Deck 6: The Economic Efficiency of Markets

Question 1

_____ is the maximum price of a good or service that the consumer puts on it.

A) Willingness to pay
B) Equilibrium
C) Utility
D) Rational self-interest

Answer 1

A

Question 2

Marta bids $15 for a shirt on an online auction site. She is the winning bid at $12. What is her willingness to pay?

A) $3
B) $12
C) $15
D) $27

Answer 2

C

Question 3

Marta bids $15 for a shirt on an online auction site. She is the winning bid at $12. What is her consumer surplus?

A) $3
B) $12
C) $15
D) $27

Answer 3

A

Question 4

(Figure: Willingness to Pay) The price is $15. In the table, what is Mabel's consumer surplus?
$\begin{array}{|l|l|}\hline \text { Buyer } & \text { Willingness to Pay } \\\hline \text { Mabel } & \$ 13 \\\hline \text { Hazel } & \$ 24 \\\hline \text { Antoinette } & \$ 20 \\\hline\end{array}$

A) $0
B) $2
C) $5
D) $13

Question 5

(Figure: Willingness to Pay) The price is $15. In the table, what is Hazel's consumer surplus?
$\begin{array}{|l|l|}\hline \text { Buyer } & \text { Willingness to Pay } \\\hline \text { Mabel } & \$ 13 \\\hline \text { Hazel } & \$ 24 \\\hline \text { Antoinette } & \$ 20 \\\hline\end{array}$

A) $2
B) $5
C) $9
D) $13

Question 6

(Figure: Willingness to Pay) The price is $15. In the table, what is Antoinette's consumer surplus?
$\begin{array}{|l|l|}\hline \text { Buyer } & \text { Willingness to Pay } \\\hline \text { Mabel } & \$ 13 \\\hline \text { Hazel } & \$ 24 \\\hline \text { Antoinette } & \$ 20 \\\hline\end{array}$

A) $2
B) $5
C) $9
D) $13

Question 7

(Figure: Consumer Surplus) The price is $15. In the table, what is Hazel's willingness to pay?
$\begin{array}{|l|l|}\hline \text { Buyer } & \text { Consumer Surplus } \\\hline \text { Mabel } & \$ 2 \\\hline \text { Hazel } & \$ 9 \\\hline \text { Antoinette } & \$ 5 \\\hline\end{array}$

A) $6
B) $9
C) $15
D) $24

Question 8

(Figure: Consumer Surplus) The price is $15. In the table, what is Mabel's willingness to pay?
$\begin{array}{|l|l|}\hline \text { Buyer } & \text { Consumer Surplus } \\\hline \text { Mabel } & \$ 2 \\\hline \text { Hazel } & \$ 9 \\\hline \text { Antoinette } & \$ 5 \\\hline\end{array}$

A) $13
B) $15
C) $17
D) $20

Question 9

(Figure: Consumer Surplus) The price is $15. In the table, what is Antoinette's willingness to pay?
$\begin{array}{|l|l|}\hline \text { Buyer } & \text { Consumer Surplus } \\\hline \text { Mabel } & \$ 2 \\\hline \text { Hazel } & \$ 9 \\\hline \text { Antoinette } & \$ 5 \\\hline\end{array}$

A) $10
B) $15
C) $20
D) $35

Question 10

(Figure: Willingness to Pay) The price is $15. In the table, what is the total consumer surplus for the three women?
$\begin{array}{|l|l|}\hline \text { Buyer } & \text { Willingness to Pay } \\\hline \text { Mabel } & \$ 13 \\\hline \text { Hazel } & \$ 24 \\\hline \text { Antoinette } & \$ 20 \\\hline\end{array}$

A) $14
B) $15
C) $16
D) $29

Question 11

Jim is willing to purchase a coffee mug for $20. The price of the mug is $15, but after the mug goes on sale, its new price is $12. What is Jim's consumer surplus based on the sale price?

A) $5
B) $8
C) $15
D) $20

Question 12

Vijaya is willing to purchase a meal at her favorite restaurant for $30, which is the usual price. When she arrives at the restaurant, she learns that it is having a promotion and her meal is half-priced. Assuming that she was willing to pay the full price, what is Vijaya's consumer surplus?

A) $30
B) $25
C) $20
D) $15

Question 13

The minimum price that a seller will take for a good or service is called willingness to:

A) buy.
B) accept.
C) purchase.
D) demand.

