Question 1

At the market equilibrium,when efficiency is attained,the marginal benefit ________ the marginal cost.

Accepted Answer

A)  is equal to 
B)  is greater than 
C)  is less than 
D)  has no necessary relationship with 
E)  is equal to the marginal deadweight loss which is equal to 
A)  is equal to 
B)  is greater than 
C)  is less than 
D)  has no necessary relationship with 
E)  is equal to the marginal deadweight loss which is equal to

Question 2

Value is

Accepted Answer

A)  the price we pay for a good. 
B)  the cost of resources used to produce a good. 
C)  objective so that it is determined by market forces, not preferences. 
D)  the marginal benefit we get from consuming another unit of a good or service. 
E)  the difference between the price paid for a good and the marginal cost of producing that unit of the good. 
A)  the price we pay for a good. 
B)  the cost of resources used to produce a good. 
C)  objective so that it is determined by market forces, not preferences. 
D)  the marginal benefit we get from consuming another unit of a good or service. 
E)  the difference between the price paid for a good and the marginal cost of producing that unit of the good.

Question 3

-The figure above shows a nation's production possibilities frontier.If the marginal cost equals the marginal benefit at point A when 4 million pizzas are produced,

Accepted Answer

A)  allocative efficiency is achieved but production efficiency is not achieved because there are no tacos being produced. 
B)  both allocative and production efficiency are achieved. 
C)  production efficiency is achieved but allocative efficiency is not achieved because there are no tacos being produced. 
D)  production efficiency is achieved but allocative efficiency is not achieved because the number of tacos produced is at its absolute maximum. 
E)  neither allocative nor production efficiency has been achieved. 
A)  allocative efficiency is achieved but production efficiency is not achieved because there are no tacos being produced. 
B)  both allocative and production efficiency are achieved. 
C)  production efficiency is achieved but allocative efficiency is not achieved because there are no tacos being produced. 
D)  production efficiency is achieved but allocative efficiency is not achieved because the number of tacos produced is at its absolute maximum. 
E)  neither allocative nor production efficiency has been achieved.

Question 4

When you arrive at Olive Garden with your date,you hae to wait 25 minutes for a table.Olive Garden is allocating tables using which method?

Accepted Answer

A)  market price 
B)  first-come, first-served 
C)  command 
D)  personal characteristics 
E)  sharing equally 
A)  market price 
B)  first-come, first-served 
C)  command 
D)  personal characteristics 
E)  sharing equally

Question 5

-The figure above shows Diane's demand curve for soda.The price of a soda is $1.00.Diane's consumer surplus from all 15 sodas is

Accepted Answer

A)  $15.00. 
B)  $22.50. 
C)  $11.25. 
D)  $8.00. 
E)  $1.50. 
A)  $15.00. 
B)  $22.50. 
C)  $11.25. 
D)  $8.00. 
E)  $1.50.

Question 6

Producer surplus is the ________ summed over the quantity produced.

Accepted Answer

A)  price of the good minus the marginal cost of producing it 
B)  marginal benefit of the good minus its marginal cost 
C)  marginal benefit of the good minus its price 
D)  marginal cost of the good minus the opportunity cost of producing it 
E)  None of the above answers is correct. 
A)  price of the good minus the marginal cost of producing it 
B)  marginal benefit of the good minus its marginal cost 
C)  marginal benefit of the good minus its price 
D)  marginal cost of the good minus the opportunity cost of producing it 
E)  None of the above answers is correct.

Question 7

Jason wants to hire Maria to tutor him in economics.Jason is willing to pay $30 for the first hour of tutoring,$25 for the second,$20 for the third,$15 for the fourth,and $10 for the fifth.Maria has an opportunity cost per hour of $6 for the first,$9 for the second,$12 for the third,$15 for the fourth,and $18 for the fifth.The initial equilibrium price for tutoring is $15 an hour and hence Maria tutors Jason for 4 hours.Now,Maria realizes that she is the only economics tutor because all the other tutors have graduated.Because she is the only tutor,she has a monopoly and,as a monopolist,Maria decides to charge a price of $25 instead of $15 an hour.
a.At the price of $25 an hour,how many hours will Maria tutor Jason?
b.At the initial equilibrium price of $15 an hour,what was Jason's total consumer surplus and Maria's total producer surplus?
c.At the price of $25 an hour,how many hours will Jason hire Maria to tutor him? What is Jason's total consumer surplus and Maria's total producer surplus?
d.How does the sum of Jason's consumer surplus plus Maria's producer surplus compare at the initial equilibrium price of $15 an hour (part b)and at the new price of $25 an hour (part c)? Comment on any difference.

