Question 1

________ is maximized in a competitive market when marginal benefit equals marginal cost.

Accepted Answer

Economic surplus (also known as total welfare or social surplus) is the difference between the total benefit received from consuming a good or service and the total cost of producing it. It is maximized in a competitive market when the marginal benefit (the additional benefit received from consuming one more unit of the good) equals the marginal cost (the additional cost of producing one more unit of the good). This is because at this point, the value consumers place on the good (as reflected in the marginal benefit) is equal to the cost of producing it (as reflected in the marginal cost), resulting in the most efficient allocation of resources and the greatest overall societal benefit.

Question 2

________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium.

Accepted Answer

Deadweight loss refers to the reduction in economic surplus resulting from not being in competitive equilibrium. Marginal cost refers to the additional cost of producing one more unit of a good or service. Producer atrophy is not a commonly used economic term. Economic shortage refers to a situation where the quantity demanded of a good or service exceeds the quantity supplied, resulting in a shortage or a lack of availability of the good or service.

Question 3

Figure 4.4
 
-Refer to Figure 4.4.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3, what changes in the market would result in an economically efficient output?

Accepted Answer

According to the law of supply, when the price of pecans increases, the quantity supplied will increase. According to the law of demand, when the price of pecans increases, the quantity demanded will decrease. Therefore, an economically efficient output would result in an increase in price, a decrease in quantity demanded, and an increase in quantity supplied, which is represented by choice D.

Question 4

Figure 4.4
 
-Refer to Figure 4.4.The figure above represents the market for pecans.Assume that this is a competitive market.If 8,000 pounds of pecans are sold

Accepted Answer

In a competitive market, the equilibrium quantity is where marginal benefit equals marginal cost. Therefore, if 8,000 pounds of pecans are sold, this must be the equilibrium quantity and thus the marginal benefit of each of the 8,000 pounds of pecans equals the marginal cost. Therefore, choice D is correct. Choices A and B are incorrect because they do not follow from the information given. Choice C is also incorrect because the marginal benefit is not necessarily equal to $9 for all units of pecans, only for the 8,000th unit sold.

Question 5

In a competitive market the demand curve shows the ________ received by consumers and the supply curve shows the ________.

Accepted Answer

In a competitive market, the demand curve shows the marginal benefit received by consumers (i.e. how much extra benefit they get from consuming an additional unit of the good) and the supply curve shows the marginal cost (i.e. how much it costs to produce an additional unit of the good) incurred by producers. Therefore, the correct choice is B.

Question 6

If equilibrium is achieved in a competitive market

Accepted Answer

When equilibrium is achieved in a competitive market, there is no deadweight loss because the market is operating efficiently and producing the maximum possible total surplus (the sum of consumer surplus and producer surplus). Deadweight loss only occurs when the market is not in equilibrium and there is a mismatch between the quantity demanded and quantity supplied.

Question 7

Economic surplus

Accepted Answer

Economic surplus is the total benefit that society receives from a transaction or a market. It is calculated as the sum of the consumer surplus and producer surplus. Consumer surplus is the difference between what a consumer is willing to pay for a product or service and the actual market price they pay, while producer surplus is the difference between the market price and the minimum price a producer would need to receive to supply the good or service. Therefore, economic surplus is equal to the sum of these two surpluses.

Question 8

If, in a competitive market, marginal benefit is less than marginal cost,

Accepted Answer

The answer of If, in a competitive market, marginal benefit...

Question 9

Figure 4.3
  
Figure 4.3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18.
-Refer to Figure 4.3.What is the value of producer surplus at a price of $18?

Accepted Answer

The answer of Figure 4.3
  
Figure 4.3 shows the...

Question 10

Deadweight loss refers to the reduction in economic surplus resulting from a market not being in competitive equilibrium.

Accepted Answer

Deadweight loss is the loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved or is not achievable. This loss of economic efficiency can occur due to several reasons such as taxes, subsidies, price ceilings, or when there are externalities present in the market.

Question 11

The sum of consumer surplus and producer surplus is called economic surplus.

Accepted Answer

Economic surplus is the total benefit that both consumers and producers receive from a transaction in a market. Therefore, it is the sum of consumer surplus and producer surplus.