Question 14

The minimum price that a seller is willing to accept for a good or service is called willingness to:

A) buy.
B) accept.
C) purchase.
D) demand.

Question 15

The seller's gain from a sale-measured as the difference between the seller's willingness to accept and the actual price received-is called:

A) item scarcity.
B) consumer surplus.
C) item value.
D) producer surplus.

Question 16

(Figure: Producer Surplus 0) The price is $25. In the table, what is Mark's willingness to accept?
$\begin{array}{|l|l|}\hline \text { Seller } & \text { Producer Surplus } \\\hline \text { Mark } & \$ 5 \\\hline \text { Hank } & \$ 10 \\\hline \text { Andy } & \$ 15 \\\hline\end{array}$

A) $5
B) $15
C) $20
D) $25

Question 17

(Figure: Producer Surplus 0) The price is $25. In the table, what is Hank's willingness to accept?
$\begin{array}{|l|l|}\hline \text { Seller } & \text { Producer Surplus } \\\hline \text { Mark } & \$ 5 \\\hline \text { Hank } & \$ 10 \\\hline \text { Andy } & \$ 15 \\\hline\end{array}$

A) $5
B) $15
C) $20
D) $25

Question 18

(Figure: Producer Surplus 0) The price is $25. In the table, what is Andy's willingness to accept?
$\begin{array}{|l|l|}\hline \text { Seller } & \text { Producer Surplus } \\\hline \text { Mark } & \$ 5 \\\hline \text { Hank } & \$ 10 \\\hline \text { Andy } & \$ 15 \\\hline\end{array}$

A) $5
B) $10
C) $20
D) $25

Question 19

(Figure: Willingness to Accept) The price is $25. In the table, what is Mark's producer surplus?
$\begin{array}{|l|l|}\hline \text { Seller } & \text { Willingness to Accept } \\\hline \text { Mark } & \$ 20 \\\hline \text { Hank } & \$ 15 \\\hline \text { Andy } & \$ 10 \\\hline\end{array}$

A) $5
B) $10
C) $20
D) $25

Question 20

(Figure: Willingness to Accept) The price is $25. In the table, what is Hank's producer surplus?
$\begin{array}{|l|l|}\hline \text { Seller } & \text { Willingness to Accept } \\\hline \text { Mark } & \$ 20 \\\hline \text { Hank } & \$ 15 \\\hline \text { Andy } & \$ 10 \\\hline\end{array}$

A) $5
B) $10
C) $20
D) $25

Question 21

(Figure: Willingness to Accept) The price is $25. In the table, what is Andy's producer surplus?
$\begin{array}{|l|l|}\hline \text { Seller } & \text { Willingness to Accept } \\\hline \text { Mark } & \$ 20 \\\hline \text { Hank } & \$ 15 \\\hline \text { Andy } & \$ 10 \\\hline\end{array}$

A) $5
B) $10
C) $15
D) $20

Question 22

(Figure: Willingness to Accept 0) The price is $30. In the table, what is the total producer surplus?
$\begin{array}{|l|l|}\hline \text { Seller } & \text { Willingness to Accept } \\\hline \text { Mark } & \$ 10 \\\hline \text { Hank } & \$ 15 \\\hline \text { Andy } & \$ 21 \\\hline\end{array}$

A) $10
B) $30
C) $44
D) $46

Question 23

Matt is selling a footstool in an online auction and is willing to accept $21 for the footstool. When the auction ends, the winning bid is $25. What is Matt's producer surplus?

A) $4
B) $21
C) $25
D) $46

Question 24

Enid is selling a dress in an online auction and would be happy to get $15 for the dress. When the auction ends, the high bid is $18. What is Enid's willingness to accept?

A) $15
B) $18
C) $26
D) $33

Question 25

Producer surplus increases when:

A) consumer surplus increases.
B) consumer surplus decreases.
C) prices fall.
D) prices rise.

Question 26

When price increases, producer surplus could increase because:

A) price decreases.
B) new sellers enter the market.
C) consumer surplus increases.
D) consumer surplus decreases.

Question 27

The sum of producer and consumer surplus along with any tax revenue is called:

A) total utility.
B) deadweight loss.
C) deadweight gain.
D) total surplus.

Question 28

Reduction in total surplus resulting from a market distortion is called:

A) total utility.
B) deadweight loss.
C) deadweight gain.
D) total surplus.

Question 29

The total benefit to society for having a market to buy and sell goods is called:

A) total utility.
B) deadweight loss.
C) deadweight gain.
D) total surplus.