Accepted Answer

a.Maria will tutor Jason for 2 hours.
b.

Question 8

A cost not borne by the producer but borne by other people is known as ________ cost.

Accepted Answer

A)  a marginal 
B)  an internal 
C)  an external 
D)  a nonessential 
E)  a subsidized 
A)  a marginal 
B)  an internal 
C)  an external 
D)  a nonessential 
E)  a subsidized

Question 9

The "big tradeoff" refers to

Accepted Answer

A)  producing capital goods instead of consumable goods. 
B)  marginal benefit versus marginal cost. 
C)  efficiency and fairness. 
D)  taking an economics course instead of some other course. 
E)  using market prices rather than a command system to allocate resources. 
A)  producing capital goods instead of consumable goods. 
B)  marginal benefit versus marginal cost. 
C)  efficiency and fairness. 
D)  taking an economics course instead of some other course. 
E)  using market prices rather than a command system to allocate resources.

Question 10

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

Accepted Answer

Taxes are unfair according to the fair r

Question 11

Which of the following is true?
i.Production efficiency occurs only when resources are used to produce the combination of goods that has the greatest value.
ii.Allocative efficiency occurs when marginal benefit equals marginal cost.
iii.A demand curve is a marginal cost curve.

Accepted Answer

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

Question 12

Adam Smith's Wealth of Nations,written in 1776,describes the market's invisible hand representing the

Accepted Answer

A)  King of England's control over the colonies. 
B)  control all governments have in organizing the market. 
C)  efficiency the market achieves without the interference of governments. 
D)  inefficiency of markets when governments do not organize them. 
E)  invisible command system that efficiently allocates resources. 
A)  King of England's control over the colonies. 
B)  control all governments have in organizing the market. 
C)  efficiency the market achieves without the interference of governments. 
D)  inefficiency of markets when governments do not organize them. 
E)  invisible command system that efficiently allocates resources.

Question 13

In the figure above,when 2,000 pizzas are produced,the marginal benefit of a pizza ________ its marginal cost,which means ________ pizza is being produced.

Accepted Answer

A)  exceeds; too little 
B)  exceeds; too much 
C)  is below; too much 
D)  is below; too little 
E)  equals; the efficient quantity of 
A)  exceeds; too little 
B)  exceeds; too much 
C)  is below; too much 
D)  is below; too little 
E)  equals; the efficient quantity of

Question 14

-Using the values for the marginal benefit and the marginal cost of a bushel of apples given in the table above,what is the allocatively efficient quantity of apples? Suppose 10 million bushels of apples are produced.Should the quantity be increased or decreased? What if 20 million bushels are produced; should the quantity be increased or decreased?

Accepted Answer

The allocatively efficient quantity of a

Question 15

Why does redistribution,so that the distribution of income is equal,bring about less total output?

Accepted Answer

A)  Incentives to work are reduced. 
B)  No one can determine marginal benefit or marginal cost as a result. 
C)  Those in political power will likely receive a larger income. 
D)  Because the marginal benefit and marginal cost of work have been equally increased. 
E)  The premise of the question is incorrect because an equal distribution of income would increase rather than decrease the total amount produced. 
A)  Incentives to work are reduced. 
B)  No one can determine marginal benefit or marginal cost as a result. 
C)  Those in political power will likely receive a larger income. 
D)  Because the marginal benefit and marginal cost of work have been equally increased. 
E)  The premise of the question is incorrect because an equal distribution of income would increase rather than decrease the total amount produced.

Question 16

-The figure above shows the supply curve for soda.The market price is $1.00 per soda.The producer surplus from the 10,000th soda is

Accepted Answer

A)  $0.00. 
B)  $0.50. 
C)  $1.00. 
D)  more than $1.00. 
E)  None of the above answers is correct. 
A)  $0.00. 
B)  $0.50. 
C)  $1.00. 
D)  more than $1.00. 
E)  None of the above answers is correct.

Question 17

Explain how the invisible hand delivers an efficient market outcome.

