Question 1

An external benefit is a benefit that

Accepted Answer

A)   experiences increasing marginal returns.
B)   is greatest at the equilibrium point.
C)   always equals external cost.
D)   is enjoyed by someone other than the buyer of a good.

Question 2

-The figure above illustrates the market for haircuts. Curve A is the _______ curve, and curve B is the _______ curve.

Accepted Answer

A)   opportunity cost; opportunity benefit
B)   marginal social cost; marginal social benefit
C)   total social cost; total social benefit
D)   marginal social benefit; marginal social cost B

Question 3

-Homer, Bart and Lisa are the only consumers in the market. Using the information in the above table, what is the market demand for chocolate chip cookies at $4.00 per box?

Accepted Answer

A)   11 boxes
B)   21 boxes
C)   4 boxes
D)   17 boxes

Question 4

A cost borne not by the producer but by other people is called _______ cost.

Accepted Answer

A)   an external
B)   a consumer
C)   a non- production
D)   an unregulated

Question 5

Jane is willing to pay $50 for a pair of shoes. The actual price of the shoes is $30. Her marginal benefit is

Accepted Answer

A)   $30.
B)   $20.
C)   $50.
D)   $80.

Question 6

A market demand curve is constructed by

Accepted Answer

A)   a vertical summation of each individual demand curve.
B)   dividing one individual demand curve by the number of consumers in the market.
C)   averaging each individual demand curve.
D)   a horizontal summation of each individual demand curve.

Question 7

-In the above figure, when the quantity equals 400 pretzels,

Accepted Answer

A)   the marginal benefit is greater than the marginal cost.
B)   producers are willing to supply 400 pretzels for $2.
C)   producers are willing to supply 400 pretzels for $3.
D)   consumers are willing to pay $2 for the 400th pretzel.

Question 8

-The above figure tells us about the market for red roses. The consumer surplus is _______ a day.

Accepted Answer

A)   $1,000
B)   $20
C)   $200
D)   $800 C

Question 9

Total surplus is defined as

Accepted Answer

A)   another word for profit.
B)   another word for total revenue.
C)   consumer surplus - producer surplus.
D)   consumer surplus + producer surplus.

Question 10

Producer surplus is the _______ summed over the quantity sold.

Accepted Answer

A)   price received for a good minus its marginal cost
B)   price received for a good minus the value of the good
C)   marginal cost of making a good minus the price received for it
D)   value of a good minus the price received for it

Question 11

Stefano has just completed an original oil painting. After considering the cost of brushes, paint, canvas, and the value of Stefano's labour time, the marginal cost of the painting is $1,000. Lucky Stefano. One art lover paid him $1,500. How much producer surplus did Stefano obtain?

Accepted Answer

A)   The amount of producer surplus cannot be determined from the information given.
B)   $1,500
C)   $500
D)   $1,000

Question 12

-In the above figure, what is the efficient quantity of hotdogs to produce?

Accepted Answer

A)   6,000 per day
B)   2,000 per day
C)   4,000 per day
D)   The efficient quantity cannot be determined without knowing the PPF for this economy.

Question 13

Suppose the marginal cost of producing a good falls so that the marginal social cost curve shifts downward. Then the efficient quantity to produce of that product

Accepted Answer

A)   decreases.
B)   does not change.
C)   increases.
D)   could increase, stay the same, or decrease.

Question 14

Which of the following can prevent markets from reaching efficiency?
I. Decreasing marginal benefit
II. Taxes
III. Quantity regulations that limit the quantity that may be produced

Accepted Answer

A)   I and II
B)   I and III
C)   II and III
D)   I, II and III C

Question 15

Deadweight loss is the decrease in _______ from producing an inefficient amount of a product.

Accepted Answer

A)   only producer surplus
B)   consumer surplus and producer surplus
C)   profit
D)   only consumer surplus

Question 16

-The above table gives the market demand and market supply schedules for lemonade. There are no external benefits or external costs. What is the efficient quantity of lemonade?