Question 30

Another name for a market that is not in equilibrium is:

A) equal equilibrium.
B) deadweight loss.
C) government failure.
D) market distortion.

Question 31

Market distortions that prevent price from reaching equilibrium generally cause:

A) an unequal equilibrium.
B) a deadweight loss.
C) a government failure.
D) a sunk cost.

Question 32

_____ is a concept that can be used to evaluate whether government policies are beneficial.

A) Unequal equilibrium
B) Market distortion
C) Government failure
D) Deadweight loss

Question 33

Minimizing production costs for any given output is called:

A) allocative efficiency.
B) productive efficiency.
C) market failure.
D) deadweight loss.

Question 34

_____ is obtaining output for the lowest possible cost.

A) Productive efficiency
B) Allocative efficiency
C) Market failure
D) Deadweight loss

Question 35

Obtaining the maximum possible output with a given set of resources is called:

A) productive efficiency.
B) allocative efficiency.
C) market failure.
D) deadweight loss.

Question 36

The optimal mix of goods and services produced is called:

A) productive efficiency.
B) allocative efficiency.
C) market failure.
D) deadweight loss.

Question 37

When markets in equilibrium maximize total surplus, the result is called:

A) productive efficiency.
B) total utility.
C) allocative efficiency.
D) deadweight loss.

Question 38

On a graph, total surplus would be depicted in the area:

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

Question 39

(Figure: Consumer, Producer, and Total Surplus) In the above figure, which area represents consumer surplus?

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

Question 40

(Figure: Consumer, Producer, and Total Surplus) In the above figure, which area represents producer surplus?

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

Question 41

(Figure: Consumer, Producer, and Total Surplus) In the above figure, which area represents total surplus?

A) A + B + C + D
B) A + B
C) B + C
D) C + D

Question 42

When allocative efficiency is achieved, _____ is maximized.

A) deadweight loss
B) consumer surplus
C) producer surplus
D) total surplus

Question 43

At _____, there is no other price or quantity that would result in a higher total surplus.

A) deadweight loss
B) consumer surplus
C) producer surplus
D) equilibrium

Question 44

Jerome bought a shirt for $15. He would have paid $20. Michael, the seller, would have sold it for $12. What is the total surplus resulting from the transaction?

A) $3
B) $8
C) $20
D) $27

Question 45

Kerrie sold a footstool to Alan for $21. She would have taken $15. Alan was willing to pay $30. What is the total surplus resulting from the transaction?

A) $6
B) $9
C) $15
D) $21

Question 46

From a recent transaction, Alfred's consumer surplus was $20. What does this mean?

A) The seller gave Alfred $20 in change.
B) The item cost Alfred $20 more than he was willing to pay.
C) Alfred would have paid $20 more than he did for the item.
D) Alfred was $20 short.

Question 47

From a recent transaction, Anton's producer surplus was $5. What does this mean?

A) Anton gave the purchaser $5 in change.
B) The price of the item was $5 more than the purchaser was willing to pay.
C) Anton received $5 less than he wanted.
D) Anton would have accepted $5 less.

Question 48

When a government intervenes in a market, generally the result is:

A) a move toward equilibrium.
B) equilibrium.
C) greater competition.
D) deadweight loss.

Question 49

_____ generally occurs when a market fails to reach equilibrium.

A) Allocative efficiency
B) Productive efficiency
C) Deadweight loss
D) Market utility

Question 50

______ occurs when government intervention keeps the price above or below the free-market equilibrium price.

A) Allocative efficiency
B) Productive efficiency
C) Deadweight loss
D) Market utility

Question 51

A law that sets a maximum price generally below equilibrium is called a price:

A) ceiling.
B) floor.
C) point.
D) equilibrium.

Question 52

Maria owns several apartments that she rents for $800 per month. The local government decides that $800 is too high and passes an ordinance stating that property owners cannot charge more than $600 per month. This is an example of a price:

A) ceiling.
B) floor.
C) point.
D) equilibrium.

Question 53

Maria owns several apartments that she rents for $800 per month. The local government decides that $800 is too high and passes an ordinance stating that property owners cannot charge more than $600 per month. What will most likely happen to the quantity supplied of apartments in the area in the long run?

A) Quantity supplied will increase.
B) Quantity supplied will decrease.
C) Quantity supplied will not be affected.
D) Quantity supplied will equal quantity demanded.

Question 54

Which of the following is a reason that governments may institute price ceilings?

