Question 1

When buyers and sellers optimize in a perfectly competitive market,________.

Accepted Answer

A)  social surplus is maximized 
B)  social surplus is minimized 
C)  only consumer surplus is maximized 
D)  only consumer surplus is minimized 
A)  social surplus is maximized 
B)  social surplus is minimized 
C)  only consumer surplus is maximized 
D)  only consumer surplus is minimized

Question 2

Which is NOT a feature of the market economy?

Accepted Answer

A)  It uses price signals to maximize social surplus. 
B)  It provides incentive to market participants to pursue self-interest. 
C)  It allocates resources to where they are best used. 
D)  It provides equity of income and consumption for market participants.. 
A)  It uses price signals to maximize social surplus. 
B)  It provides incentive to market participants to pursue self-interest. 
C)  It allocates resources to where they are best used. 
D)  It provides equity of income and consumption for market participants..

Question 3

Which of the following statements is true of a perfectly competitive market?

Accepted Answer

A)  At equilibrium, it is possible to make someone better off without making someone else worse off. 
B)  The equilibrium price in a competitive market efficiently allocates scarce resources to participants. 
C)  The equilibrium price is determined by a few large firms in the market. 
D)  The sum of consumer surplus and producer surplus is not maximized at the equilibrium. 
A)  At equilibrium, it is possible to make someone better off without making someone else worse off. 
B)  The equilibrium price in a competitive market efficiently allocates scarce resources to participants. 
C)  The equilibrium price is determined by a few large firms in the market. 
D)  The sum of consumer surplus and producer surplus is not maximized at the equilibrium.

Question 4

Scenario: There are two firms producing ballpoint pens in a perfectly competitive industry. The market price of one pen is $5. Firm A has a lower marginal cost than Firm B. The following graphs illustrate the marginal cost curves of both firms.
  
-Refer to the scenario above.If the government removes the ban that it had imposed earlier on Firm B and both Firm A and Firm B aim at maximizing profits,the ________.

Accepted Answer

A)  marginal cost of Firm A will eventually be greater than the marginal cost of Firm B 
B)  marginal cost of Firm B will eventually be greater than the marginal cost of Firm A 
C)  marginal cost of both firms will eventually be equalized 
D)  difference in the marginal cost of both firms will eventually increase 
A)  marginal cost of Firm A will eventually be greater than the marginal cost of Firm B 
B)  marginal cost of Firm B will eventually be greater than the marginal cost of Firm A 
C)  marginal cost of both firms will eventually be equalized 
D)  difference in the marginal cost of both firms will eventually increase

Question 5

Scenario: The table below lists the willingness to pay for ten potential buyers of a Walter Payton rookie card and the willingness to accept for ten potential sellers of the card. (Walter Payton was a running back for the NFL's Chicago Bears from 1985 to 1987 and was elected into the NFL's Hall of Fame in 1993.) The graph below the table can be used to display the demand and supply schedules.

-Refer to the scenario above.Social surplus in this market is ________.

Accepted Answer

A)  $200 
B)  $225 
C)  $250 
D)  $500 
A)  $200 
B)  $225 
C)  $250 
D)  $500

Question 6

An outcome is Pareto efficient if ________.

Accepted Answer

A)  an individual can be made better off without making someone else worse off 
B)  the benefits of the outcome are equally distributed among all participants 
C)  no individual can be made better off without making someone else worse off 
D)  the costs of the outcome are equally shared by all participants 
A)  an individual can be made better off without making someone else worse off 
B)  the benefits of the outcome are equally distributed among all participants 
C)  no individual can be made better off without making someone else worse off 
D)  the costs of the outcome are equally shared by all participants

Question 7

Is the invisible hand likely to work better in a market with price controls or without price controls? Explain your answer.

Accepted Answer

In a perfectly competitive market,market

Question 8

Without any restrictions in a perfectly competitive market,if there is a sudden rightward shift in the demand for a good,sellers of the good will ________.

Accepted Answer

A)  increase the supply of the good at the same price 
B)  increase the quantity of the good supplied in the market 
C)  decrease the supply of the good at the same price 
D)  decrease the quantity supplied 
A)  increase the supply of the good at the same price 
B)  increase the quantity of the good supplied in the market 
C)  decrease the supply of the good at the same price 
D)  decrease the quantity supplied

Question 9

The following figure shows the marginal cost curve and the average total cost curve of a firm operating in a perfectly competitive industry.
  
-Refer to the figure above.At what level of output does the firm maximize profits?

Accepted Answer

A)  0 units 
B)  10 units 
C)  20 units 
D)  30 units 
A)  0 units 
B)  10 units 
C)  20 units 
D)  30 units

Question 10

Scenario: The retail market for beef in Argentina is given by the following demand and supply schedules, where the price is in Argentine pesos per kilo and the quantity is millions of kilos per year.
Demand: QD = 220 P,
Supply: QS = 20 + P.
  
-Refer to the scenario above.In the initial competitive market equilibrium,consumer surplus is ________ million pesos,producer surplus is ________ million pesos,and social surplus is ________ million pesos.