Question 12

Economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production, and in which

Accepted Answer

Economic efficiency occurs when the marginal benefit to consumers equals the marginal cost of production because this is the point at which society is producing the optimal amount of a good. At this point, the sum of consumer and producer surplus is at a maximum, indicating that both consumers and producers are benefiting from the transaction. Therefore, A is the correct choice. B and D are incorrect because economic surplus is not minimized in economic efficiency, it is maximized. C is incorrect because economic efficiency is about balancing the benefits to consumers and producers, not necessarily making them equal.

Question 13

If there is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and consumer surplus plus producer surplus is maximized, then

Accepted Answer

When the marginal benefit to consumers is equal to the marginal cost of production and the maximum consumer and producer surplus is achieved, it indicates that the market is operating at its highest efficiency. At this point, deadweight loss is minimized, and economic welfare is maximized. Therefore, option B is the best choice.

Question 14

Figure 4.3
  
Figure 4.3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18.
-Refer to Figure 4.3.What is the value of the deadweight loss at a price of $18?

Accepted Answer

The answer of Figure 4.3
  
Figure 4.3 shows the...

Question 15

Figure 4.4
 
-Refer to Figure 4.4.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following is true?

Accepted Answer

Both 40,000 kilograms and 12,000 kilograms are economically inefficient rates of output because they do not correspond to the equilibrium quantity where supply equals demand in a competitive market.

Question 16

Economic efficiency is a market outcome in which the marginal benefit of consumers is equal to the marginal cost of production and the sum of consumer surplus and producer surplus is maximized.

Accepted Answer

Economic efficiency is achieved when the market produces the optimal quantity of goods, which occurs where the marginal benefit or willingness to pay of consumers is equal to the marginal cost of production, and the resulting consumer and producer surpluses (the difference between what consumers are willing to pay and what they actually pay, and the difference between the cost of production and what producers receive, respectively) are maximized.

Question 17

Will equilibrium in a market always result in an outcome that is economically efficient? Explain.

Accepted Answer

The answer of Will equilibrium in a market always result...

Question 18

Figure 4.3
  
Figure 4.3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18.
-Refer to Figure 4.3.At a price of $18 consumers are willing to buy 40 kilograms of tiger shrimp.Is this an economically efficient quantity?

Accepted Answer

The economically efficient quantity is where marginal benefit equals marginal cost. If producers cut output to 40 and raise the price to $18, consumers are willing to buy 40 kilograms of tiger shrimp. However, the marginal benefit of the 40th unit is higher than the marginal cost of that unit. Therefore, this is not an economically efficient quantity.

Question 19

Figure 4.4
 
-Refer to Figure 4.4.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3

Accepted Answer

The answer of Figure 4.4
 
-Refer to Figure 4.4.The figure...

Question 20

Figure 4.4
 
-Refer to Figure 4.4.The figure above represents the market for pecans.Assume that this is a competitive market.At a price of $9

Accepted Answer

The answer of Figure 4.4
 
-Refer to Figure 4.4.The figure...

Quiz 4: Economic Efficiency, Government Price Setting, and Taxes

________ is maximized in a competitive market when marginal benefit equals marginal cost.

________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium.

Figure 4.4 -Refer to Figure 4.4.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3, what changes in the market would result in an economically efficient output?

Figure 4.4 -Refer to Figure 4.4.The figure above represents the market for pecans.Assume that this is a competitive market.If 8,000 pounds of pecans are sold

In a competitive market the demand curve shows the received by consumers and the supply curve shows the .

If equilibrium is achieved in a competitive market

Economic surplus

If, in a competitive market, marginal benefit is less than marginal cost,

Figure 4.3 Figure 4.3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40 in order to raise the price to $18. -Refer to Figure 4.3.What is the value of producer surplus at a price of $18?

Deadweight loss refers to the reduction in economic surplus resulting from a market not being in competitive equilibrium.

The sum of consumer surplus and producer surplus is called economic surplus.

Economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production, and in which

If there is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and consumer surplus plus producer surplus is maximized, then

Figure 4.4 -Refer to Figure 4.4.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following is true?

Economic efficiency is a market outcome in which the marginal benefit of consumers is equal to the marginal cost of production and the sum of consumer surplus and producer surplus is maximized.

Will equilibrium in a market always result in an outcome that is economically efficient? Explain.

Figure 4.4 -Refer to Figure 4.4.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3

Figure 4.4 -Refer to Figure 4.4.The figure above represents the market for pecans.Assume that this is a competitive market.At a price of $9