A) to raise money for local government operations
B) to support worthwhile charities
C) to make a product more affordable to low income individuals
D) to increase the cost of the product or service

Question 55

(Figure: Price Ceiling 0) In the above figure, what is the equilibrium price?

A) $25
B) $30
C) $35
D) $50

Question 56

(Figure: Price Ceiling 0) In the above figure, what is the equilibrium quantity?

A) 15
B) 20
C) 10
D) 30

Question 57

(Figure: Price Ceiling 0) In the above figure, what is the price after the price ceiling is instituted?

A) $15
B) $20
C) $25
D) $30

Question 58

(Figure: Price Ceiling 0) In the above figure, what is the quantity demanded after the price ceiling is instituted?

A) 15
B) 30
C) 10
D) 20

Question 59

(Figure: Price Ceiling 0) In the above figure, after the price ceiling is instituted, there is:

A) an equilibrium.
B) a shortage.
C) a surplus.
D) an efficient market.

Question 60

(Figure: Price Ceiling 0) In the above figure, there is a _____ of _____ as a result of the price ceiling.

A) surplus; 10
B) surplus; 5
C) shortage; 5
D) shortage; 10

Question 61

(Figure: Price Ceiling A) In the above figure, what is the price after the price ceiling is instituted?

A) $20
B) $25
C) $30
D) $35

Question 62

(Figure: Price Ceiling A) In the above figure, what is the quantity supplied after the price ceiling is instituted?

A) 10
B) 15
C) 20
D) 5

Question 63

When a price ceiling is above equilibrium:

A) market price rises.
B) market price falls.
C) the price ceiling is illegal.
D) the market remains at equilibrium.

Question 64

The equilibrium price for travel by taxi is $1 per mile. The local government sets a price ceiling of $3 per mile. What is the effect on the market for travel by taxi?

A) Market price rises to $4 per mile.
B) Market price rises to $3 per mile.
C) Market price rises to $2 per mile.
D) Market price remains at $1 per mile.

Question 65

According to most economists, the best way to eliminate shortages is to:

A) lower a price ceiling.
B) lower a price floor.
C) eliminate price controls.
D) raise a price ceiling.

Question 66

(Figure: DWL0) In the figure, what is the total consumer surplus with the price ceiling?

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

Question 67

(Figure: DWL0) In the figure, what is the total consumer surplus at equilibrium?

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

Question 68

(Figure: DWL0) In the figure, what is the total producer surplus with the price ceiling?

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

Question 69

(Figure: DWL0) In the figure, what is the deadweight loss caused by the price ceiling?

A) B + D
B) C + D
C) C + B + D
D) D

Question 70

A law that sets a minimum price, usually above equilibrium, is a:

A) price ceiling.
B) price floor.
C) price point.
D) price equilibrium.

Question 71

A price floor is intended to benefit:

A) consumers.
B) suppliers.
C) only the poor.
D) only the wealthy.

Question 72

A price ceiling is intended to benefit:

A) consumers.
B) suppliers.
C) only the poor.
D) only the wealthy.

Question 73

Farmer Jones raises wheat. The equilibrium market price for wheat is $5.15 per bushel. However, government is requiring Farmer Jones to sell his wheat at $5.50 per bushel. This is an example of a:

A) price ceiling.
B) price floor.
C) market equilibrium.
D) new equilibrium price.

Question 74

(Figure: Price Floor 0) In the above figure, what is the equilibrium price?

A) $4
B) $4.50
C) $5
D) $5.50

Question 75

(Figure: Price Floor 0) In the above figure, what is the equilibrium quantity?

A) 1
B) 2
C) 3
D) 4

Question 76

(Figure: Price Floor 0) In the above figure, what is the price after the price floor is instituted?

A) $4
B) $4.5
C) $5
D) $5.5

Question 77

(Figure: Price Floor 0) In the above figure, what is the quantity demanded after the price floor is instituted?

A) 1
B) 2
C) 3
D) 4

Question 78

(Figure: Price Floor 0) In the above figure, after the price floor is instituted there is:

A) an equilibrium.
B) a shortage.
C) a surplus.
D) an efficient market.

Question 79

(Figure: Price Floor 0) In the above figure, there is a _____ of _____ as a result of the price floor.

A) surplus; 1
B) surplus; 2
C) shortage; 1
D) shortage; 2

Question 80

(Figure: Price Floor 0) In the above figure, what is the quantity supplied after the price floor is instituted?

A) 1
B) 2
C) 3
D) 4