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

If equilibrium is achieved in a competitive market

Accepted Answer

Equilibrium in a competitive market implies that the market is operating efficiently, and all gains from trade are being realized. Therefore, there is no deadweight loss, which is the loss of economic efficiency that occurs when the equilibrium outcome is not achieved.

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.Which of the following is true?

Accepted Answer

Both 4,000 and 12,000 pounds of output result in a price that is higher than the economically efficient price, indicating that resources are being wasted. The economically efficient output is at the intersection of the supply and demand curves, which is at 8,000 pounds of pecans and a price of $6. At any other quantity of output, either too many or too few resources are being allocated to the production of pecans.

Question 4

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 for each additional unit produced, the benefit derived is greater than the cost of producing it. This implies that output is still efficient and should be increased as it generates more benefit than cost. Inefficiency occurs when marginal cost exceeds marginal benefit, indicating that producing an additional unit reduces overall benefit.

Question 5

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

Accepted Answer

If the market price is at equilibrium, the producer surplus is maximized because they are able to sell their goods at the highest possible price while still satisfying consumers' willingness to pay.

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 the price of pecans is $9

Accepted Answer

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

Question 7

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

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

Question 8

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 as the quantity demanded and quantity supplied are equal, and resources are allocated efficiently. Therefore, there is no maximization of deadweight loss in equilibrium.

Question 9

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

Accepted Answer

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

Question 10

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

Accepted Answer

Deadweight loss occurs when a market is not in competitive equilibrium, which leads to a loss in economic surplus. This loss occurs because the quantity of goods produced and consumed is not at the optimal level, leading to inefficiency and waste.

Question 11

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 producing pecans is above the marginal benefit of buying them. This indicates that the market is producing too much and the output is inefficiently high. To achieve allocative efficiency, the market should produce at the point where marginal cost equals marginal benefit. In this case, it would be at a lower quantity than 12,000 pounds. Therefore, the best choice is C.

Question 12

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 and the supply curve shows the marginal cost. This is because consumers determine their willingness to pay (marginal benefit) based on the price of the product, while producers determine their willingness to sell (marginal cost) based on the cost of producing the product. Thus, the equilibrium point where the two curves intersect represents the most efficient allocation of resources in the market.

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 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 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 4,000 pounds of pecans are sold

Accepted Answer

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

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.If the price of pecans is $9, what changes in the market would result in an economically efficient output?

Accepted Answer

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

Question 16

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 17

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 of the last unit produced is equal to its marginal cost of production and consumer surplus plus producer surplus is maximized, it represents a state of economic efficiency. At this point, resources are being allocated in the most optimal way and there is no deadweight loss. It does not necessarily mean that profits are maximized or costs are minimized.

Question 18

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

Accepted Answer

The economic surplus represents the net benefit to society from a particular economic activity or transaction. It is the sum of consumer surplus (the difference between what consumers are willing to pay for a good or service and the price they actually pay) and producer surplus (the difference between the price producers receive for a good or service and the minimum price they would be willing to accept).

Question 19

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

Economic efficiency occurs when the benefits of producing a good or service outweigh the costs, and the market price reflects this balance. When the marginal benefit to consumers equals the marginal cost of production, the market is said to be efficient because there is no wasted surplus or lost opportunities. Additionally, both consumer surplus (the difference between what consumers are willing to pay and what they actually pay) and producer surplus (the difference between what producers are willing to sell for and what they actually sell for) are maximized in an efficient market.

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.If the price of pecans is $3, what changes in the market would result in an economically efficient output?

Accepted Answer

In a competitive market, an economically efficient output occurs where the quantity supplied and quantity demanded are equal at the equilibrium price. If the price of pecans is $3 and the market is competitive, any excess demand (quantity demanded > quantity supplied) will drive the price up, and any excess supply (quantity supplied > quantity demanded) will drive the price down. Therefore, for an economically efficient output, the price of pecans should increase to eliminate excess demand and encourage more supply, which would then lead to a decrease in quantity demanded and an increase in quantity supplied, ultimately resulting in the quantity supplied and quantity demanded being equal at the new equilibrium price.

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

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

If equilibrium is achieved in a competitive market

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?

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

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 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.At a quantity of 4,000 pounds

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

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

Deadweight loss refers to the reduction in economic surplus resulting from a market 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.At a quantity of 12,000 pounds

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

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

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.If the price of pecans is $9, 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 the price of pecans is $3

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

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

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.

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?