Question 1

-The figure above shows the market for ink-jet printers.
a) What are the equilibrium price and equilibrium quantity of printers? Is this equilibrium efficient? Explain.
b) Calculate the total amount consumers paid for printers bought.
c) Calculate the consumer surplus.
d) Calculate the producer surplus.

Accepted Answer

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

Question 2

If the marginal social benefit of ice cream curve shifts rightward because people now like ice cream better than before, the marginal social cost curve of ice cream will shift leftward.

Accepted Answer

There is no direct relationship between the marginal social benefit curve and the marginal social cost curve of ice cream. The two curves can shift independently based on various factors such as changes in production technology, input prices, or regulations.

Question 3

-The table above gives the demand and supply schedules for bottled spring water in Springsboro. Assume that the only people who benefit from spring water are the people who drink it and the only people who bear the cost of bottled spring water are the people who produce it.
a) Draw the market demand and market supply curves. What are the equilibrium price and equilibrium quantity of spring water? Is this equilibrium efficient? Explain.
b) What is the maximum price that consumers are willing to pay for the 400th bottle? What is the minimum price that producers are willing to accept for the 400th bottle? Explain.
c) Are 400 bottles a day less than or greater than the efficient quantity? Explain your answer.
d) If the market for spring water is efficient, what is the consumer surplus? Show it on your graph. What is the producer surplus? Show it on your graph.
e) If spring water bottlers produce 400 bottles a day, is there a deadweight loss? If yes, what is it? Explain your answer using your graph.

Accepted Answer

The answer of 
-The table above gives the demand and...

Question 4

A competitive market is always efficient.

Accepted Answer

While a competitive market has the potential to be efficient due to the pressure to keep prices low and quality high, there are certain circumstances, such as market power or externalities, that can prevent the market from achieving maximum efficiency.

Question 5

Market failure is the situation in which a market delivers an inefficient outcome.

Accepted Answer

Market failure occurs when the free market fails to allocate resources in an efficient manner, resulting in an inefficient outcome. This can be due to reasons such as externalities, public goods, imperfect competition, etc.

Question 6

When there are external costs of production, such as when electric utilities burn coal, a competitive market will produce an inefficient level of output.

Accepted Answer

This is because in a competitive market, firms only consider their private costs of production and do not take into account the external costs, such as pollution. As a result, they will produce more than the socially efficient level of output, leading to negative effects on society.

Question 7

One of the obstacles to efficiency is monopoly.

Accepted Answer

Monopolies have no competition, which can lead to a lack of incentive to innovate or reduce costs, resulting in higher prices and less efficient production processes.

Question 8

-The table gives the demand and supply schedules for milk in Cowburg. Assume that the only people who benefit from milk are the people who consume it and the only people who bear the cost of milk are the people who produce it.
a) Draw the market demand and market supply curves. What are the equilibrium price and equilibrium quantity of milk? Is this equilibrium efficient? Explain.
b) What is the maximum price that consumers are willing to pay for the 500th gallon? What is the minimum price that producers are willing to accept for the 500th gallon? Explain.
c) Are 500 gallons a day less than or greater than the efficient quantity? Explain your answer.
d) If the market for milk is efficient, what is the consumer surplus? Show it on your graph. What is the producer surplus? Show it on your graph.
e) If farmers produce 500 gallons a day, is there a deadweight loss? If yes, what is it? Explain your answer using your graph.

Accepted Answer

The answer of 
-The table gives the demand and supply...

Question 9

-The table gives the demand and supply schedules for ice cream in Sweetsville in July and November. Assume that the only people who benefit from ice cream are the people who consume it and the only people who bear the cost of ice cream are the people who produce it.
a) Draw the market demand and market supply curves. What are the equilibrium price and equilibrium quantity of ice cream in July and November? Is the allocation of resources efficient in July? Is it efficient in November? Explain.
b) What is the maximum price that consumers are willing to pay for the 100th gallon of ice cream in July? In November? What is the minimum price that producers are willing to accept for the 100th gallon in July and November? Explain.
c) What happens to consumer surplus and producer surplus in November compared to July? Why?

Accepted Answer