Question 1

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

Economic efficiency is achieved when the market is in equilibrium, where the marginal benefit to consumers is equal to the marginal cost of production, and where consumer surplus plus producer surplus is maximized. This means that resources are being allocated efficiently and there is no deadweight loss. Maximizing profits or minimizing costs may not necessarily lead to economic efficiency.

Question 2

Economic surplus

Accepted Answer

Economic surplus is the total benefit to society from a transaction or economic activity. It is calculated as the difference between the total amount that consumers are willing to pay for a good or service (consumer surplus) and the total amount that producers are willing to accept as payment (producer surplus). In other words, economic surplus is the sum of consumer surplus and producer surplus. Option A is incorrect because economic surplus does exist in equilibrium. Option C is incorrect because it refers to a situation where the market price is above equilibrium. Option D is incorrect because economic surplus is not equal to either consumer surplus or producer surplus alone, but rather the sum of both.

Question 3

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. Marginal benefit is the additional satisfaction or utility that a consumer derives from consuming an additional unit of a good or service, while marginal cost is the additional cost incurred by producers in producing an additional unit of output. The intersection of the two curves determines the equilibrium price and quantity exchanged in the market.

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 price of $9

Accepted Answer

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

Question 5

________ 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. This can occur when there is market inefficiency, such as when there is a monopoly or when there are externalities present. Deadweight loss represents the loss of potential gains from trade that could have been made if the market was functioning at its most efficient level.

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, the market reaches equilibrium when marginal benefit is equal to marginal cost. Therefore, at 8,000 pounds of pecans sold, the marginal benefit of the last pound sold is equal to the marginal cost of producing that last pound. This means that D is the correct answer. The other options are incorrect as they do not accurately reflect the concept of a competitive market equilibrium.

Question 7

Refer to Figure 4-3.At a price of $18 consumers are willing to buy 40 pounds of tiger shrimp.Is this an economically efficient quantity?

Accepted Answer

The answer of Refer to Figure 4-3.At a price of...

Question 8

Refer to Figure 4-3.What is the value of the deadweight loss at a price of $18?

Accepted Answer

The answer of Refer to Figure 4-3.What is the value...

Question 9

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 is achieved when marginal benefit equals marginal cost, which maximizes the sum of consumer and producer surplus. Option A correctly states that economic efficiency is when the sum of consumer surplus and producer surplus is at a maximum.

Question 10

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 11

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

Accepted Answer

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

Question 12

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

This is the definition of economic efficiency.

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 $3,what changes in the market would result in an economically efficient output?

Accepted Answer

According to the law of supply, as the price of pecans increases, the quantity supplied will increase. On the other hand, according to the law of demand, as the price increases, the quantity demanded will decrease. Therefore, an increase in price will lead to a decrease in quantity demanded and an increase in quantity supplied, resulting in an economically efficient output at the new equilibrium point. Choice D accurately describes this scenario.

Question 14

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

Accepted Answer

This is a fundamental concept in economics, known as the "total surplus" or "economic welfare." It represents the net benefit to society as a whole from a given transaction or market activity.

Question 15

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

Accepted Answer

Deadweight loss occurs when the quantity of a good produced and consumed in a market is lower than the efficient equilibrium quantity, resulting in a decline in economic surplus. This situation can arise due to market distortions such as taxes, subsidies, price controls, or other forms of market failures that lead to a suboptimal allocation of resources. Deadweight loss is a measure of the efficiency loss or welfare loss that occurs when the benefits of producing or consuming a good or service are less than the costs of doing so, creating a net loss to society. Therefore, deadweight loss is a significant concept in microeconomics that helps to explain the consequences of market intervention and the rationale for policy reforms to enhance market efficiency.

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

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 pounds and 12,000 pounds are economically inefficient rates of output. This is because at these output levels, the marginal cost is less than the price, indicating that the firm could increase its profits by producing more. The economically efficient output is at the intersection of the supply and demand curves, which is 28,000 pounds at a price of $6. At this output level, the marginal cost equals the price, and there is no deadweight loss.

Question 18

Refer to Figure 4-3.What is the value of producer surplus at a price of $18??

Accepted Answer

The answer of Refer to Figure 4-3.What is the value...

Question 19

If equilibrium is achieved in a competitive market

Accepted Answer

In a competitive market, equilibrium is achieved when the quantity demanded equals the quantity supplied. At this point, both consumer and producer surplus are maximized and there is no deadweight loss. Therefore, the best choice is A.

Question 20

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

Accepted Answer

Economic surplus, also known as total surplus, is the difference between the total benefit received by consumers and the total cost incurred by producers in a market. In a competitive market, economic surplus is maximized when marginal benefit, which is the additional benefit received by consuming one more unit of a good, equals marginal cost, which is the additional cost incurred by producing one more unit of a good. This is because any further production beyond this point would incur additional costs that outweigh the additional benefits received, resulting in a decrease in economic surplus. Therefore, in a competitive market, producers will tend to produce at a level where marginal cost equals price, while consumers will tend to consume at a level where marginal benefit equals price, resulting in the efficient allocation of resources and maximum economic surplus.

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