Deck 9: Equilibrium and Welfare

Question 1

In a market the demand curve is given by P = 100 - 2q and supply by P = 2q.What is PS in the market equilibrium?

A)PS = 725
B)PS = 125
C)PS = 500
D)PS = 625
E)None of the above.

Answer 1

PS = 625

Question 2

In a market the demand curve is given by P = 120 - 2q and supply by P = q.What are the equilibrium price and quantity traded?

A)P* = 60, q* = 60
B)P* = 40, q* = 80
C)P* = 40, q* = 40
D)P* = 20, q* = 40
E)None of the above.

Answer 2

P* = 40, q* = 40

Question 3

Which statement is true?

A)Consumer surplus is the benefit a consumer receives from consuming a product, net of the price they have to pay for it.
B)Consumer surplus is the area underneath the demand curve above the price line.
C)Consumer surplus is the area underneath the price line above the demand curve.
D)a and b.

Answer 3

a and b.

Question 4

Producer surplus:

A)Is the area under the supply curve above the price line.
B)Is the price a firm receives for a good minus its marginal cost of production, for every unit it sells.
C)Is the firm's marginal cost minus the price it receives for selling the good for every unit sold.
D)The area between the MB and MC curves
E)None of the above.

Question 5

In a market the demand curve is given by P = 120 - 2q and supply by P = q.What is PS in the market equilibrium?

A)PS = 1600
B)PS = 3200
C)PS = 1200
D)PS = 800
E)None of the above.

Question 6

Which statement is true?

A)A competitive market maximizes total surplus as all the gains from trade are realized.
B)In a competitive market all trade for which the MB is greater than or equal to the MC of production take place.
C)If output was increased beyond the traded in a competitive market total surplus would decrease
D)The competitive equilibrium outcome is Pareto efficient.
E)All of the above.

Question 7

In a market the demand curve is given by P = 100 - 2q and supply by P = 2q.What is CS in the market equilibrium?

A)CS = 625
B)CS = 1250
C)CS = 750
D)CS = 500
E)None of the above.

Question 8

In a market the demand curve is given by P = 120 - 2q and supply by P = q.What is CS in the market equilibrium?

A)CS = 3200
B)CS = 1600
C)CS = 3600
D)CS = 800
E)None of the above.

Question 9

In a market the demand curve is given by P = 100 - 2q and supply by P = 2q.What are the equilibrium price and quantity traded?

A)P* = 25, q* = 25
B)P* = 100, q* = 50
C)P* = 50, q* = 50
D)P* = 50, q* = 25
E)None of the above.

Question 10

Consider the competitive markets for running shoes and gym memberships, two complementary products.Assume that the laws of demand supply hold in each market.You observe the following facts in the two markets: in the running shoe market both the price and quantity traded fall; and in the gym membership market the price increases and the quantity traded falls.What change could explain these changes?

A)The cost of rubber, an input into running shoes, increases.
B)The cost of rubber, an input into running shoes, falls.
C)New computer and security technology allows gyms to operate with fewer staff.
D)New medical research shows that people that exercise regularly live longer and are happier.
E)A new workplace safety law requires that all gyms need to have more and better trained staff.