Question 1

Figure 5.4 
-Refer to Figure 5.4.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 is achieved when the quantity supplied is equal to the quantity demanded, which occurs at the equilibrium price of $3 in this case. If the price of pecans is held constant at $3, any increase in demand or decrease in supply would result in a shortage, with quantity demanded exceeding quantity supplied, leading to potential inefficiencies such as rationing or waiting in line for pecans. Conversely, any decrease in demand or increase in supply would result in a surplus, with quantity supplied exceeding quantity demanded, leading to potential inefficiencies such as wasted pecans. Therefore, the only choice that leads to an economically efficient output is D, where an increase in price would decrease quantity demanded and increase quantity supplied, leading to a new equilibrium point with the same price but a higher quantity.

Question 2

Figure 5.4 
-Refer to Figure 5.4.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 5.4 
-Refer to Figure 5.4.The figure...

Question 3

The graph below represents the market for lychee nuts.The equilibrium price is $7.00 per bushel, but the market price is $5.00 per bushel.Identify the areas representing consumer surplus, producer surplus, and deadweight loss at the equilibrium price of $7.00 and at the market price of $5.00.  __________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The answer of The graph below represents the market for...

Question 4

If equilibrium is achieved in a competitive market,

Accepted Answer

When equilibrium is achieved in a competitive market, the market reaches the optimal allocation of resources because the quantity supplied equals the quantity demanded and there is no deadweight loss. This means that all gains from trade are being realized, and there are no inefficiencies in the market. Therefore, option A is the correct answer.

Question 5

Figure 5.4 
-Refer to Figure 5.4.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following is true?

Accepted Answer

Both 4000 and 12000 metrics are points away from the equilibrium point in a competitive market, indicating inefficiency. The economically efficient output is where supply equals demand, typically not at the extremes of the supply and demand curves.

Question 6

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 maximised, 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 maximised, it is known as allocative efficiency which is a criterion of economic efficiency. This outcome ensures that resources are allocated in the most efficient way possible, without any waste or underproduction of goods and services. Therefore, option B is the correct answer. Option A is incorrect because maximum deadweight loss occurs when the market is operating inefficiently. Option C is incorrect because this outcome does not necessarily maximise profits. Option D is incorrect because this outcome does not necessarily minimise costs.

Question 7

Figure 5.4 
-Refer to Figure 5.4.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following statements is true if 8000 metrics of pecans are sold?

Accepted Answer

In a competitive market, the efficient outcome is achieved when marginal benefit equals marginal cost. Thus, if 8000 metrics of pecans are sold, the optimal point would be where the marginal benefit of the last unit sold equals the marginal cost of producing it. Therefore, D is the correct answer. (A) is false because deadweight loss is the loss in economic surplus due to inefficiency caused by market distortions. (B) is false because in a competitive market, producer surplus and consumer surplus are not necessarily equal. (C) is false because we don't have information to determine the marginal benefit of each unit sold.

Question 8

Figure 5.4 
-Refer to Figure 5.4.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3,

Accepted Answer

At a price of $3, the quantity supplied is less than the quantity demanded, indicating that the market is not at equilibrium. This means that the quantity supplied is less than the economically efficient quantity, which would be achieved at the market equilibrium where supply equals demand.

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

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

Accepted Answer

When the market price is at equilibrium, both the producer surplus and consumer surplus are maximized. This is because the price that consumers are willing to pay and the price that producers are willing to sell at are in balance, resulting in the most efficient allocation of goods and services.

Question 11

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

Accepted Answer

If marginal benefit is greater than marginal cost, it indicates that the value of producing one more unit is higher than the cost of producing that unit, suggesting that increasing output could improve efficiency, not that it is inefficiently high.

Question 12

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, resulting in a loss of economic surplus. This can occur due to various factors such as taxes, subsidies, price controls, and market power.

Question 13

Figure 5.4 
-Refer to Figure 5.4.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

At a price of $9, above the equilibrium price, the quantity supplied exceeds the quantity demanded, leading to a surplus. To reach an economically efficient output, the price must decrease to eliminate the surplus, which would decrease the quantity supplied and increase the quantity demanded until equilibrium is reached.

Question 14

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 maximised.

Accepted Answer

This is an accurate definition of economic efficiency, as it represents a situation where resources are allocated in the most socially desirable way.

Question 15

Figure 5.4 
-Refer to Figure 5.4.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following statements is true if 4000 metrics of pecans are sold?

Accepted Answer

The answer of Figure 5.4 
-Refer to Figure 5.4.The figure...

Question 16

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

Accepted Answer

If the market price is at equilibrium, there is no deadweight loss as quantity supplied equals quantity demanded. Deadweight loss exists only when there is market inefficiency, such as the imposition of a price floor or ceiling. When the market is at equilibrium, there is no such inefficiency and hence no deadweight loss.

Question 17

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

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

Question 18

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

Accepted Answer

This statement is true. Consumer surplus is the difference between what a consumer is willing to pay for a good or service and what they actually have to pay. Producer surplus is the difference between the price a producer is willing to sell a good or service for and the price they actually receive. Economic surplus is the sum of these two surpluses and represents the overall benefit to society from the production and consumption of a good or service.

Question 19

The graph below represents the market for walnuts.Identify the values of the marginal benefit and the marginal cost at the output levels of 2000 metrics, 4000 metrics and 6000 metrics.At each of these output levels, state whether output is inefficiently high, inefficiently low, or economically efficient.  __________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The answer of The graph below represents the market for...

Question 20

Which statement is true when a competitive equilibrium is achieved in a market?

Accepted Answer

When a competitive equilibrium is achieved in a market, it means that the market has reached the point where the supply and demand curve intersect, and the quantity demanded equals the quantity supplied at a given price. At this point, the total net benefit to society is maximized because there is no deadweight loss. The economy operates at the most efficient point, where the total benefits to consumers are equal to the total benefits to producers. This means that both consumers and producers are better off than they would have been if a price ceiling or price floor was imposed by the government. Therefore, statement B is the correct answer.

Quiz 5: Economic Efficiency, Government Price Setting and Taxes

Figure 5.4 -Refer to Figure 5.4.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 5.4 -Refer to Figure 5.4.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $9,

If equilibrium is achieved in a competitive market,

Figure 5.4 -Refer to Figure 5.4.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following is true?

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 maximised, then

Figure 5.4 -Refer to Figure 5.4.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following statements is true if 8000 metrics of pecans are sold?

Figure 5.4 -Refer to Figure 5.4.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3,

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