Question 1

Figure 11.1 
-Refer to Figure 11.1.The figure above represents the market for pecans.Assume that this is a competitive market.If 4000 metrics of pecans are sold,

Accepted Answer

A

Question 2

Figure 11.1 
-Refer to Figure 11.1.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 metrics and 12,000 metrics are economically inefficient rates of output because they do not reflect the equilibrium where supply equals demand, leading to either excess supply or demand.

Question 3

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

Accepted Answer

A common resource is a good that is rival in consumption (i.e. one person's consumption of the good reduces the amount available for others) and non-excludable (i.e. it is difficult or impossible to prevent others from accessing the good). Examples of common resources include fish stocks in the ocean and clean air.

Question 4

Figure 11.1 
-Refer to Figure 11.1.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 optimal quantity sold is where marginal benefit equals marginal cost. Therefore, if 8000 metrics of pecans are sold, it implies that the market is at equilibrium and marginal benefit is equal to marginal cost. Option A is incorrect because deadweight loss (reduction in economic efficiency) is only equal to economic surplus when the market is not at equilibrium. Option B is incorrect because in a competitive market, producer surplus and consumer surplus are not necessarily equal. Option C is incorrect because we do not have information about the marginal benefit of each metric of pecans.

Question 5

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 known as the willingness-to-pay approach and reflects the total value that consumers place on the public good. It is the most accurate way to estimate the total demand for a public good.

Question 6

Figure 11.1 
-Refer to Figure 11.1.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

If the price is above equilibrium, the price should decrease to reach equilibrium, increasing quantity demanded and decreasing quantity supplied to achieve economic efficiency.

Question 7

Figure 11.1 
-Refer to Figure 11.1.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 because the market price is below the equilibrium price, leading to a shortage.

Question 8

Figure 11.1 
-Refer to Figure 11.1.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

An economically efficient output is where the quantity demanded equals the quantity supplied at the equilibrium price. If the price of pecans is $3 and the market is competitive, then any changes that lead to an increase in price would result in a decrease in quantity demanded and an increase in quantity supplied. Thus, the best choice is D where an increase in price would decrease quantity demanded and increase quantity supplied, leading to an economically efficient output at the equilibrium price.

Question 9

Why do private producers have no incentive to provide public goods?

Accepted Answer

Private producers have no incentive to provide public goods because once produced, it will not be possible to exclude those who do not pay for the good. This creates a free-rider problem where people can benefit from the public good without paying for it, leading to underproduction of public goods by private producers.

Question 10

Figure 11.1 
-Refer to Figure 11.1.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 high.

Question 11

When is economic efficiency achieved in a competitive market?

Accepted Answer

Economic efficiency is achieved when the marginal benefit equals the marginal cost from the last unit sold. This means that there is no other way to allocate resources that would make society better off without making someone worse off. It is the point where the market achieves maximum total welfare.

Question 12

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 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 used efficiently and there is no wastage. This is the definition of economic efficiency. Therefore, option B is the correct answer. The other options are not necessarily true in this scenario.

Question 13

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 14

Figure 11.1 
-Refer to Figure 11.1.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $9,

Accepted Answer

The answer of Figure 11.1 
-Refer to Figure 11.1.The figure...

Question 15

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 marginal benefit equals marginal cost, and at that point, the sum of consumer surplus and producer surplus is at its maximum. Therefore, option A is the correct answer. Option B and D are incorrect because they imply a decrease in economic value, which is not the case for economic efficiency. Option C is incorrect because economic efficiency is about balancing the benefits of both consumers and firms, not just one or the other.

Question 16

For certain public projects such as building a dam on a river or a bridge to an island,what procedure is a government likely to use to determine what quantity of a public good should be supplied?

Accepted Answer

The government is likely to evaluate the costs and benefits of producing the good, as this allows them to determine the optimal quantity of the public good to supply. They may also consider feedback from public surveys and expert opinions from economists, but ultimately the decision will be based on a careful analysis of the costs and benefits associated with the project. A vote in Congress may also play a role in the decision-making process, but it is not the primary method used to determine the quantity of a public good to be supplied.

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

What is one difference between the demand for a private good and that for a public good?

Accepted Answer

The demand for a private good is based on individual preferences and each consumer can choose the quantity they want to consume based on their willingness to pay. However, with a public good, everyone consumes the same quantity and it is not possible for one individual to consume more or less than others. This is because public goods are non-rivalrous, meaning that one person's consumption does not reduce the amount available for others.

Question 19

Figure 11.1 
-Refer to Figure 11.1.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 demanded of pecans is 8,000 and the quantity supplied is 4,000. This implies that there is underproduction of pecans, and the market is inefficiently low. The marginal benefit of pecans at this price is higher than the marginal cost, indicating that consumers are willing to pay more for the pecans than it costs to produce them. Therefore, increasing the output of pecans to the point where the marginal cost equals the marginal benefit would result in a more efficient allocation of resources.

Question 20

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

Accepted Answer

Public goods are the only goods that exhibit both non-rivalry and non-excludability in consumption. Non-rivalry means that a person's consumption of the good does not diminish its availability to others, while non-excludability means that it is not possible to prevent anyone from consuming the good, even if they do not pay for it. Private goods are both rivalrous and excludable, quasi-public goods are excludable but not necessarily non-rivalrous, and common resources are rivalrous but not necessarily non-excludable.

Quiz 11: Government Intervention in the Market

Figure 11.1 -Refer to Figure 11.1.The figure above represents the market for pecans.Assume that this is a competitive market.If 4000 metrics of pecans are sold,

Figure 11.1 -Refer to Figure 11.1.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following is true?

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

Figure 11.1 -Refer to Figure 11.1.The figure above represents the market for pecans.Assume that this is a competitive market.If 8000 metrics of pecans are sold,

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

Figure 11.1 -Refer to Figure 11.1.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?

Figure 11.1 -Refer to Figure 11.1.The figure above represents the market for pecans.Assume that this is a competitive market.If the price of pecans is $3,

Figure 11.1 -Refer to Figure 11.1.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?