Question 1

If the difference between the marginal benefit and the marginal cost of a good is as large as possible,

Accepted Answer

A)  resources are being used with maximum efficiency. 
B)  resources would create more value producing other goods and hence the production of this good should be decreased. 
C)  more of the good should be produced. 
D)  allocative efficiency has been attained. 
E)  Both answers A and D are correct. 
A)  resources are being used with maximum efficiency. 
B)  resources would create more value producing other goods and hence the production of this good should be decreased. 
C)  more of the good should be produced. 
D)  allocative efficiency has been attained. 
E)  Both answers A and D are correct.

Question 2

A quantity less than the equilibrium quantity in a competitive market is inefficient because

Accepted Answer

A)  the marginal benefit of another unit is greater than its marginal cost. 
B)  too much of the good is being produced. 
C)  the marginal cost of another unit is greater than its marginal benefit. 
D)  the marginal benefit of another unit is not equal to zero. 
E)  the marginal benefit is not maximized. 
A)  the marginal benefit of another unit is greater than its marginal cost. 
B)  too much of the good is being produced. 
C)  the marginal cost of another unit is greater than its marginal benefit. 
D)  the marginal benefit of another unit is not equal to zero. 
E)  the marginal benefit is not maximized.

Question 3

An unequal distribution of income is considered fair according to Robert Nozick if

Accepted Answer

A)  marginal cost equals marginal benefit. 
B)  the cost of administering a welfare system is minimized. 
C)  property rights are enforced and voluntary exchange occurs. 
D)  the economy is producing its maximum total output. 
E)  resources are allocated using the command method. 
A)  marginal cost equals marginal benefit. 
B)  the cost of administering a welfare system is minimized. 
C)  property rights are enforced and voluntary exchange occurs. 
D)  the economy is producing its maximum total output. 
E)  resources are allocated using the command method.

Question 4

"Allocative efficiency requires that the maximum number of people have access to all of the goods and services that our economy produces." Is this statement true or false? Explain your answer.

Accepted Answer

The statement is false.Allocative effici

Question 5

Honda will sell its vehicles to anyone who wants to and can buy one.Honda is using 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 6

If the market for bicycles is efficient,then

Accepted Answer

A)  no more bicycles can be produced. 
B)  marginal benefit exceeds marginal cost. 
C)  consumer surplus must be greater than producer surplus. 
D)  it is not possible to produce more bicycles without sacrificing another, more highly valued good. 
E)  consumer surplus must equal producer surplus. 
A)  no more bicycles can be produced. 
B)  marginal benefit exceeds marginal cost. 
C)  consumer surplus must be greater than producer surplus. 
D)  it is not possible to produce more bicycles without sacrificing another, more highly valued good. 
E)  consumer surplus must equal producer surplus.

Question 7

Which of the following statements is correct?

Accepted Answer

A)  Consumer surplus equals the price paid for a good. 
B)  The consumer surplus from a good is always larger than the total benefit from the good. 
C)  An increase in price decreases consumer surplus. 
D)  An increase in price has no effect on consumer surplus. 
E)  The consumer surplus from a good or service must always equal producer surplus. 
A)  Consumer surplus equals the price paid for a good. 
B)  The consumer surplus from a good is always larger than the total benefit from the good. 
C)  An increase in price decreases consumer surplus. 
D)  An increase in price has no effect on consumer surplus. 
E)  The consumer surplus from a good or service must always equal producer surplus.

Question 8

Assume the Nozick rules are being followed in the economy so that the distribution of income is fair.What must be true for this to create an efficient allocation of resources?

Accepted Answer

A)  All people are earning equal incomes. 
B)  There are no public goods, monopolies, high transactions costs, or external costs and benefits. 
C)  The costs of administering redistribution equals the benefits the poor receive. 
D)  The government must redistribute income in a fashion that minimizes the "big tradeoff." 
E)  The government must allocate resources using a command mechanism. 
A)  All people are earning equal incomes. 
B)  There are no public goods, monopolies, high transactions costs, or external costs and benefits. 
C)  The costs of administering redistribution equals the benefits the poor receive. 
D)  The government must redistribute income in a fashion that minimizes the "big tradeoff." 
E)  The government must allocate resources using a command mechanism.

