Question 1

At the current level of output, the marginal social cost of sandwiches exceeds the marginal social benefit of sandwiches. Compared to the allocatively efficient quantity we are producing too ________ sandwiches and too ________ of other goods.

Accepted Answer

When the marginal social cost exceeds the marginal social benefit, it indicates overproduction of sandwiches, meaning too many sandwiches are being produced and too little of other goods.

Question 2

In the competitive market for balloon rides, marginal social cost equals marginal social benefit when 3,000 balloon rides a day are taken and the price of a ride is $130. Which of the following statements is TRUE?

Accepted Answer

The efficient quantity of balloon rides is achieved when marginal social cost equals marginal social benefit, which occurs at 3,000 rides per day.

Question 3

A market is allocatively efficient if

Accepted Answer

Allocative efficiency occurs when resources are distributed in a way that maximizes the total surplus, which is the sum of consumer and producer surplus.

Question 4

It is efficient to produce an additional shirt if the

Accepted Answer

Producing an additional shirt is efficient when the marginal social benefit exceeds the marginal social cost, indicating that the benefits of producing one more shirt outweigh the costs.

Question 5

At the current level of output, the marginal social benefit of pizza exceeds the marginal social cost of pizza. Compared to the allocatively efficient quantity, we are producing too ________ pizza and too ________ of other goods.

Accepted Answer

When the marginal social benefit exceeds the marginal social cost, it indicates that the current level of output is less than the allocatively efficient quantity. Therefore, we are producing too little pizza and too much of other goods.

Question 6

At the current level of output, the marginal social benefit from a slice of pizza is less than the marginal social cost of producing a slice of pizza. Resources will be used more efficiently if ________ slices of pizza are produced and ________ other goods are produced.

Accepted Answer

When the marginal social benefit is less than the marginal social cost, it indicates overproduction. Producing fewer slices of pizza and reallocating resources to produce more of other goods will lead to more efficient resource use.

Question 7

Resource use is efficient when

Accepted Answer

Resource use is efficient when marginal social benefit equals marginal social cost, as this indicates that the resources are being used in a way that maximizes net benefits to society.

Question 8

The cost of producing one more pizza is the

Accepted Answer

The cost of producing one more pizza is referred to as the marginal cost, which is the additional cost incurred to produce one additional unit of a good.

Question 9

When 2,000 hamburgers per day are produced, the marginal social benefit is $1.50 and the marginal social cost is $1.00. And when 7,500 hamburgers per day are produced, the marginal social benefit is $1.00 and the marginal social cost is $1.50. The efficient production quantity of hamburgers is ________ a day.

Accepted Answer

The efficient production quantity is where marginal social benefit equals marginal social cost. This occurs between 2,000 and 7,500 hamburgers, as the benefit decreases and cost increases across this range.

Question 10

Suppose a country produces only bikes and clothing. The country achieves an efficient allocation of resources when

Accepted Answer

The efficient allocation of resources occurs when the marginal social benefit of producing a good equals the marginal social cost of producing that good.

Question 11

Alice is willing to pay $3 for the second slice of pizza she eats. The price she pays is $2. Alice's consumer surplus for this slice of pizza equals

Accepted Answer

Alice's consumer surplus is the difference between the price she is willing to pay and the price she actually pays. In this case, she is willing to pay $3 and she pays $2, so her consumer surplus is $1.

Question 12

In the market for DVDs, 500,000 DVDs a month are available. The value people place on the 500,000th DVD a month is less than the marginal social cost of producing it. Resource use

Accepted Answer

Resource use is inefficient because the value placed on the 500,000th DVD is less than the marginal social cost of producing it, indicating overproduction and a misallocation of resources.

Question 13

The market supply curve shows the

Accepted Answer

The market supply curve represents the minimum price at which suppliers are willing to produce and sell an additional unit of a good, reflecting their marginal cost of production.

Question 14

Charlie's consumer surplus from the first slice of pizza he buys is greater than the consumer surplus from the second slice because of

Accepted Answer

Charlie's consumer surplus decreases with each additional slice due to decreasing marginal benefits, meaning each additional slice provides less additional satisfaction.

Question 15

Resource use is efficient when production is such that marginal social benefit is

Accepted Answer

Marginal social benefit is the additional benefit to society from producing one more unit of a good or service. Marginal social cost is the additional cost to society from producing one more unit of a good or service. Resource use is efficient when production is such that marginal social benefit is equal to marginal social cost. This is because at this point, the additional benefit to society from producing one more unit of a good or service is just equal to the additional cost to society from producing that unit.

Question 16

Total surplus is defined as

Accepted Answer

Total surplus is the sum of consumer surplus and producer surplus, representing the total net benefit to society from the production and consumption of goods and services.

Question 17

The producer surplus from a good is equal to the

Accepted Answer

Producer surplus is the difference between the price received by producers and their opportunity cost of production, summed over the quantity sold.

Question 18

Allocative efficiency occurs when

Accepted Answer

Allocative efficiency is achieved when the marginal social benefit equals the marginal social cost, indicating that resources are being used in a way that maximizes total social welfare.

Question 19

If resources are used efficiently, then

Accepted Answer

Efficient resource use maximizes the total surplus, which is the sum of consumer and producer surplus, reflecting optimal allocation of resources.

Question 20

Which of the following statements is TRUE?

Accepted Answer

At the efficient quantity, marginal social benefit equals marginal social cost, ensuring that resources are allocated optimally without overproduction or underproduction.

Quiz 5: Efficiency and Equity

At the current level of output, the marginal social cost of sandwiches exceeds the marginal social benefit of sandwiches. Compared to the allocatively efficient quantity we are producing too sandwiches and too of other goods.