Question 1

An efficient producer will keep increasing production until:

Accepted Answer

A)  total benefit equals total cost.
B)  minimum average cost has been reached.
C)  maximum benefit equals maximum cost.
D)  price equals marginal cost.

Question 2

Markets achieve an efficient allocation of resources when:

Accepted Answer

A)  the government intervenes in the market.
B)  the quantity demanded equals the quantity supplied.
C)  property rights are assigned.
D)  the producer surplus is zero.

Question 3

Why are both positive analysis and normative analysis needed for decision making?

Accepted Answer

The answer of Why are both positive analysis and normative...

Question 4

Which of the following is a positive economic statement?

Accepted Answer

A)  The government ought to balance its budget and eliminate the deficit.
B)  That company with a 50% profit rate made too much profit at the expense of consumers.
C)  If the government raises taxes, people will have less income available for purchases and saving.
D)  A 10% inflation rate is too high and should be reduced.

Question 5

The rational rule for markets is to produce:

Accepted Answer

A)  the output level with minimum average cost and buy the quantity with maximum benefit.
B)  more if the unit's marginal benefit exceeds its marginal cost.
C)  at the output where efficient quantity equals benefit.
D)  less if marginal benefit exceeds marginal cost.

Question 6

A key difference between equity and efficiency is that equity deals with _____ and efficiency focuses on _____.

Accepted Answer

A)  equality; minimizing costs
B)  minimizing costs; equality
C)  maximizing welfare; fairness
D)  fairness; maximizing economic surplus

Question 7

The most efficient outcome in a set of options is the one with the:

Accepted Answer

A)  largest economic surplus.
B)  lowest total costs.
C)  lowest total benefit.
D)  smallest positive difference between benefits minus total cost.

Question 8

The economic surplus in a market is the:

Accepted Answer

A)  excess demand due to a price below the equilibrium price.
B)  surplus that accrues when a good is not scarce, defined as the total amount (if any)  by which quantity demanded exceeds quantity supplied at a zero price.
C)  marginal benefit less the marginal cost of a good.
D)  sum of consumer surplus and producer surplus.

Question 9

When government policies lead to outcomes that are worse than those that would occur in unregulated markets:

Accepted Answer

A)  marginal costs occur.
B)  liveweight loss occurs.
C)  government failure occurs.
D)  government efficiency occurs.

Question 10

(Figure: Supply Curve 2)  Use the supply curve for bottles of dish soap in the graph to answer the question.
If 15 bottles are sold at a price of $8, what is the total producer surplus?

Accepted Answer

A)  $0
B)  $6
C)  $45
D)  $90

Question 11

_____ determines the amount of economic surplus; ______ determines whether buyers or sellers get the surplus.

Accepted Answer

A)  Price; quantity
B)  Quantity; price
C)  Marginal benefit; marginal cost
D)  Marginal cost; marginal benefit

Question 12

A market's deadweight loss is calculated as:

Accepted Answer

A)  the economic loss that a firm has when it is not producing its profit-maximizing output.
B)  the loss to consumers when a product malfunctions or fails to meet expectations.
C)  the economic surplus at the efficient quantity minus the economic surplus at the actual quantity.
D)  the price at equilibrium minus the price at actual quantity.

Question 13

In a market graph, consumer surplus is the area:

Accepted Answer

A)  between the demand curve and the supply curve.
B)  above the price.
C)  below the demand curve.
D)  above the price and below the demand curve.

Question 14

(Figure: Demand for Chicago Cubs Tickets) The figure Demand for Chicago Cubs Tickets represents Jeremy's annual demand for tickets to Chicago Cubs baseball games. At $20, Jeremy will purchase five tickets. How much consumer surplus does Jeremy receive?

Accepted Answer

The answer of (Figure: Demand for Chicago Cubs Tickets) The...

Question 15

Markets distribute production across companies in a way that:

Accepted Answer

A)  maximizes the number of firms.
B)  minimizes production.
C)  minimizes costs.
D)  maximizes production.

Question 16

Measurement of economic efficiency provides important information about the functioning of a market. Why should this information be used cautiously?

Accepted Answer

The answer of Measurement of economic efficiency provides important information...

Question 17

Efficient allocation of output requires that:

Accepted Answer

A)  each unit of output will go to the person who will get the highest marginal benefit from it.
B)  each unit of output will be produced at minimum fixed cost.
C)  output will be distributed evenly across consumers and producers.
D)  consumers will each pay a price equal to the marginal benefit received from the good.

Question 18

When goods are allocated in a way that creates the largest economic surplus:

Accepted Answer

A)  output is evenly allocated across firms.
B)  production is minimized.
C)  efficient allocation has been achieved.
D)  the marginal benefit of the last unit bought is the maximum marginal benefit.

Question 19

What is positive analysis?

Accepted Answer

A)  It prescribes what should happen, which involves value judgments.
B)  It puts the options that are available in order of the priorities held by the decision maker.
C)  It is based on beliefs about what is most important.
D)  It describes what is happening, explains why it is happening, or predicts what will happen.

Question 20

(Figure: Market 3)  Use the graph for the watermelon market to answer the question.
What is the economically efficient quantity of watermelons?

Accepted Answer

A)  two
B)  five
C)  seven
D)  10.5

Exam 7: Welfare and Efficiency

Efficient allocation of output requires that:

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The most efficient outcome in a set of options is the one with the:

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An efficient producer will keep increasing production until:

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Which of the following is a positive economic statement?

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What is positive analysis?

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(Figure: Demand for Chicago Cubs Tickets) The figure Demand for Chicago Cubs Tickets represents Jeremy's annual demand for tickets to Chicago Cubs baseball games. At $20, Jeremy will purchase five tickets. How much consumer surplus does Jeremy receive?

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(Figure: Market 3) Use the graph for the watermelon market to answer the question. What is the economically efficient quantity of watermelons?

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The economic surplus in a market is the:

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Markets distribute production across companies in a way that:

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The rational rule for markets is to produce:

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A market's deadweight loss is calculated as:

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When goods are allocated in a way that creates the largest economic surplus:

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Measurement of economic efficiency provides important information about the functioning of a market. Why should this information be used cautiously?

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A key difference between equity and efficiency is that equity deals with _____ and efficiency focuses on _____.

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(Figure: Supply Curve 2) Use the supply curve for bottles of dish soap in the graph to answer the question. If 15 bottles are sold at a price of $8, what is the total producer surplus?

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Why are both positive analysis and normative analysis needed for decision making?

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_____ determines the amount of economic surplus; ______ determines whether buyers or sellers get the surplus.

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In a market graph, consumer surplus is the area:

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Markets achieve an efficient allocation of resources when:

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When government policies lead to outcomes that are worse than those that would occur in unregulated markets:

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A key difference between equity and efficiency is that equity deals with _ and efficiency focuses on _.

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_ determines the amount of economic surplus; __ determines whether buyers or sellers get the surplus.

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