Question 9

-The figure above shows the market for brooms.If 800 brooms are produced,

Accepted Answer

A)  consumer surplus is maximized. 
B)  producer surplus is maximized. 
C)  market failure and a deadweight loss occur. 
D)  marginal cost is less than marginal benefit. 
E)  there is no deadweight loss. 
A)  consumer surplus is maximized. 
B)  producer surplus is maximized. 
C)  market failure and a deadweight loss occur. 
D)  marginal cost is less than marginal benefit. 
E)  there is no deadweight loss.

Question 10

The consumer acquires a consumer surplus on a good if the marginal benefit is

Accepted Answer

A)  equal to the price. 
B)  greater than the price. 
C)  less than the price. 
D)  zero. 
E)  less than the marginal cost. 
A)  equal to the price. 
B)  greater than the price. 
C)  less than the price. 
D)  zero. 
E)  less than the marginal cost.

Question 11

If one producer has control over an entire market and underproduces,the producer will

Accepted Answer

A)  increase producer surplus by lowering pollution costs. 
B)  increase consumer surplus by lowering producer surplus. 
C)  increase both consumer and producer surplus. 
D)  create a deadweight loss. 
E)  decrease the deadweight loss that would exist if the market were efficient. 
A)  increase producer surplus by lowering pollution costs. 
B)  increase consumer surplus by lowering producer surplus. 
C)  increase both consumer and producer surplus. 
D)  create a deadweight loss. 
E)  decrease the deadweight loss that would exist if the market were efficient.

Question 12

The marginal cost curve is

Accepted Answer

A)  downward sloping to reflect the bowed out PPF. 
B)  downward sloping as marginal benefits increase. 
C)  upward sloping because marginal cost falls as more of a good or service is produced. 
D)  upward sloping to reflect the increasing opportunity cost of producing one more unit. 
E)  U-shaped to reflect the bowed out PPF. 
A)  downward sloping to reflect the bowed out PPF. 
B)  downward sloping as marginal benefits increase. 
C)  upward sloping because marginal cost falls as more of a good or service is produced. 
D)  upward sloping to reflect the increasing opportunity cost of producing one more unit. 
E)  U-shaped to reflect the bowed out PPF.

Question 13

-In the figure above,the equilibrium market price is $20.Area A is the

Accepted Answer

A)  marginal cost of 150th unit. 
B)  willingness to pay for the 150th unit. 
C)  producer surplus. 
D)  consumer surplus. 
E)  marginal benefit of 150th unit. 
A)  marginal cost of 150th unit. 
B)  willingness to pay for the 150th unit. 
C)  producer surplus. 
D)  consumer surplus. 
E)  marginal benefit of 150th unit.

Question 14

The supply curve of a good or service is the same as

Accepted Answer

A)  the demand curve. 
B)  the marginal benefit curve. 
C)  the marginal cost curve. 
D)  the total surplus curve. 
E)  None of the above answers is correct. 
A)  the demand curve. 
B)  the marginal benefit curve. 
C)  the marginal cost curve. 
D)  the total surplus curve. 
E)  None of the above answers is correct.

Question 15

Allocative efficiency refers to

Accepted Answer

A)  producing the goods and services most highly valued. 
B)  using the least amount of labor to produce output. 
C)  producing the maximum possible amount of output. 
D)  obtaining the least output with the most inputs. 
E)  producing at any point on the PPF. 
A)  producing the goods and services most highly valued. 
B)  using the least amount of labor to produce output. 
C)  producing the maximum possible amount of output. 
D)  obtaining the least output with the most inputs. 
E)  producing at any point on the PPF.

Question 16

The chair of the Department of Economics at Colorado State University decided that office space is for tenured faculty and that graduate students are required to share cubicles.What method is used to allocate office space?

Accepted Answer

A)  lottery 
B)  majority rule 
C)  command 
D)  first-come, first-served 
E)  sharing equally 
A)  lottery 
B)  majority rule 
C)  command 
D)  first-come, first-served 
E)  sharing equally

Question 17

The marginal benefit of each additional unit of a good consumed

Accepted Answer

A)  increases as more is consumed. 
B)  is always equal to its marginal cost. 
C)  decreases as more is consumed. 
D)  will maximize consumer surplus. 
E)  is equal to the deadweight loss if the unit of the good is not produced. 
A)  increases as more is consumed. 
B)  is always equal to its marginal cost. 
C)  decreases as more is consumed. 
D)  will maximize consumer surplus. 
E)  is equal to the deadweight loss if the unit of the good is not produced.

