds marginal cost by as much as possible.

Question 11

If the government imposes a tax on a competitive market with no externalities,then
i.resource use is not efficient.
ii.there is a deadweight loss.
iii.consumer surplus is at its maximum.

Accepted Answer

A)  ii only 
B)  i and ii 
C)  iii only 
D)  i and iii 
E)  i, ii, and iii 
A)  ii only 
B)  i and ii 
C)  iii only 
D)  i and iii 
E)  i, ii, and iii

Question 12

When people cannot be excluded from consuming a good,even if they have not paid for the good,competitive markets would

Accepted Answer

A)  produce more of the good than society needs. 
B)  allocate more resources than the efficient amount to the production of the good. 
C)  produce the good so that people could enjoy a "free ride." 
D)  produce less than the efficient quantity. 
E)  eliminate the deadweight loss. 
A)  produce more of the good than society needs. 
B)  allocate more resources than the efficient amount to the production of the good. 
C)  produce the good so that people could enjoy a "free ride." 
D)  produce less than the efficient quantity. 
E)  eliminate the deadweight loss.

Question 13

Which describes the economic meanings of value and price?

Accepted Answer

A)  Value is exchange worth minus marginal benefit and price is the dollars that must be paid. 
B)  Value is the marginal benefit obtained and price is the dollars that must be paid. 
C)  Value refers to the gain the producer gets from the good or service and price refers to the gain the consumer gets from the good or service. 
D)  Value refers to the dollars that must be paid and price refers to the cost of producing the good. 
E)  They are the same and both mean the dollars that must be paid. 
A)  Value is exchange worth minus marginal benefit and price is the dollars that must be paid. 
B)  Value is the marginal benefit obtained and price is the dollars that must be paid. 
C)  Value refers to the gain the producer gets from the good or service and price refers to the gain the consumer gets from the good or service. 
D)  Value refers to the dollars that must be paid and price refers to the cost of producing the good. 
E)  They are the same and both mean the dollars that must be paid.

Question 14

What is the "big tradeoff"?

Accepted Answer

The "big tradeoff" is the tradeoff betwe

Question 15

John has a marginal benefit of $7 for 1 slice of pizza,$5 for a second slice,$3 for a third slice,$1 for a fourth slice,and $0.50 for a fifth slice.The price of pizza is $1.50 per slice.Which of the following statements is correct?

Accepted Answer

A)  John will purchase 3 slices of pizza and have consumer surplus of $10.50. 
B)  John will purchase 4 slices of pizza and have consumer surplus of $12.00. 
C)  John will purchase 2 slices of pizza and have consumer surplus of $1.50. 
D)  John will purchase 3 slices of pizza and have consumer surplus of $4.50. 
E)  John will purchase 2 slices of pizza and have consumer surplus of $3.00. 
A)  John will purchase 3 slices of pizza and have consumer surplus of $10.50. 
B)  John will purchase 4 slices of pizza and have consumer surplus of $12.00. 
C)  John will purchase 2 slices of pizza and have consumer surplus of $1.50. 
D)  John will purchase 3 slices of pizza and have consumer surplus of $4.50. 
E)  John will purchase 2 slices of pizza and have consumer surplus of $3.00.

Question 16

-The figure above shows the market for brooms.If the market is efficient,

Accepted Answer

A)  0 brooms are produced. 
B)  600 brooms are produced. 
C)  more than 1000 brooms are produced. 
D)  between 0 and 600 brooms are produced. 
E)  between 600 and 1000 brooms are produced. 
A)  0 brooms are produced. 
B)  600 brooms are produced. 
C)  more than 1000 brooms are produced. 
D)  between 0 and 600 brooms are produced. 
E)  between 600 and 1000 brooms are produced.

Question 17

What did Adam Smith identify as the source of the invisible hand in 1776?

Accepted Answer

A)  a benevolent central government that decided was best for everyone 
B)  an individual's concern for fellow humans 
C)  an individual's own self-interest 
D)  the stock market 
E)  buyers' and suppliers' concerns to obtain and retain good reputations 
A)  a benevolent central government that decided was best for everyone 
B)  an individual's concern for fellow humans 
C)  an individual's own self-interest 
D)  the stock market 
E)  buyers' and suppliers' concerns to obtain and retain good reputations

Question 18

"A demand curve is the same as a marginal cost curve." Is this statement correct or incorrect? Explain your answer.

Accepted Answer

The statement is incorrect.A demand curv

Question 19

In a figure,the consumer surplus is equal to the area ________ the ________ curve and ________ the price.

