Question 1

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 2

When a competitive equilibrium is achieved in a market,

Accepted Answer

A competitive equilibrium is achieved when the quantity demanded by consumers equals the quantity supplied by producers at the market-clearing price. At this point, the total net benefit to society is maximized because the market is operating efficiently and resources are being allocated in the most optimal way. This means that the benefits to consumers are equal to the benefits to producers, leading to a Pareto efficient outcome.

Question 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

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 economic efficiency or Pareto efficiency. This means that the resources are allocated in the most efficient way possible and there is no way to make one party better off without making the other worse off. Therefore, there is no deadweight loss and both consumers and producers are getting the maximum possible surplus. Maximising profits or minimising costs may not necessarily lead to economic efficiency.

Question 4

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. Deadweight loss only occurs when the market is not at equilibrium, such as when prices are artificially high or low due to external interventions. At equilibrium, the quantity demanded equals the quantity supplied and there is no inefficiency or loss of economic surplus.

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.If the price of pecans is $3,what changes in the market would result in an economically efficient output?

Accepted Answer

At a price of $3, there is excess quantity supplied and excess quantity demanded. This means that there is a market inefficiency. To achieve an economically efficient output, the price needs to increase to reduce the quantity demanded and increase the quantity supplied, ultimately leading to a new equilibrium point where the quantity demanded equals the quantity supplied. Therefore, the correct choice is (D) where the price would increase, the quantity demanded would decrease, and the quantity supplied would increase.

Question 6

Figure 5-4 
-Refer to Figure 5-4.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 Figure 5-4 
-Refer to Figure 5-4.The figure...

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.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 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 $9,

Accepted Answer

The answer of Figure 5-4 
-Refer to Figure 5-4.The figure...

Question 9

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 10

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

Accepted Answer

If marginal benefit is greater than marginal cost, it means that there is still room for additional output to be produced before reaching the point of efficiency. Therefore, output cannot be inefficiently high as the production is still increasing.

Question 11

Figure 5-4 
-Refer to Figure 5-4.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, the price is determined where marginal benefit equals marginal cost. At the quantity where 8000 pounds of pecans are sold, the market reaches an equilibrium and the marginal benefit of the last unit sold equals the marginal cost of producing that last unit. Therefore, choice D is correct. The deadweight loss is not equal to economic surplus, so choice A is incorrect. Producer surplus and consumer surplus will not necessarily be equal, so choice B is also incorrect. Finally, there is no information given in the figure about the marginal benefit of each pound of pecans being $9, so choice C is also incorrect.

Question 12

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 13

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

The economically efficient rate of output is where marginal cost equals marginal benefit, which is at 8,000 pounds of pecans in this graph. Both 4,000 pounds and 12,000 pounds are economically inefficient as they result in either higher marginal cost or lower marginal benefit. Therefore, option C is correct. Option A is incorrect as at $3, the market is not in equilibrium and there will be excess demand resulting in shortage. Option B is incorrect as at $9, the quantity demanded is less than the efficient output. Option D is incorrect as if the price is $3, the quantity supplied will be 8,000 pounds, which is the efficient rate, not the inefficient one.

Question 14

If equilibrium is achieved in a competitive market,

Accepted Answer

In a competitive market, equilibrium is achieved when the quantity demanded by consumers equals the quantity supplied by producers, resulting in an efficient allocation of resources. At this equilibrium, there is no deadweight loss as there is no longer a societal loss due to under or overproduction.

Question 15

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 reaches a point where the marginal benefit to consumers is equal to the marginal cost of production. This is also known as allocative efficiency. The sum of producer surplus and consumer surplus is maximized at this point, which means that resources are allocated efficiently to maximize social welfare.

Question 16

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 pounds,4000 pounds and 6000 pounds.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 17

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 18

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 and results in a reduction of economic surplus. This can happen due to market distortions such as taxes, subsidies, price ceilings/floors, and monopolies.

Question 19

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

Accepted Answer

The answer of What is economic surplus? When is economic...

Question 20

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

Accepted Answer

This statement is true. The economic surplus represents the total value that society gains from a transaction or market exchange, and it is calculated as the sum of consumer surplus and producer surplus.

Quiz 5: Economic Efficiency, Government Price Setting and Taxes

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

When a competitive equilibrium is achieved in a market,

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

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

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 4000 pounds 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,

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,