Question 18

When marginal benefit exceeds marginal cost in a market,

Accepted Answer

A)  only consumer surplus is reduced. 
B)  only producer surplus is reduced. 
C)  consumer surplus and producer surplus are not affected compared to when production is such that marginal cost equals marginal benefit. 
D)  the deadweight loss is negative. 
E)  None of the above answers is correct. 
A)  only consumer surplus is reduced. 
B)  only producer surplus is reduced. 
C)  consumer surplus and producer surplus are not affected compared to when production is such that marginal cost equals marginal benefit. 
D)  the deadweight loss is negative. 
E)  None of the above answers is correct.

Question 19

As more of a good is consumed,the marginal benefit of the good

Accepted Answer

A)  increases. 
B)  decreases. 
C)  remains constant. 
D)  is unpredictable. 
E)  first decreases and then increases. 
A)  increases. 
B)  decreases. 
C)  remains constant. 
D)  is unpredictable. 
E)  first decreases and then increases.

Question 20

A supply curve shows quantities supplied at various prices.It also shows the

Accepted Answer

A)  total profit the firm earns at a given level of output. 
B)  marginal benefit of the good. 
C)  total cost of production. 
D)  marginal cost of production. 
E)  producer surplus, which is equal to the slope of the supply curve. 
A)  total profit the firm earns at a given level of output. 
B)  marginal benefit of the good. 
C)  total cost of production. 
D)  marginal cost of production. 
E)  producer surplus, which is equal to the slope of the supply curve.

If the difference between the marginal benefit and the marginal cost of a good is as large as possible,

A quantity less than the equilibrium quantity in a competitive market is inefficient because

An unequal distribution of income is considered fair according to Robert Nozick if

"Allocative efficiency requires that the maximum number of people have access to all of the goods and services that our economy produces." Is this statement true or false? Explain your answer.

Honda will sell its vehicles to anyone who wants to and can buy one.Honda is using a ________ allocation method.

If the market for bicycles is efficient,then

Which of the following statements is correct?

Assume the Nozick rules are being followed in the economy so that the distribution of income is fair.What must be true for this to create an efficient allocation of resources?

-The figure above shows the market for brooms.If 800 brooms are produced,

The consumer acquires a consumer surplus on a good if the marginal benefit is

If one producer has control over an entire market and underproduces,the producer will

The marginal cost curve is

-In the figure above,the equilibrium market price is $20.Area A is the

The supply curve of a good or service is the same as

Allocative efficiency refers to

The chair of the Department of Economics at Colorado State University decided that office space is for tenured faculty and that graduate students are required to share cubicles.What method is used to allocate office space?

The marginal benefit of each additional unit of a good consumed

When marginal benefit exceeds marginal cost in a market,

As more of a good is consumed,the marginal benefit of the good

A supply curve shows quantities supplied at various prices.It also shows 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

If the difference between the marginal benefit and the marginal cost of a good is as large as possible,

A quantity less than the equilibrium quantity in a competitive market is inefficient because

An unequal distribution of income is considered fair according to Robert Nozick if

"Allocative efficiency requires that the maximum number of people have access to all of the goods and services that our economy produces." Is this statement true or false? Explain your answer.

Honda will sell its vehicles to anyone who wants to and can buy one.Honda is using a ________ allocation method.

If the market for bicycles is efficient,then

Which of the following statements is correct?

Assume the Nozick rules are being followed in the economy so that the distribution of income is fair.What must be true for this to create an efficient allocation of resources?

-The figure above shows the market for brooms.If 800 brooms are produced,

The consumer acquires a consumer surplus on a good if the marginal benefit is

If one producer has control over an entire market and underproduces,the producer will

The marginal cost curve is

-In the figure above,the equilibrium market price is $20.Area A is the

The supply curve of a good or service is the same as

Allocative efficiency refers to

The chair of the Department of Economics at Colorado State University decided that office space is for tenured faculty and that graduate students are required to share cubicles.What method is used to allocate office space?

The marginal benefit of each additional unit of a good consumed

When marginal benefit exceeds marginal cost in a market,

As more of a good is consumed,the marginal benefit of the good

A supply curve shows quantities supplied at various prices.It also shows 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