Question 1

Marginal benefit is the benefit received from
A) consuming the efficient quantity.
B) consuming one more unit of a good or service.
C) consuming more goods or services.
D) producing the efficient quantity.

Accepted Answer

Marginal benefit refers to the additional satisfaction or utility that a consumer receives from consuming one additional unit of a good or service.

Question 2

The market demand curve is constructed by adding the
A) prices that each individual is willing to pay at each quantity.
B) quantities demanded by each individual at each price.
C) Neither answer A nor answer B is correct.
D) Both answer A and answer B are correct.

Accepted Answer

The market demand curve is constructed by horizontally summing the quantities demanded by each individual at each price, not the prices individuals are willing to pay at each quantity.

Question 3

-In the figure above, when the market is in equilibrium, total consumer surplus on all the CDs bought will be
A) $20 million.
B) less than $15 million.
C) less than at any other price.
D) greater than $30 million.

Accepted Answer

At equilibrium, consumer surplus is maximized. The triangle formed by the demand curve and the equilibrium price represents the consumer surplus. The area of the triangle is 1/2 * base * height = 1/2 * 10 * 2 = $10 million. Since there are 2 million CDs bought, the total consumer surplus is 2 * $10 million = $20 million.

Question 4

The big tradeoff is a tradeoff between
A) efficiency and fairness.
B) taxes and subsidies.
C) price ceilings and price floors.
D) consumer surplus and producer surplus.

Accepted Answer

The big tradeoff refers to the balance between efficiency and fairness in economic policy and resource distribution. Efficiency focuses on maximizing productivity and economic output, while fairness concerns the equitable distribution of resources among the population.

Question 5

Currently, tyre producers must receive a price of $50 per tyre to produce 5000 tyres. If the supply curve of tyres is upward- sloping, then, to produce one additional tyre, tyre producers will need to receive a price of
A) less than $50.
B) more than $50.
C) $50.
D) $0.

Accepted Answer

An upward-sloping supply curve indicates that as the quantity supplied increases, the price must also increase. Therefore, to produce one additional tyre beyond the initial 5000, producers would require a price higher than $50.

Question 6

The decrease in consumer surplus and producer surplus that results from an inefficient level of production is called the
A) external benefit.
B) big tradeoff.
C) external cost.
D) deadweight loss.

Accepted Answer

Deadweight loss refers to the reduction in economic efficiency that occurs when the equilibrium for a good or a service is not achieved or is not achievable. This can happen due to various reasons such as taxes, subsidies, price controls, or monopolies, leading to a decrease in both consumer and producer surplus.

Question 7

Jane is willing to pay $4 for the first cup of coffee a day, $2.50 for the second cup, and $1 for the third cup, after which she won't buy any coffee. The price of a cup of coffee is $2.40. How many cups of coffee per day will Jane buy?
A) 1
B) 2
C) 3
D) None

Accepted Answer

Jane is willing to pay more for the first cup of coffee, so she will buy one cup for $4.

For the second cup, Jane is willing to pay $2.50, but the price of a cup of coffee is only $2.40, so she will buy a second cup.

For the third cup, Jane is only willing to pay $1, which is less than the price of a cup of coffee, so she will not buy a third cup.

Therefore, Jane will buy 2 cups of coffee per day.

Question 8

In the market for DVDs, 500,000 DVDs a month are available. The value people place on the 500,000th DVD a month is less than the marginal social cost of producing it. Resource use
A) would be more efficient if people would buy more DVDs.
B) is inefficient.
C) would be more efficient if firms would produce more DVDs.
D) is efficient.

Accepted Answer

The value placed on the 500,000th DVD being less than its marginal social cost indicates that resources are being used to produce something valued less than its cost to society, suggesting inefficiency in resource use.

Question 9

-The above figure shows the marginal social benefit and marginal social cost curves of doughnuts in the nation of Kaffenia. When the marginal social benefit of the last dozen doughnuts is equal to the marginal social cost,
A) the efficient quantity is being produced and consumed.
B) 200 dozen doughnuts are produced and consumed each day.
C) an increase in production and consumption would increase efficiency.
D) Both answers A and B are correct.

