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Exam 6: Efficiency and Fairness of Markets

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Question 101

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Production efficiency requires that

A) the economy be producing on the PPF but the marginal cost of a good does not need to equal its marginal benefit.
B) the economy be producing on the PPF and that the marginal cost of a good equals its marginal benefit.
C) the marginal cost of a good equals its marginal benefit but the economy does not need to be producing on its PPF.
D) the society be producing at the point of allocative efficiency.
E) opportunity costs be minimized.

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Question 102

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-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.

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

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Question 103

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Suppose the price of a scooter is $200 and Cora Lee is willing to pay $250.Cora Lee's

Ben's cost of making an additional rocking chair is $75.

Canned milk was only rationed to babies and small children during World War II.This rationing was an example of allocation by

-In the figure above,if the market price is $12,then the total consumer surplus is

If a landlord will rent an apartment only to married couples over 30 years old,the landlord is allocating resources using a ________ allocation method.

The "equality of opportunity" idea of fairness claims

Jake just bought a new hockey stick.When he was leaving the shop,he thought that he such a great deal and would have paid $50 more dollars for the stick.Jake received

If the price is greater than the marginal cost of producing a good,the seller has

Samantha was willing to pay $10 for a hamburger because she was hungry but she only paid $2.50.What is the marginal benefit Samantha gained from the hamburger?

Which of the following is true? When there are no externalities,public goods,common resources,taxes or subsidies,then i.allocative efficiency occurs when marginal benefit exceeds marginal cost by as much as possible. ii.an a competitive equilibrium,resource allocation is efficient. iii.fair rules require income transfers from the rich to the poor.

When less than the efficient amount of a good is produced,how does the marginal benefit of the last unit produced compare to its marginal cost?

At a competitive market equilibrium,if there are no taxes,subsidies,price regulations,quantity regulations,or externalities, i.consumer surplus is minimized. ii.marginal cost equals marginal benefit. iii.resources are efficiently used. iv.producer surplus is minimized.

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.

Allocative efficiency refers to

Wal-Mart has a limited number of "Black Friday" (the day-after Thanksgiving Day) special items on sale at prices well below their typical price.Wal-Mart opens at 10 PM on Thanksgiving.Wal-Mart is using a ________ allocation method for these items.

When the price rises and the supply curve does not shift,the firms' producer surplus ________.When the price falls and the supply curve does not shift,the firms' producer surplus ________.

Value is

The concept of "the invisible hand" suggests that to attain efficiency,the government should