Accepted Answer

The invisible hand concepts claims that

Question 18

If marginal benefit is equal to marginal cost,then the

Accepted Answer

A)  producer surplus is equal to the consumer surplus. 
B)  sum of producer surplus and consumer surplus is as large as possible. 
C)  sum of producer surplus and consumer surplus equals zero. 
D)  market has squeezed out total surplus so that it equals zero. 
E)  deadweight loss is more than zero but less than its maximum. 
A)  producer surplus is equal to the consumer surplus. 
B)  sum of producer surplus and consumer surplus is as large as possible. 
C)  sum of producer surplus and consumer surplus equals zero. 
D)  market has squeezed out total surplus so that it equals zero. 
E)  deadweight loss is more than zero but less than its maximum.

Question 19

Which of the following is a correct description of the supply curve?
i.The supply curve is also the marginal cost curve.
ii.The supply curve shows the dollars' worth of other goods that we must sacrifice to produce another unit of a good.
iii.The supply curve shows the additional cost of producing another unit of a good.

Accepted Answer

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

Question 20

If a seller charges a buyer the exact price the buyer is willing to pay,then the buyer would

Accepted Answer

A)  not buy the good. 
B)  receive the maximum consumer surplus. 
C)  receive no benefit from the good. 
D)  receive no consumer surplus from that unit of the good. 
E)  suffer a deadweight loss from buying the good. 
A)  not buy the good. 
B)  receive the maximum consumer surplus. 
C)  receive no benefit from the good. 
D)  receive no consumer surplus from that unit of the good. 
E)  suffer a deadweight loss from buying the good.

At the market equilibrium,when efficiency is attained,the marginal benefit ________ the marginal cost.

Value is

-The figure above shows a nation's production possibilities frontier.If the marginal cost equals the marginal benefit at point A when 4 million pizzas are produced,

When you arrive at Olive Garden with your date,you hae to wait 25 minutes for a table.Olive Garden is allocating tables using which method?

-The figure above shows Diane's demand curve for soda.The price of a soda is $1.00.Diane's consumer surplus from all 15 sodas is

Producer surplus is the ________ summed over the quantity produced.

A cost not borne by the producer but borne by other people is known as ________ cost.

The "big tradeoff" refers to

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

Which of the following is true? i.Production efficiency occurs only when resources are used to produce the combination of goods that has the greatest value. ii.Allocative efficiency occurs when marginal benefit equals marginal cost. iii.A demand curve is a marginal cost curve.

Adam Smith's Wealth of Nations,written in 1776,describes the market's invisible hand representing the

In the figure above,when 2,000 pizzas are produced,the marginal benefit of a pizza its marginal cost,which means pizza is being produced.

Why does redistribution,so that the distribution of income is equal,bring about less total output?

-The figure above shows the supply curve for soda.The market price is $1.00 per soda.The producer surplus from the 10,000th soda is

Explain how the invisible hand delivers an efficient market outcome.

If marginal benefit is equal to marginal cost,then the

If a seller charges a buyer the exact price the buyer is willing to pay,then the buyer would

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

At the market equilibrium,when efficiency is attained,the marginal benefit ________ the marginal cost.

Value is

-The figure above shows a nation's production possibilities frontier.If the marginal cost equals the marginal benefit at point A when 4 million pizzas are produced,

When you arrive at Olive Garden with your date,you hae to wait 25 minutes for a table.Olive Garden is allocating tables using which method?

-The figure above shows Diane's demand curve for soda.The price of a soda is $1.00.Diane's consumer surplus from all 15 sodas is

Producer surplus is the ________ summed over the quantity produced.

A cost not borne by the producer but borne by other people is known as ________ cost.

The "big tradeoff" refers to

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

Which of the following is true? i.Production efficiency occurs only when resources are used to produce the combination of goods that has the greatest value. ii.Allocative efficiency occurs when marginal benefit equals marginal cost. iii.A demand curve is a marginal cost curve.

Adam Smith's Wealth of Nations,written in 1776,describes the market's invisible hand representing the

In the figure above,when 2,000 pizzas are produced,the marginal benefit of a pizza ________ its marginal cost,which means ________ pizza is being produced.

Why does redistribution,so that the distribution of income is equal,bring about less total output?

-The figure above shows the supply curve for soda.The market price is $1.00 per soda.The producer surplus from the 10,000th soda is

Explain how the invisible hand delivers an efficient market outcome.

If marginal benefit is equal to marginal cost,then the

If a seller charges a buyer the exact price the buyer is willing to pay,then the buyer would

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 the figure above,when 2,000 pizzas are produced,the marginal benefit of a pizza its marginal cost,which means pizza is being produced.