Question 1

If the hot dog vendors at Yankee Stadium are earning a producer surplus on each hot dog they sell, then baseball fans cannot be gaining any consumer surplus on the hot dogs they buy.

Accepted Answer

This statement is false. Both hot dog vendors and baseball fans can experience surplus from the transaction. The vendors are earning producer surplus by charging a price higher than their marginal cost, while fans may experience consumer surplus if they value the hot dog more than the price they pay for it.

Question 2

Buyers receive a consumer surplus when the price exceeds the marginal benefit.

Accepted Answer

Buyers receive a consumer surplus when the price is less than the marginal benefit, not the other way around.

Question 3

-The figure above shows the market supply and market demand for pizza.
a) What is the efficient quantity of pizzas?
b) If 70,000 pizzas are produced, what area represents the deadweight loss?
c) Why does the deadweight loss in part (b) occur?
d) If 20,000 pizzas are produced, what area represents the deadweight loss?
e) Why does the deadweight loss in part (d) occur?

Accepted Answer

The answer of 
-The figure above shows the market supply...

Question 4

The opportunity cost to the firm of producing one more unit of output is also called marginal cost.

Accepted Answer

This statement is true. The opportunity cost of producing one more unit of output is the additional cost incurred by the firm, which is equivalent to the marginal cost of production.

Question 5

If the marginal social cost of a television exceeds the marginal social benefit of a television, it would increase society's total surplus to decrease production of televisions.

Accepted Answer

If the marginal social cost (MSC) of a television exceeds the marginal social benefit (MSB), it means that the cost of producing each additional unit of television is greater than the benefit society receives from consuming that additional unit. In this case, producing more televisions would decrease total surplus because the resources used to produce televisions could have been used to produce something else that would have generated more overall benefits for society. Therefore, decreasing production of televisions would increase society's total surplus.

Question 6

Although the efficient quantity to produce of any good is located where marginal social benefit and marginal social cost are equal, there will usually be other quantities where the sum of consumer and producer surplus are greater.

Accepted Answer

The answer of Although the efficient quantity to produce of...

Question 7

When the efficient quantity of output is being produced and sold, the deadweight loss is maximized.

Accepted Answer

The efficient quantity of output is the quantity at which the marginal cost equals the marginal benefit, and there is no deadweight loss at this point. Therefore, producing and selling the efficient quantity of output does not result in a maximized deadweight loss.

Question 8

Consumers don't always have to pay the maximum price they are willing to pay.

Accepted Answer

Consumers can often negotiate or find discounts on products or services, allowing them to pay less than their maximum willingness to pay. Additionally, the market competition and supply and demand can also affect the price of goods and services, potentially lowering the price for consumers.

Question 9

As long as production is such that marginal social benefit is greater than marginal social cost, an efficient outcome occurs.

Accepted Answer

The answer of As long as production is such that...

Question 10

The producer surplus on a unit of output is the difference between the market price and the opportunity cost of producing it.

Accepted Answer

This is the correct definition of producer surplus.

Question 11

Producer surplus is the price of a good minus the opportunity cost of producing it, summed over the quantity produced.

Accepted Answer

This statement accurately defines producer surplus, which represents the benefit that suppliers receive from selling a good at a higher price than their cost of producing it. It is calculated by subtracting the cost (or opportunity cost) of producing the item from the price at which it is sold, and multiplying the difference by the quantity produced. Therefore, the statement is true.

Question 12

Command system allocates resources by the order of someone in authority.

Accepted Answer

In a command system, resources are allocated by a person in authority who gives orders and determines priorities.

Question 13

If the marginal social cost exceeds the marginal social benefit for the last pair of shoes produced, then the economy is producing more than the efficient amount.

Accepted Answer

The answer of If the marginal social cost exceeds the...

Question 14

If the marginal social benefit of pizza exceeds the marginal social cost of pizza, the economy is producing the efficient quantity of pizza.

Accepted Answer

The answer of If the marginal social benefit of pizza...

Question 15

The opportunity cost to the consumer of purchasing and consuming one more unit of a good is called the marginal benefit.

Accepted Answer

The opportunity cost to the consumer of purchasing and consuming one more unit of a good is actually the marginal cost. The marginal benefit refers to the additional benefit received from consuming one more unit of a good.

Question 16

In a competitive equilibrium, the total consumer surplus must equal the total producer surplus.

Accepted Answer

The answer of In a competitive equilibrium, the total consumer...

Question 17

Marginal cost is the minimum price that producers must receive to induce them to produce another unit of a good or service.

Accepted Answer

Marginal cost is the additional cost incurred in producing one extra unit of a good or service. To ensure profitability, producers must set their prices at or above the marginal cost to cover the cost of production and make a profit. Therefore, the minimum price that producers must receive to induce them to produce another unit of a good or service is equal to the marginal cost.

Question 18

If the marginal social benefit exceeds the marginal social cost of producing the next kilowatt hour of electricity, then it is efficient to produce as many kilowatt hours as possible.

Accepted Answer

The answer of If the marginal social benefit exceeds the...

Question 19

The value of one more unit of a good or service is its marginal benefit.

Accepted Answer

This statement is true. Marginal benefit refers to the additional value or utility gained by consuming one more unit of a good or service.

Question 20

Consumer surplus is the value of a good minus the cost of producing it, summed over the quantity bought.

Accepted Answer

Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good and the actual price they pay. It is not directly related to the cost of producing the good.

Quiz 5: Efficiency and Equity