Question 1

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 their willingness to pay (marginal benefit). When the price exceeds their willingness to pay, they do not gain a consumer surplus.

Question 2

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 amount that consumers are willing to pay for a good and the market price that they actually pay. It is not related to the cost of producing the good.

Question 3

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

Accepted Answer

This is the correct definition of producer surplus. It represents the difference between the price a producer receives for a good and the minimum price they would have been willing to accept in order to produce it. Summing this difference over the entire quantity produced gives the total producer surplus.

Question 4

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 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 of a television exceeds the marginal social benefit of a television, it means that society as a whole is losing more than it is gaining from the production of televisions. In this case, decreasing production would reduce the negative impact on society's total surplus and increase overall welfare.

Question 6

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

Accepted Answer

The statement is incorrect. The opportunity cost to the consumer of purchasing and consuming one more unit of a good is not the same as marginal benefit. Marginal benefit refers to the additional benefit that a consumer receives from consuming one more unit of a good. The opportunity cost is the next best alternative foregone when a choice is made.

Question 7

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 8

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

Accepted Answer

This statement is true. Marginal cost is defined as the additional cost incurred by a firm when producing one more unit of output, and it represents the opportunity cost of diverting resources from alternative uses to produce that additional unit.

Question 9

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 10

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 11

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 definition of producer surplus in economics.

Question 12

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

Accepted Answer

Marginal benefit is the additional satisfaction or utility that a consumer derives from an additional unit of a good or service. Therefore, the statement "the value of one more unit of a good or service is its marginal benefit" is true.

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

-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 15

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 16

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

Accepted Answer

In a command system, resources are allocated based on the orders or directions of someone in authority, such as a government or military leader.

Question 17

-Jason wants to hire Maria to tutor him in economics. Jason is willing to pay $30 for the first hour of tutoring, $25 for the second, $20 for the third, $15 for the fourth, and $10 for the fifth. Maria has an opportunity cost per hour of $6 for the first, $9 for the second, $12 for the third, $15 for the fourth, and $18 for the fifth. The initial equilibrium price for tutoring is $15 an hour and hence Maria tutors Jason for 4 hours. Now, Maria realizes that she is the only economics tutor because all the other tutors have graduated. Because she is the only tutor, she has a monopoly and, as a monopolist, Maria decides to charge a price of $25 instead of $15 an hour.
a) At the price of $25 an hour, how many hours will Maria tutor Jason?
b) At the initial equilibrium price of $15 an hour, what was Jason's total consumer surplus and Maria's total producer surplus?
c) At the price of $25 an hour, what is Jason's total consumer surplus and Maria's total producer surplus?
d) How does the sum of Jason's consumer surplus plus Maria's producer surplus compare at the initial equilibrium price of $15 an hour (part b) and at the new price of $25 an hour (part c)? Comment on any difference.

Accepted Answer

The answer of 
-Jason wants to hire Maria to tutor...

Question 18

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

Accepted Answer

Consumers can negotiate prices or wait for sales and discounts to pay less than the maximum price they are willing to pay for a product or service.

Question 19

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

Accepted Answer

This statement accurately defines the concept of marginal cost.

Question 20

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. The fact that hot dog vendors are earning a producer surplus does not necessarily mean that baseball fans are not gaining any consumer surplus. Consumer surplus is the difference between the price a consumer is willing to pay for a good and the actual price they pay. For example, if a fan is willing to pay $5 for a hot dog and they are sold for $4, then the fan is experiencing a consumer surplus of $1. The existence of producer surplus does not preclude the possibility of consumer surplus.

Quiz 5: Efficiency and Equity