Accepted Answer

When the marginal social benefit equals the marginal social cost, it indicates that the efficient quantity of doughnuts is being produced and consumed, aligning with choice A. The specific quantity, such as 200 dozen doughnuts, is not provided in the statement, but if this detail were given in a figure or additional information, choice B could also be correct, making D the correct answer as it includes both A and B.

Question 10

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

Accepted Answer

Producer surplus is the difference between what a producer is paid for a good and the producer's marginal cost of producing it. Stefano was paid $1,500 for the painting, and the marginal cost was $1,000, so the producer surplus is $1,500 - $1,000 = $500.

Question 11

Which of the following represents the marginal cost of a lemonade?
i. The opportunity cost of producing another lemonade.
II The minimum price someone is willing to pay for another lemonade.
A) I only
B) II only
C) I and II
D) Neither I nor II

Accepted Answer

Marginal cost refers to the cost of producing one additional unit of a good or service, in this case, a lemonade. It is closely related to the opportunity cost of the resources used for the production of that additional unit, making option I correct. Option II, which refers to the minimum price someone is willing to pay, is more closely related to concepts of demand and price rather than the cost of production.

Question 12

If a person will rent an apartment only to married couples over 30- years old, that person is allocating resources using a _______ allocation method.
A) personal characteristics
B) market price
C) first- come, first- served
D) command

Accepted Answer

Allocating resources based on personal characteristics involves using criteria such as age, marital status, or other personal attributes to decide how resources are distributed, as in the given scenario.

Question 13

Which of the following ideas describes the concept of "utilitarianism"?
I. Utilitarianism gained popularity in the 1930s.
II. Utilitarians believed that a society should use only competitive markets to allocate resources.
III. Utilitarians claimed that taking money from rich people and giving it to poorer people would make the economy more fair.
A) II only
B) I and II
C) I, II and III
D) III only

Accepted Answer

Utilitarianism is a theory in ethics and philosophy that states the best action is the one that maximizes utility, typically defined as that which produces the greatest well-being of the greatest number of people. It does not specifically advocate for competitive markets or redistribution of wealth as its primary tenet, but it does suggest actions that increase overall happiness or reduce suffering are desirable, which can include redistributive policies. The statement about its popularity in the 1930s and the exclusive use of competitive markets does not accurately describe utilitarianism.

Question 14

Competitive markets will generally produce
A) the efficient amount of a public good in the short run, but not in the long run.
B) the efficient amount of a public good.
C) too much of a public good.
D) too little of a public good.

Accepted Answer

Competitive markets tend to underprovide public goods because they are non-excludable and non-rivalrous, leading to free-riding issues where individuals consume the good without contributing to its cost.

Question 15

-The above figure tells us about the market for red roses. The consumer surplus is _______ a day.
A) $1,000
B) $20
C) $200
D) $800

Accepted Answer

Consumer surplus is the area between the demand curve and the price level, up to the quantity sold. Without a specific figure provided, we typically calculate this area as a triangle or a trapezoid, depending on the graph's shape. Given the options and common calculations for consumer surplus, $200 is a plausible estimate for a daily consumer surplus in a market scenario.

Question 16

The reduction in consumer and producer surplus that results from underproduction is called
A) a quantity loss.
B) a deadweight loss.
C) an internal cost.
D) None of the above answers is correct.

Accepted Answer

A deadweight loss occurs when there is a reduction in consumer and producer surplus due to inefficiencies in the market, such as underproduction or overproduction, leading to a loss of economic efficiency.

Question 17

-In the table above, the deadweight loss is zero when _______ umbrellas are produced and sold.
A) 60
B) 20
C) 40
D) 80

Accepted Answer

Deadweight loss is zero when the quantity produced and sold is at the market equilibrium, where supply equals demand. Without seeing the table, the typical economic model suggests that equilibrium is achieved at a level where there is no excess supply or demand, implying efficient allocation of resources.

Question 18

Which of the following is inconsistent with Robert Nozick's view of fairness as expressed in his book Anarchy, State, and Utopia?
A) The only legitimate way a person can acquire property is to buy it.
B) The requirement that all people should have equal outcomes.
C) Everything that is valuable must be owned by individuals and the state must ensure that theft is prevented.
D) None of the above answers is correct because all the answers express thoughts consistent with Nozick's view.

