Question 1

If the market supply curve is perfectly elastic and an excise tax is imposed,

Accepted Answer

A)   all of the tax is paid by buyers
B)   all of the tax is paid by sellers
C)   the tax burden is divided equally between buyers and sellers
D)   the market price will not change
E)   the market price will fall by the amount of the tax

Question 2

A Pareto improvement

Accepted Answer

A)   cannot take place unless a side payment is made
B)   cannot take place unless a market is perfectly competitive
C)   cannot occur unless both parties to a transaction enjoy positive net benefits
D)   will increase the total net benefits available in a perfectly competitive market
E)   occurs whenever the sum of market consumer surplus and market producer surplus is positive

Question 3

-In Figure 14-1 which area represents producer surplus?

Accepted Answer

A)   A
B)   B
C)   C
D)   D
E)   E

Question 4

Instead of throwing away a worn-out pair of jeans,a cowboy trades them in for $12.The jeans are resold for $45 to someone who likes to project a rugged image.These transactions are Pareto improvements.

Accepted Answer

A) True 
 B)False

Question 5

The more elastic the demand for a good,

Accepted Answer

A)   the more of an excise tax is that is collected by sellers
B)   the more of an excise tax that is paid by buyers
C)   the more an excise that is paid by sellers
D)   the more elastic the supply of that good
E)   the smaller the burden of a tax on that good

Question 6

Pareto improvements that require the use of side payments typically are easy to coordinate and tend to enhance economic efficiency.

Accepted Answer

A) True 
 B)False

Question 7

Tom carries on loud cellphone conversations in public places.He values such conversations at $1 per minute.Steve prefers piece and quiet.He would pay $2 per minute to avoid overhearing Tom's conversations.In this situation

Accepted Answer

A)   Tom should quit using his cellphone because that would be a Pareto improvement
B)   Tom should quit using his cellphone because that would be efficient
C)   If Steve made a side payment of $3 to Tom,that would be a Pareto improvement
D)   If Steve paid Tom 50 cents per minute to quit talking,that would be a Pareto improvement
E)   If Steve paid Tom $1.50 per minute to quit talking,that would be a Pareto improvement

Question 8

At the output level corresponding to the efficient quantity of a good,

Accepted Answer

A)   the value of the last unit can be negative for some consumer
B)   the value of the last unit to some consumer equals the minimum price some seller must receive for producing it
C)   the distribution of the good is fair
D)   the minimum price some consumer must pay for the last unit equals the value of the unit to some producer
E)   the price is the lowest that a typical firm would ever be willing to accept

Question 9

If the supply curve is perfectly inelastic and an excise tax is imposed

Accepted Answer

A)   all of the tax is paid by buyers
B)   all of the tax is paid by sellers
C)   the market price will rise by the amount of the tax
D)   the market price will fall by the amount of the tax
E)   the tax is divided equally between buyers and sellers

Question 10

An efficient economy

Accepted Answer

A)   is a fair economy
B)   can only be a capitalist economy
C)   is not necessarily a fair economy
D)   would never experience air or water pollution
E)   would not have a government sector

Question 11

The total consumer surplus enjoyed by all consumers in a market

Accepted Answer

A)   exceeds the market price
B)   is measured by the area under the market demand curve
C)   is measured by the area beneath the market price
D)   is a Pareto improvement
E)   is called market consumer surplus

Question 12

A price ceiling in a perfectly competitive market

Accepted Answer

A)   leads to the same result as if the market were monopolized
B)   results in a welfare loss
C)   is effective only if it is set above the equilibrium price
D)   may result from collusion among the firms selling in that market
E)   may result from collusion among the consumers buying in that market

Question 13

Of the four major market structures,perfect competition is the best at achieving economic efficiency.

Accepted Answer

A) True 
 B)False

Question 14

If a firm changed its fringe benefit program so that no employee suffered a loss in benefits and some employees enjoyed an increase in benefits,then

Accepted Answer

A)   this could not be a Pareto improvement
B)   the firm's policies are economically efficient
C)   this could be a Pareto improvement
D)   the firm's policies are fair
E)   the firm is losing money

Question 15

Consider a market with a price ceiling.If the price ceiling is raised which of the following would happen?

Accepted Answer

A)   The consumer surplus would increase,the producer surplus would decrease and the dead weight loss would decrease
B)   The consumer surplus would increase,the producer surplus would decrease and the dead weight loss would increase
C)   The consumer surplus,the producer surplus and the dead weight loss would all decrease
D)   The consumer surplus,the producer surplus and the dead weight loss would all increase
E)   The consumer surplus would decrease,the producer surplus would increase and the dead weight loss would decrease

Question 16

Economic efficiency

Accepted Answer

A)   is guaranteed in perfectly competitive and monopolistically competitive markets
B)   is achieved in any market where firms are free to maximize profits
C)   leads to a fair distribution of income
D)   leads to a fair distribution of goods
E)   is most likely to be achieved in perfectly competitive markets

Question 17

A Pareto improvement is any action that makes everyone better off.

Accepted Answer

A) True 
 B)False

Question 18

Suppose that a perfectly competitive market is in equilibrium,and then market supply decreases.Which of the following would happen?

Accepted Answer

A)   both producer and consumer surplus would increase
B)   both producer and consumer surplus would decrease
C)   producer surplus would decrease and consumer surplus would increase
D)   producer surplus would increase and consumer surplus would decrease
E)   producer and consumer surplus would remain unchanged

Question 19

If 10 units of a good are sold at a market price of $40 each,then

Accepted Answer

A)   the value to some individual of the tenth unit of output is $40
B)   the economy is efficient
C)   selling an 11th unit would be a Pareto improvement
D)   a side payment of $40 is needed to ensure that the good is produced
E)   the market must be perfectly competitive

Question 20

Economic efficiency

Accepted Answer

A)   should be society's main goal
B)   means that no Pareto improvements are possible
C)   cannot coexist with Pareto efficiency
D)   requires that income be distributed fairly
E)   implies that goods can be reallocated in a way that benefits someone

Exam 14: Economic Efficiency and the Competitive Ideal

A Pareto improvement is any action that makes everyone better off.

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The total consumer surplus enjoyed by all consumers in a market

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The more elastic the demand for a good,

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-In Figure 14-1 which area represents producer surplus?

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If 10 units of a good are sold at a market price of $40 each,then

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Tom carries on loud cellphone conversations in public places.He values such conversations at $1 per minute.Steve prefers piece and quiet.He would pay $2 per minute to avoid overhearing Tom's conversations.In this situation

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Of the four major market structures,perfect competition is the best at achieving economic efficiency.

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If the market supply curve is perfectly elastic and an excise tax is imposed,

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At the output level corresponding to the efficient quantity of a good,

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Economic efficiency

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An efficient economy

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If a firm changed its fringe benefit program so that no employee suffered a loss in benefits and some employees enjoyed an increase in benefits,then

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Economic efficiency

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Suppose that a perfectly competitive market is in equilibrium,and then market supply decreases.Which of the following would happen?

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Pareto improvements that require the use of side payments typically are easy to coordinate and tend to enhance economic efficiency.

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A Pareto improvement

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A price ceiling in a perfectly competitive market

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Consider a market with a price ceiling.If the price ceiling is raised which of the following would happen?

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If the supply curve is perfectly inelastic and an excise tax is imposed

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Instead of throwing away a worn-out pair of jeans,a cowboy trades them in for $12.The jeans are resold for $45 to someone who likes to project a rugged image.These transactions are Pareto improvements.

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