Accepted Answer

A)  above; demand; above 
B)  below; supply; below 
C)  below; demand; below 
D)  below; demand; above 
E)  above; supply; below 
A)  above; demand; above 
B)  below; supply; below 
C)  below; demand; below 
D)  below; demand; above 
E)  above; supply; below

Question 20

A point on the supply curve can illustrate the

Accepted Answer

A)  price and the corresponding quantity supplied. 
B)  marginal cost of that unit of the good. 
C)  price the consumer is willing to pay. 
D)  Both answers A and B are correct. 
E)  Both answers A and C are correct. 
A)  price and the corresponding quantity supplied. 
B)  marginal cost of that unit of the good. 
C)  price the consumer is willing to pay. 
D)  Both answers A and B are correct. 
E)  Both answers A and C are correct.

Which of the following is an example in which "the big tradeoff" can occur?

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

When economists refer to "the invisible hand," what do they mean?

Suppose the price of a scooter is $200 and Cora Lee is willing to pay $250.Cora Lee's

-In the above figure,if the quantity is restricted to 500,000 and the price is allowed to rise to set the quantity demanded equal to the quantity supplied,then area C + area E is equal to

The price of a cowboy hat is $100.Willie can produce a hat at a marginal cost of $130,Waylon can produce at a marginal cost of $100,and Merle can produce at a marginal cost of $85.Which of the following statements is correct?

The figure above shows the demand curve for pizza and the market price of pizza. -In the figure above,how much do the consumers pay in total for the quantity of pizza they buy per day?

Which of the following leads to a deadweight loss? i.overproduction ii.underproduction iii.taxes iv.monopoly

When a society achieves allocative efficiency,it

If the government imposes a tax on a competitive market with no externalities,then i.resource use is not efficient. ii.there is a deadweight loss. iii.consumer surplus is at its maximum.

When people cannot be excluded from consuming a good,even if they have not paid for the good,competitive markets would

Which describes the economic meanings of value and price?

What is the "big tradeoff"?

John has a marginal benefit of $7 for 1 slice of pizza,$5 for a second slice,$3 for a third slice,$1 for a fourth slice,and $0.50 for a fifth slice.The price of pizza is $1.50 per slice.Which of the following statements is correct?

-The figure above shows the market for brooms.If the market is efficient,

What did Adam Smith identify as the source of the invisible hand in 1776?

"A demand curve is the same as a marginal cost curve." Is this statement correct or incorrect? Explain your answer.

In a figure,the consumer surplus is equal to the area the curve and the price.

A point on the supply curve can illustrate the

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 6: Efficiency and Fairness of Markets

Which of the following is an example in which "the big tradeoff" can occur?

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

When economists refer to "the invisible hand," what do they mean?

Suppose the price of a scooter is $200 and Cora Lee is willing to pay $250.Cora Lee's

-In the above figure,if the quantity is restricted to 500,000 and the price is allowed to rise to set the quantity demanded equal to the quantity supplied,then area C + area E is equal to

The price of a cowboy hat is $100.Willie can produce a hat at a marginal cost of $130,Waylon can produce at a marginal cost of $100,and Merle can produce at a marginal cost of $85.Which of the following statements is correct?

The figure above shows the demand curve for pizza and the market price of pizza. -In the figure above,how much do the consumers pay in total for the quantity of pizza they buy per day?

Which of the following leads to a deadweight loss? i.overproduction ii.underproduction iii.taxes iv.monopoly

When a society achieves allocative efficiency,it

If the government imposes a tax on a competitive market with no externalities,then i.resource use is not efficient. ii.there is a deadweight loss. iii.consumer surplus is at its maximum.

When people cannot be excluded from consuming a good,even if they have not paid for the good,competitive markets would

Which describes the economic meanings of value and price?

What is the "big tradeoff"?

John has a marginal benefit of $7 for 1 slice of pizza,$5 for a second slice,$3 for a third slice,$1 for a fourth slice,and $0.50 for a fifth slice.The price of pizza is $1.50 per slice.Which of the following statements is correct?

-The figure above shows the market for brooms.If the market is efficient,

What did Adam Smith identify as the source of the invisible hand in 1776?

"A demand curve is the same as a marginal cost curve." Is this statement correct or incorrect? Explain your answer.

In a figure,the consumer surplus is equal to the area ________ the ________ curve and ________ the price.

A point on the supply curve can illustrate the

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

In a figure,the consumer surplus is equal to the area the curve and the price.