Exam 6: Efficiency and Fairness of Markets

Often politicians assert that a price,such as the price of gasoline or the rent for an apartment,is too high and that it is unfair for these prices to be so high.If these products are traded in competitive markets,what fairness rule are politicians using? Why?

According to the "fair rules" view of fairness,are taxes fair? Explain.

What is the "big tradeoff"?

In December 2010,Kansas had a severe ice storm that caused electrical blackouts.The Fictitious Portable Generator firm of Lawrence had several portable generators that could be used by homeowners to provide electricity.Which of the following would be the fair-rules way to provide them?

The idea of the "big tradeoff" points out the costs of

In a figure,the consumer surplus is equal to the area ________ the ________ curve and ________ the price.

Possibility Bread (number) Books (number) A 0 1,000 B 100 900 C 200 700 D 300 400 E 400 0 -The table above shows the production possibilities for an economy.When the economy produces a combination of 900 books and 50 loaves of bread,

What is the "invisible hand"?

What did Adam Smith identify as the source of the invisible hand in 1776?

To achieve allocative efficiency,one must compare the

-In the above figure,if the quantity is restricted to 500,000 and the price is allowed to rise to set the quantity demanded equal to the quantity supplied,then area C + area E is equal to

When production moves from the efficient quantity to a point of overproduction,

The value of a slice of pizza to a consumer is equal to

Consumer surplus is the area

-In the figure above,at the market price of $15,the consumer surplus equals

As more of a good is consumed,marginal benefit ________ and as more of a good is produced,marginal cost ________.

A point on the demand curve shows the

-The figure above shows the supply curve for soda.The market price is $1.00 per soda.The producer surplus from the 20,000th soda is

Marginal cost is the opportunity cost of producing

Which of the following is a correct description of the supply curve? i.The supply curve is also the marginal cost curve. ii.The supply curve shows the dollars' worth of other goods that we must sacrifice to produce another unit of a good. iii.The supply curve shows the additional cost of producing another unit of a good.