Question 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

C

Question 2

How does the construction of a market demand curve for a private good differ from that for a public good?

Accepted Answer

C

Question 3

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

Accepted Answer

Public goods have nonrivalry and nonexcludability in consumption. Nonrivalry means that one person's consumption of the good does not diminish the amount available for others to consume. Nonexcludability means that it is difficult to exclude people from using the good once it is provided. Both of these characteristics make it difficult for private markets to provide the good, and therefore public intervention may be necessary.

Question 4

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 5

-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 6

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

Accepted Answer

A common resource is rivalrous because consumption by one person reduces the amount available for others, and it is non-excludable because it is difficult to prevent people from using it. Examples of common resources include fisheries, grazing land, and clean air.

Question 7

-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

In a competitive market, the economically efficient output is where supply equals demand. Both 4000 pounds and 12,000 pounds are likely not at this equilibrium point, making them inefficient.

Question 8

The market demand for a public good can be determined by

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, meaning that once the good is provided, everyone can benefit from it and consuming it does not diminish its availability to others. Therefore, the value of the public good is determined by how much each consumer is willing to pay for it, as this reflects the benefit they receive from consuming it.

Question 9

-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

The answer of 
-Refer to Figure 14-1. The figure above...

Question 10

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 means that resources are being allocated efficiently. This is because the market is producing the quantity that maximises the total surplus (consumer and producer surplus), and no other allocation of resources can increase total surplus further. Therefore, economic efficiency is achieved. Choice A is incorrect because maximum deadweight loss occurs when the market outcome deviates from economic efficiency. Choice C is incorrect because producer profits may not be maximised in an efficient market outcome, and choice D is incorrect because costs may not be minimised either.

Question 11

-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 12

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

Accepted Answer

If marginal benefit is greater than marginal cost, then producing more output would increase total welfare, so the output is efficient. Inefficient production occurs when marginal cost is greater than marginal benefit.

Question 13

-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 14

-Refer to Figure 14-1. The figure above represents the market for pecans. Assume that this is a competitive market. If 8000 pounds of pecans are sold,

Accepted Answer

In a competitive market, equilibrium is achieved when the quantity supplied equals the quantity demanded, meaning the marginal benefit equals the marginal cost.

Question 15

-Refer to Figure 14-1. The figure above represents the market for pecans. Assume that this is a competitive market. If 4000 pounds of pecans are sold,

Accepted Answer

The answer of 
-Refer to Figure 14-1. The figure above...

Question 16

-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

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 18

Economic efficiency in a competitive market is achieved when

Accepted Answer

Economic efficiency in a competitive market is achieved when the marginal benefit equals the marginal cost from the last unit sold. This is because at this point, there is no further gain to society from producing more goods, as the cost of producing an additional unit would exceed the benefit gained from it. This is known as allocative efficiency. A and D are incorrect as they only focus on the surplus gained by consumers or producers, without taking into account the overall efficiency of the market. B is too vague and does not provide a specific indicator of economic efficiency.

Question 19

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 the marginal benefit equals the marginal cost, which ensures that resources are allocated efficiently. In a market where economic efficiency is achieved, consumers benefit from receiving goods or services that they value more than the cost of producing them, while producers benefit from receiving a price that covers their production costs. This results in the maximum possible sum of consumer surplus (the difference between the price paid and the value placed on the good or service) and producer surplus (the difference between the price received and the cost of production). Therefore, choice A is the best answer.

Question 20

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

Economic efficiency occurs when the market equilibrium is reached, meaning that the marginal benefit for consumers equals the marginal cost for producers and the combined surplus is maximised.

Quiz 14: Government Intervention in the Market

-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 does the construction of a market demand curve for a private good differ from that for a public good?

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

In a competitive market equilibrium,

-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?

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

-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?

The market demand for a public good can be determined by

-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,

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

-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,

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

-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?

-Refer to Figure 14-1. The figure above represents the market for pecans. Assume that this is a competitive market. If 8000 pounds of pecans are sold,

-Refer to Figure 14-1. The figure above represents the market for pecans. Assume that this is a competitive market. If 4000 pounds of pecans are sold,

-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,

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

Economic efficiency in a competitive market is achieved when

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

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.