Accepted Answer

A)   1000
B)   600
C)   1400
D)   It is impossible to determine the efficient quantity without more information.

Question 17

Suppose there are four firms that are each willing to sell one unit of a good. Each firm has a different minimum price that they are willing to sell for: Firm A, $6; Firm B, $7; Firm C, $10; and Firm D, $12. If the market price is $11 then the market supply for this good will be

Accepted Answer

A)   4 units.
B)   1 unit.
C)   2 units.
D)   3 units.

Question 18

-In the above figure, when the efficient quantity is produced the marginal social benefit of the last magazine is

Accepted Answer

A)   $3.
B)   $5.
C)   $1.
D)   some amount not given in the above three answers.

Question 19

Among the sources of economic inefficiency are all of the following EXCEPT

Accepted Answer

A)   taxes.
B)   subsidies.
C)   external costs.
D)   competition.

Question 20

-The figure above illustrates the market for hot dogs on Big Foot Island. The producer surplus is

Accepted Answer

A)   $1.20 a hot dog.
B)   $180 an hour.
C)   $60 an hour.
D)   $240 an hour.

Exam 5: Efficiency and Equity

An external benefit is a benefit that

Correct AnswerverifiedShow Answer

-The figure above illustrates the market for haircuts. Curve A is the _______ curve, and curve B is the _______ curve.

Correct AnswerverifiedB

-Homer, Bart and Lisa are the only consumers in the market. Using the information in the above table, what is the market demand for chocolate chip cookies at $4.00 per box?

Correct AnswerverifiedShow Answer

A cost borne not by the producer but by other people is called _______ cost.

Correct AnswerverifiedShow Answer

Jane is willing to pay $50 for a pair of shoes. The actual price of the shoes is $30. Her marginal benefit is

Correct AnswerverifiedShow Answer

A market demand curve is constructed by

Correct AnswerverifiedShow Answer

-In the above figure, when the quantity equals 400 pretzels,

Correct AnswerverifiedShow Answer

-The above figure tells us about the market for red roses. The consumer surplus is _______ a day.

Correct AnswerverifiedC

Total surplus is defined as

Correct AnswerverifiedShow Answer

Producer surplus is the _______ summed over the quantity sold.

Correct AnswerverifiedShow Answer

Stefano has just completed an original oil painting. After considering the cost of brushes, paint, canvas, and the value of Stefano's labour time, the marginal cost of the painting is $1,000. Lucky Stefano. One art lover paid him $1,500. How much producer surplus did Stefano obtain?

Correct AnswerverifiedShow Answer

-In the above figure, what is the efficient quantity of hotdogs to produce?

Correct AnswerverifiedShow Answer

Suppose the marginal cost of producing a good falls so that the marginal social cost curve shifts downward. Then the efficient quantity to produce of that product

Correct AnswerverifiedShow Answer

Which of the following can prevent markets from reaching efficiency? I. Decreasing marginal benefit II. Taxes III. Quantity regulations that limit the quantity that may be produced

Correct AnswerverifiedC

Deadweight loss is the decrease in _______ from producing an inefficient amount of a product.

Correct AnswerverifiedShow Answer

-The above table gives the market demand and market supply schedules for lemonade. There are no external benefits or external costs. What is the efficient quantity of lemonade?

Correct AnswerverifiedShow Answer

Suppose there are four firms that are each willing to sell one unit of a good. Each firm has a different minimum price that they are willing to sell for: Firm A, $6; Firm B, $7; Firm C, $10; and Firm D, $12. If the market price is $11 then the market supply for this good will be

Correct AnswerverifiedShow Answer

-In the above figure, when the efficient quantity is produced the marginal social benefit of the last magazine is

Correct AnswerverifiedShow Answer

Among the sources of economic inefficiency are all of the following EXCEPT

Correct AnswerverifiedShow Answer

-The figure above illustrates the market for hot dogs on Big Foot Island. The producer surplus is

Correct AnswerverifiedShow Answer

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-The figure above illustrates the market for haircuts. Curve A is the _ curve, and curve B is the _ curve.

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B

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C

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C

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