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

Both 4000 pounds and 12,000 pounds are below the economically efficient output of 8000 pounds, as at the efficient output, the marginal benefit of the last unit produced equals its marginal cost. At 4000 pounds, the benefit of producing one more pound of pecans is greater than the cost, and at 12,000 pounds, the cost of producing one more pound of pecans is greater than the benefit. Thus, both amounts result in a deadweight loss.

Question 2

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 3

The market demand for a public good can be determined by

Accepted Answer

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, as the price of a public good cannot be determined by the quantity of the good that each individual consumes. Therefore, the total demand for the public good can only be derived from the willingness of each consumer to pay for each unit of the public good.

Question 4

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 5

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

Accepted Answer

The answer of How does the construction of a market...

Question 6

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

At the price of $3, the market is currently not in equilibrium, as the quantity demanded exceeds the quantity supplied. To reach an economically efficient output, the price must increase, which would decrease the quantity demanded and increase the quantity supplied, eventually leading to an equilibrium at a higher price and quantity. Therefore, choice D is the best answer.

Question 7

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 only 8,000 while the quantity demanded is 16,000. This means that the marginal benefit (as represented by the demand curve) is greater than the marginal cost (as represented by the supply curve) at this price. Therefore, there is inefficiency in the market as it is producing less than the socially optimal level. The market should produce more pecans at a lower price to reach the optimal level.

Question 8

In a competitive market equilibrium,

Accepted Answer

In a competitive market equilibrium, the market is efficient, meaning that the marginal benefit of the last unit sold equals its marginal cost. This ensures that both consumers and producers benefit, but not necessarily equally. Furthermore, total consumer surplus may not necessarily equal total producer surplus, although together they represent total social welfare. Therefore, only option D is the correct statement.

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.At a price of $9,

Accepted Answer

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

Question 10

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 statement accurately defines economic efficiency. When there is economic efficiency, resources are being allocated in the most optimal way possible, and both producers and consumers are achieving maximum benefit, creating the greatest overall welfare.

Question 11

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 equals the marginal cost and both consumer and producer surplus are maximized, economic efficiency is achieved. This means resources are allocated efficiently and there is no deadweight loss. While profits may be maximized in some cases, it is not necessarily the goal of achieving economic efficiency. Likewise, minimizing costs may not always result in the most efficient allocation of resources.

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 $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 13

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

Accepted Answer

Public goods are characterized by non-rivalry, meaning that consumption by one person does not reduce the amount available for others, and non-excludability, meaning that it is difficult or impossible to exclude people from consuming the good once it is provided. Private goods are rivalrous and excludable, quasi-public goods are excludable but non-rivalrous or partially rivalrous, and common resources are rivalrous but non-excludable.

Question 14

Economic efficiency in a competitive market is achieved when

Accepted Answer

Economic efficiency in a competitive market is achieved when the marginal benefit (the additional benefit received from consuming one more unit) equals the marginal cost (the additional cost incurred from producing one more unit) from the last unit sold. This is because at this point, consumers are willing to pay as much as it costs firms to produce the good, resulting in no waste of resources and maximizing social welfare. Option A is incorrect because economic surplus includes both producer and consumer surplus, which may not necessarily be equal in a competitive market. Option B is incorrect because the satisfaction of consumers and producers does not necessarily mean economic efficiency has been achieved. Option D is incorrect because producer surplus does not take into account consumer surplus, and does not necessarily lead to economic efficiency.

Question 15

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 pounds of pecans are sold,

Accepted Answer

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

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.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 17

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

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

Question 18

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

Accepted Answer

A common resource is a good that is rivalrous (meaning consumption by one person limits the consumption of others) and non-excludable (meaning it is difficult or impossible to prevent someone from using it). Examples include fisheries, forests, and clean air.

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 of consuming a good is equal to its marginal cost of production. This implies that the quantity produced and consumed is optimal - society gets the maximum benefit from the resources used in producing the good. The maximum benefit is achieved when the sum of consumer surplus (the difference between what consumers are willing to pay and what they actually pay) and producer surplus (the difference between the price producers receive and the cost of production) is maximized. Therefore, choice A is correct. Choices B, C, and D are incorrect.

Question 20

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 pounds of pecans are sold,

Accepted Answer

In a competitive market, the equilibrium point is where marginal benefit equals marginal cost. Therefore, if 8000 pounds of pecans are sold, it must be at the equilibrium point. At this point, producer surplus equals consumer surplus, but there is a deadweight loss caused by the difference between the total economic surplus and the value of the surplus at the equilibrium point. Thus, choice A and B are incorrect. Additionally, we cannot determine the marginal benefit from the given information, so choice C is also incorrect. The only correct choice is D, which follows from the definition of a competitive market.

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?

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

The market demand for a public good can be determined by

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

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

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.At a price of $3,

In a competitive market equilibrium,

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,

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.

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 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?

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

Economic efficiency in a competitive market is achieved when

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 pounds of pecans are sold,

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 the price of pecans is $3,

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

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

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 pounds of pecans are sold,