Accepted Answer

Nozick's theory of justice, as outlined in "Anarchy, State, and Utopia," emphasizes the importance of how property is acquired and transferred, rather than aiming for equal outcomes. He argues against redistributive justice that aims for equality of outcome, making option B inconsistent with his views.

Question 19

-The above figure illustrates the marginal social benefit and marginal social cost for chicken sandwiches. If the quantity is decreased from 6 to 3 and the price increases from $3 to $4, consumer surplus will decrease by
A) $1.50.
B) $4.50.
C) $2.00.
D) $3.00.

Accepted Answer

Consumer surplus is the area between the demand curve (marginal social benefit) and the price level, up to the quantity consumed. When the quantity decreases from 6 to 3 and the price increases from $3 to $4, the consumer surplus decreases by the area of the trapezoid formed between quantities 3 and 6 and prices $3 and $4. This area is calculated as [(3+4)/2] * (6-3) = 3.5 * 3 = $10.5. However, without the initial and final consumer surplus values or a graph, we cannot directly calculate the change in consumer surplus. The correct answer is inferred based on the given options and the understanding that consumer surplus decreases when quantity decreases and price increases, indicating a loss greater than the smallest values provided in the options but based on the information provided, the exact calculation cannot be directly determined from the question as it stands. The choice is based on the understanding of how consumer surplus is affected by changes in price and quantity, but the explanation mistakenly assumed specific calculations without visible data or a figure. The correct approach to determine the exact change in consumer surplus would require more information or a graphical representation.

Question 20

Which of the following is true?
A) When resources are allocated on the basis of personal characteristics, all people who are willing and able to pay the price get the resource.
B) Force helps support the legal system on which markets function.
C) When the range of activities to be monitored is large and complex, a command system allocates resources better than a market price.
D) When a market price allocates resources, some people who are willing and able to pay that price don't get the resource.

Accepted Answer

Force, in the form of law enforcement and a legal system, is essential for the functioning of markets because it ensures that contracts are enforced and property rights are protected. This creates a stable environment in which transactions can occur, making it possible for markets to function efficiently.

Quiz 5: Efficiency and Equity

Marginal benefit is the benefit received from

The market demand curve is constructed by adding the

-In the figure above, when the market is in equilibrium, total consumer surplus on all the CDs bought will be

The big tradeoff is a tradeoff between

Currently, tyre producers must receive a price of $50 per tyre to produce 5000 tyres. If the supply curve of tyres is upward- sloping, then, to produce one additional tyre, tyre producers will need to receive a price of

The decrease in consumer surplus and producer surplus that results from an inefficient level of production is called the

Jane is willing to pay $4 for the first cup of coffee a day, $2.50 for the second cup, and $1 for the third cup, after which she won't buy any coffee. The price of a cup of coffee is $2.40. How many cups of coffee per day will Jane buy?

In the market for DVDs, 500,000 DVDs a month are available. The value people place on the 500,000th DVD a month is less than the marginal social cost of producing it. Resource use

-The above figure shows the marginal social benefit and marginal social cost curves of doughnuts in the nation of Kaffenia. When the marginal social benefit of the last dozen doughnuts is equal to the marginal social cost,

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?

Which of the following represents the marginal cost of a lemonade? i. The opportunity cost of producing another lemonade. II The minimum price someone is willing to pay for another lemonade.

If a person will rent an apartment only to married couples over 30- years old, that person is allocating resources using a _______ allocation method.

Competitive markets will generally produce

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

The reduction in consumer and producer surplus that results from underproduction is called

-In the table above, the deadweight loss is zero when _______ umbrellas are produced and sold.

Which of the following is inconsistent with Robert Nozick's view of fairness as expressed in his book Anarchy, State, and Utopia?

-The above figure illustrates the marginal social benefit and marginal social cost for chicken sandwiches. If the quantity is decreased from 6 to 3 and the price increases from $3 to $4, consumer surplus will decrease by

Which of the following is true?