Question 1

Figure 14.1 
-Refer to Figure 14.1.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following is true?

Accepted Answer

The economically efficient output is where the supply and demand curves intersect at a quantity of 8000 metrics and a price of $6. At a quantity of 4000 or 12000 metrics, either the producers or the consumers could benefit by adjusting the quantity produced or consumed to reach the economically efficient level. Thus, both of these quantities are economically inefficient.

Question 2

Figure 14.1 
-Refer to Figure 14.1.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $9,

Accepted Answer

At a price of $9, the quantity supplied exceeds the quantity demanded, leading to a surplus. This indicates that more pecans are being produced and offered for sale than what is considered economically efficient, where economic efficiency is achieved at the equilibrium price where quantity demanded equals quantity supplied.

Question 3

Figure 14.1 
-Refer to Figure 14.1.The figure above represents the market for pecans.Assume that this is a competitive market.If 8000 metrics of pecans are sold,

Accepted Answer

In a competitive market, the allocation of resources is efficient when marginal benefit equals marginal cost. Therefore, if 8000 metrics of pecans are sold, it must be the case that the marginal benefit of each unit (i.e., the price) equals the marginal cost of production. Thus, choice D is correct. Choices A and B are incorrect because economic surplus is not necessarily equal to zero, and producer surplus and consumer surplus can still exist even though the market is efficient. Choice C is incorrect because we do not have enough information to determine the marginal benefit of each unit.

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 is efficient to increase output until the two are equal, at which point the optimal level of output is reached. Therefore, output is not inefficiently high.

Question 5

Figure 14.1 
-Refer to Figure 14.1.The figure above represents the market for pecans.Assume that this is a competitive market.At a price of $9,

Accepted Answer

The marginal benefit of pecans is greater than the marginal cost; therefore, output is inefficiently low.

Question 6

How can the market demand for a public good be determined?

Accepted Answer

The market demand for a public good can be determined by adding up how much each consumer is willing to pay for each unit of the public good. This is because public goods are non-excludable and non-rivalrous, so individuals cannot be excluded from consuming them and the consumption of one person does not diminish the consumption of another. Therefore, the value of the public good is based on how much each consumer is willing to pay for it, which can be added up to determine the overall market demand.

Question 7

Which of the following displays these two characteristics: non-rivalry and non-excludability in consumption?

Accepted Answer

Public goods are characterized by non-rivalry and non-excludability in consumption. Non-rivalry means that consumption by one individual does not diminish the availability of the good for others. Non-excludability means that individuals cannot be easily prevented from consuming the good, even if they do not pay for it. Examples of public goods include national defense, lighthouses, and public parks.

Question 8

Which of the following displays these two characteristics: rivalry and non-excludability?

Accepted Answer

A common resource is a good that is rivalrous (use by one person diminishes the amount available for others) and non-excludable (it is difficult or impossible to prevent others from using it). Examples include fisheries, forests, and grazing lands.

Question 9

Figure 14.1 
-Refer to Figure 14.1.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

If the price of pecans is $3, an economically efficient output would result in an increase in price. This would lead to a decrease in quantity demanded, as consumers would be less willing to purchase pecans at a higher price, and an increase in quantity supplied as producers would be more willing to supply more pecans at the higher price. This shift toward a higher equilibrium price and quantity traded is a result of the market adjusting to reach economic efficiency, where marginal benefit equals marginal cost. Thus, the correct choice is D.

Question 10

Figure 14.1 
-Refer to Figure 14.1.The figure above represents the market for pecans.Assume that this is a competitive market.If 4000 metrics of pecans are sold,

Accepted Answer

The answer of Figure 14.1 
-Refer to Figure 14.1.The figure...

Question 11

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 the definition of economic efficiency.

Question 12

Figure 14.1 
-Refer to Figure 14.1.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 economically efficient quantity, indicating a shortage in the market.

Question 13

When is economic efficiency achieved in a competitive market?

Accepted Answer

Economic efficiency is achieved in a competitive market when the marginal benefit of the last unit sold is equal to the marginal cost of producing that unit. This is because at this point, the market is producing the optimal amount of goods that maximizes the total surplus (consumer plus producer surplus). Therefore, choice C is the correct answer. Choices A, B, and D are not necessarily indicators of economic efficiency in a competitive market.

Question 14

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, economic efficiency is achieved. This is because resources are being allocated in a way that maximises total surplus (consumer and producer surplus). At this point, there is no deadweight loss, which occurs when there is a market failure and resources are not allocated efficiently. Profit maximisation and cost minimisation may not necessarily lead to economic efficiency.

Question 15

In a competitive market equilibrium,

Accepted Answer

In a competitive market equilibrium, the marginal benefit (the additional benefit that a consumer receives from consuming one more unit of a good) is equal to the marginal cost (the additional cost incurred by producing one more unit of a good) of the last unit sold. This ensures that resources are allocated efficiently, as society gains the most from the production and consumption of goods and services at this point. Therefore, the correct choice is D.

Question 16

Figure 14.1 
-Refer to Figure 14.1.The figure above represents the market for pecans.Assume that this is a competitive market.At a price of $3,

Accepted Answer

At a price of $3, the quantity supplied is 8,000 and the quantity demanded is 4,000. Since the price is below the equilibrium price of $6, the marginal benefit of pecans is higher than the marginal cost of producing pecans, and output is inefficiently low. Therefore, choice A is the correct answer.

Question 17

The construction of a market demand curve for a private good differs from that for a public good in that

Accepted Answer

The market demand curve for a private good is derived by horizontally summing individual demand curves, which means adding up the quantities demanded by each consumer at each price. For public goods, the demand curve is constructed by vertically summing individual willingness to pay for each quantity of the good, reflecting the collective value placed on each unit of the good.

Question 18

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 19

Figure 14.1 
-Refer to Figure 14.1.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 20

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 is equal to the marginal cost of production. This means that resources are allocated in the most efficient way possible, resulting in maximum total surplus (the sum of consumer and producer surplus). Therefore, choice A is correct. Choice B is incorrect because economic efficiency aims to maximize economic surplus, not minimize it. Choice C is incorrect because it is possible for one group (firms or consumers) to benefit more than the other without affecting economic efficiency. Choice D is incorrect because minimizing total surplus would not result in economic efficiency.

Quiz 14: Government Intervention in the Market

Figure 14.1 -Refer to Figure 14.1.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following is true?

Figure 14.1 -Refer to Figure 14.1.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $9,

Figure 14.1 -Refer to Figure 14.1.The figure above represents the market for pecans.Assume that this is a competitive market.If 8000 metrics of pecans are sold,

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

Figure 14.1 -Refer to Figure 14.1.The figure above represents the market for pecans.Assume that this is a competitive market.At a price of $9,

How can the market demand for a public good be determined?

Which of the following displays these two characteristics: non-rivalry and non-excludability in consumption?

Which of the following displays these two characteristics: rivalry and non-excludability?

Figure 14.1 -Refer to Figure 14.1.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 14.1 -Refer to Figure 14.1.The figure above represents the market for pecans.Assume that this is a competitive market.If 4000 metrics of pecans are sold,