Question 1

-In the above figure, if the production of gloves was restricted to 2,000 a day, then the deadweight loss would equal

Accepted Answer

A)  $0, because 2,000 gloves per day is an efficient quantity of gloves to produce. 
B)  $2,000. 
C)  $5,000. 
D)  $10,000.

Question 2

Command system allocates resources by the order of someone in authority.

Accepted Answer

A) True 
 B)False

Question 3

Farmer Jones knows that the marginal cost to produce a bushel of tomatoes is $5 per bushel. He also knows that a consumer is willing to pay a maximum of $9 for the bushel. The price of the bushel is $6 and Farmer Jones sells his bushel for $6. On this bushel, Farmer Jones earns a producer surplus equal to

Accepted Answer

A)  $1. 
B)  $3. 
C)  $5. 
D)  $6.

Question 4

-The figure above shows the market for milk. If one firm owns all the milk outlets in the city and sells 100 gallons of milk

Accepted Answer

A)  the deadweight loss is $100. 
B)  the deadweight loss is $75. 
C)  the deadweight loss is $50. 
D)  there is no deadweight loss.

Question 5

-In the above figure, what is the total consumer surplus from all the milk bought if the price of milk is $3.00 per gallon?

Accepted Answer

A)  $16 million 
B)  $12 million 
C)  $4 million 
D)  $2 million

Question 6

-The figure above shows the market for coffee. If 30 pound of coffee a month are available, the ________ price that consumers are willing to pay for the last pound is ________.

Accepted Answer

A)  maximum; $4.00 
B)  minimum; $4.00 
C)  maximum; $2.50 
D)  minimum; $2.50

Question 7

Producer surplus is the price of a good minus the opportunity cost of producing it, summed over the quantity produced.

Accepted Answer

A) True 
 B)False

Question 8

The value of a good is equal to the

Accepted Answer

A)  maximum price you are willing to pay for it. 
B)  price that you actually pay for it. 
C)  price you actually pay for it minus the maximum you are willing to pay for it. 
D)  maximum you are willing to pay for it minus the price you actually pay for it.

Question 9

Consumer surplus is the ________ summed over the quantity bought.

Accepted Answer

A)  marginal social benefit minus the marginal social cost 
B)  number of dollars' worth of other goods and services forgone to obtain one more unit of a good or service 
C)  value of a good or service minus the price paid for the good or service 
D)  value of a good or service plus the price paid for the good or service

Question 10

-The above figure shows the competitive market for turkey. The consumer surplus for the 300 millionth pound of turkey is

Accepted Answer

A)  $2.00 per pound. 
B)  $225 million. 
C)  $0.80 per pound. 
D)  $0.50 per pound.

Question 11

Nick can purchase each milkshake for $2. For the first milkshake purchased Nick is willing to pay $4, for the second milkshake $3, for the third milkshake $2 and for the fourth milkshake $1. What is the value of Nick's consumer surplus for the milkshakes he buys?

Accepted Answer

A)  $2 
B)  $9 
C)  $3 
D)  $10

Question 12

-The above figure shows the marginal social benefit and marginal social cost curves of coffee in the nation of Kaffenia. For a consumer, the price they are willing to pay for each additional pound of coffee is

Accepted Answer

A)  always less than the economy's marginal social cost of producing that additional pound. 
B)  equal to their own marginal benefit from consuming that additional pound. 
C)  equal to their consumer surplus. 
D)  Both answers B and C are correct.

Question 13

At the current level of output, the marginal social benefit of pizza exceeds the marginal social cost of pizza. Compared to the allocatively efficient quantity, we are producing too ________ pizza and too ________ of other goods.

Accepted Answer

A)  much; little 
B)  much; much 
C)  little; little 
D)  little; much

Question 14

The table below shows the demand schedules for pizza for Abby and Barry who are the only buyers in the market. 
-Based on the table, what is the marginal social benefit from the 45th slice of pizza?

Accepted Answer

A)  $3.50 
B)  $3.25 
C)  $0.50 
D)  $9

Question 15

Resource use is efficient when production is such that marginal social benefit is

Accepted Answer

A)  greater than marginal social cost. 
B)  equal to marginal social cost. 
C)  less than marginal social cost. 
D)  at its maximum value.

Question 16

When the efficient quantity of output is produced

Accepted Answer

A)  the marginal social benefit of the last unit produced is equal to the marginal social cost of the last unit produced. 
B)  the sum of consumer surplus and producer surplus is maximized. 
C)  resources are used in the activities in which they are most highly valued. 
D)  All of the above answers are correct.

Question 17

-The figure above shows Clara's demand for CDs. If the price of a CD were to increase from $15 to $25, Clara's total consumer surplus for all the CDs she buys would

Accepted Answer

A)  decrease by $40. 
B)  remain unchanged. 
C)  decrease by $90. 
D)  increase by $80.

Question 18

The latest model car in the dealer's showroom has a sticker price of $35,000.00. Fred, the shopper, has decided that he would pay no more than $32,000.00 for the car. After two hours of bargaining with the saleswoman, Fred actually purchases the car for $31,000.00. Fred, therefore, has obtained a consumer surplus of

Accepted Answer

A)  $35,000.00. 
B)  $32,000.00. 
C)  $4,000.00. 
D)  $1,000.00.

Question 19

What is allocative efficiency?

Accepted Answer

The answer of What is allocative efficiency?...

Question 20

Producer surplus is the price received ________ summed over the quantity sold.

Accepted Answer

A)  plus the consumer surplus 
B)  multiplied by the quantity sold 
C)  minus its marginal cost of production 
D)  subtracted from the value of the good

Exam 5: Efficiency and Equity