Question 1

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 2

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 4,000 pounds and 12,000 pounds are economically inefficient rates of output because they do not correspond to the equilibrium quantity where supply equals demand, leading to either excess supply or demand.

Question 3

What is economic surplus? When is economic surplus at a maximum?

Accepted Answer

The answer of What is economic surplus? When is economic...

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.At a quantity of 12,000 pounds,

Accepted Answer

At a quantity of 12,000 pounds, the marginal cost of pecans is greater than the marginal benefit. This means that the additional cost of producing one more pound of pecans is higher than the additional benefit received from selling one more pound of pecans. Therefore, output is inefficiently high, and producers should decrease the quantity supplied. This can be achieved by either raising the price or decreasing the quantity supplied to reach the equilibrium point where marginal cost equals marginal benefit. However, in a competitive market, producers do not have much control over the price and must adjust their quantity supplied to meet the demand at the equilibrium price.

Question 5

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

Accepted Answer

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

Question 6

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, equilibrium is reached when marginal benefit equals marginal cost. Therefore, if 8,000 pounds of pecans are sold, it implies that marginal benefit is equal to marginal cost. Option D is the correct choice. Options A and B are incorrect because deadweight loss and economic surplus depend on the quantity exchanged, which is not given in the question. Option C is also incorrect because marginal benefit is not provided in dollars, so it is not possible to say that the marginal benefit of each of the 8,000 pounds of pecans equals $9.

Question 7

If the market price is at equilibrium, the deadweight loss is maximized.

Accepted Answer

If the market price is at equilibrium, there is no deadweight loss present since the quantity demanded and supplied are equal, and the market is efficient. Deadweight loss occurs when markets are not at equilibrium and there is a loss of surplus due to inefficiency. Therefore, the statement is false.

Question 8

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

An economically efficient output occurs when the market is in equilibrium, where the quantity demanded and quantity supplied are equal. At a price of $3, there is a surplus of pecans, so the quantity supplied exceeds the quantity demanded. To move towards equilibrium, the price would need to increase, leading to a decrease in quantity demanded and an increase in quantity supplied until the market reaches a balance. Therefore, the best choice is D, where the price would increase, the quantity demanded would decrease, and the quantity supplied would increase, resulting in an economically efficient output.

Question 9

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

Accepted Answer

This definition accurately describes economic efficiency. It occurs when the market allocates resources in a way that maximizes the overall satisfaction of consumers and producers, while minimizing waste and inefficiencies.

Question 10

If equilibrium is achieved in a competitive market, then

Accepted Answer

When equilibrium is achieved in a competitive market, the quantity supplied by the producers is equal to the quantity demanded by the consumers, resulting in an efficient allocation of resources with no deadweight loss. Therefore, choice A is the best answer.

Question 11

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, resulting in fewer transactions and less overall welfare. This can occur due to market distortions such as government intervention, externalities, monopolies, etc.

Question 12

If marginal benefit is greater than marginal cost, output is inefficiently high.

Accepted Answer

If marginal benefit is greater than marginal cost, it means that there is still room for additional output to be produced before reaching the point of efficiency. Therefore, output cannot be inefficiently high as the production is still increasing.

Question 13

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 $9,

Accepted Answer

The answer of Figure 4-4
 
-Refer to Figure 4-4.The figure...

Question 14

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

If the price of pecans is $3 and it is below the equilibrium price, the quantity supplied will be less than the economically efficient quantity, leading to a shortage in the market.

Question 15

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, as they are willing to pay higher prices for a good or service that they value highly. On the other hand, the supply curve shows the marginal cost incurred by producers, as they are willing to produce and sell more units of a good or service at higher prices that cover their costs and allow them to earn a profit. Hence, the matching of the marginal benefit and marginal cost at the equilibrium point determines the quantity and price that balance the market.

Question 16

If the market price is at equilibrium, the producer surplus is minimized.

Accepted Answer

If the market price is at equilibrium, both the consumer surplus and producer surplus are maximized, not minimized. Producer surplus refers to the difference between the market price and the minimum price a producer is willing to accept for a good or service. At equilibrium, the market price is exactly what the producer is willing to accept, so their surplus is maximized.

Question 17

Figure 4-4
 
-Refer to Figure 4-4.The figure above represents the market for pecans.Assume that this is a competitive market.If 4,000 pounds of pecans are sold,

Accepted Answer

The answer of Figure 4-4
 
-Refer to Figure 4-4.The figure...

Question 18

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 quantity of 4,000 pounds,

Accepted Answer

At a quantity of 4,000 pounds, if the marginal benefit is greater than the marginal cost, it indicates that consumers value the pecans more than the cost to produce them, suggesting that more should be produced to reach an efficient output level.

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 $9, what changes in the market would result in an economically efficient output?

Accepted Answer

If the price is above equilibrium at $9, there is excess supply. To reach economic efficiency, the price should decrease, leading to a decrease in quantity supplied and an increase in quantity demanded until equilibrium is reached.

Question 20

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 equals the marginal cost, economic efficiency is achieved. This means that resources are being allocated in the best possible way to maximize overall welfare. Additionally, when consumer surplus and producer surplus are maximized, it indicates that the market is working efficiently to create value for both buyers and sellers. Therefore, B is the correct answer. A, C, and D are all incorrect because they do not necessarily indicate that economic efficiency has been achieved.

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

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.Which of the following is true?

What is economic surplus? When is economic surplus at a maximum?

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 quantity of 12,000 pounds,

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

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,

If the market price is at equilibrium, the deadweight loss is maximized.

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?

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

If equilibrium is achieved in a competitive market, then

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

If marginal benefit is greater than marginal cost, output is inefficiently high.

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 $9,

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,

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

If the market price is at equilibrium, the producer surplus is minimized.

Figure 4-4 -Refer to Figure 4-4.The figure above represents the market for pecans.Assume that this is a competitive market.If 4,000 pounds of pecans are sold,

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 quantity of 4,000 pounds,

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 $9, what changes in the market would result in an economically efficient output?

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