Accepted Answer

A)  5,000; 5,000; 10,000 
B)  10,000; 10,000; 20,000 
C)  5,000; 10,000; 15,000 
D)  10,000; 5,000; 15,000 
A)  5,000; 5,000; 10,000 
B)  10,000; 10,000; 20,000 
C)  5,000; 10,000; 15,000 
D)  10,000; 5,000; 15,000

Question 11

What role does the invisible hand play when two firms are producing in the same competitive industry?

Accepted Answer

When two firms are producing in the same

Question 12

The following figure shows the supply and demand for Uber rides in downtown Miami. On New Year's Eve the demand for Uber rides in downtown increases significantly.
  
-Refer to the figure above.On New Year's Eve,if the market forces are allowed to function,we expect to see ________ Uber rides in downtown Miami.

Accepted Answer

A)  a shift rightward in demand, and a movement along the supply curve of 
B)  a shift rightward in demand, and a shift rightward in the supply of 
C)  a shift leftward in demand , and a shift rightward in the supply of 
D)  a movement along the demand curve, and a shift rightward in the supply of 
A)  a shift rightward in demand, and a movement along the supply curve of 
B)  a shift rightward in demand, and a shift rightward in the supply of 
C)  a shift leftward in demand , and a shift rightward in the supply of 
D)  a movement along the demand curve, and a shift rightward in the supply of

Question 13

The following figure shows the demand and supply curves for a good. The initial demand curve is D₁ and the supply curve is S. Later, due to an external shock, the demand curve shifts to D₂.
  
-Refer to the figure above.What is the initial equilibrium price of the good?

Accepted Answer

A)  $20 
B)  $40 
C)  $60 
D)  $80 
A)  $20 
B)  $40 
C)  $60 
D)  $80

Question 14

The following figure depicts the market for a certain good.
  
-Refer to the figure above.For what price would a price ceiling policy create a deadweight loss of $10?

Accepted Answer

A)  $8 
B)  $6 
C)  $4 
D)  $3 
A)  $8 
B)  $6 
C)  $4 
D)  $3

Question 15

Consider the two economies of Lithasia and Barylia.Economic agents in Lithasia have coordination and incentive problems,while social surplus is maximized in Barylia.Which economic system does each economy most likely have? Explain your answer.

Accepted Answer

A coordination problem refers to the pro

Question 16

In a perfectly competitive market,if market price is lower than the average total cost of production,________.

Accepted Answer

A)  new firms will enter the market 
B)  existing firms will leave the market 
C)  all existing firms will earn positive economic profits 
D)  all existing firms will earn zero economic profits 
A)  new firms will enter the market 
B)  existing firms will leave the market 
C)  all existing firms will earn positive economic profits 
D)  all existing firms will earn zero economic profits

Question 17

The following table displays the reservation values of buyers and sellers in the market for notebooks, where each individual either wants to buy or sell one notebook.
  
-Refer to the table above.If the market for notebooks is perfectly competitive,the equilibrium price is ________.

Accepted Answer

A)  $2 
B)  $3 
C)  $4 
D)  $5 
A)  $2 
B)  $3 
C)  $4 
D)  $5

Question 18

The following figure illustrates the demand and supply curves for a good in a competitive market.
  
-Refer to the figure above.Suppose a price control of $7 is imposed on this market.Area(s)________ on the graph represent the consumer surplus,and area(s)________ represent the producer surplus in this market after this price policy.

Accepted Answer

A)  A + B + E; H 
B)  E; A + B + H 
C)  A + E; B + H 
D)  A + C + E; B + D + H 
A)  A + B + E; H 
B)  E; A + B + H 
C)  A + E; B + H 
D)  A + C + E; B + D + H

Question 19

D.Gale Johnson was an economist at Iowa State and later the University of Chicago who studied Soviet agriculture.Johnson found that on large Soviet collective farms,crops often rotted in the field as mechanical harvesters were not deployed in time for the harvest.They followed a harvest schedule set centrally,and often the harvesting machines sat idle during the peak harvest season.This outcome is an example of ________.Explain your answer.

Accepted Answer

A)  the invisible hand 
B)  a sunk cost 
C)  a coordination problem 
D)  an incentive problem 
A)  the invisible hand 
B)  a sunk cost 
C)  a coordination problem 
D)  an incentive problem

Question 20

The following figure depicts the market for a certain good.
  
-Refer to the figure above.If the supply were to shift 10 units to the left at any price,what would be the new deadweight loss if the price must be kept at $6?

Accepted Answer

A)  $5 
B)  $10 
C)  $15 
D)  $20 
A)  $5 
B)  $10 
C)  $15 
D)  $20

When buyers and sellers optimize in a perfectly competitive market,________.

Which is NOT a feature of the market economy?

Which of the following statements is true of a perfectly competitive market?

An outcome is Pareto efficient if ________.

Is the invisible hand likely to work better in a market with price controls or without price controls? Explain your answer.

Without any restrictions in a perfectly competitive market,if there is a sudden rightward shift in the demand for a good,sellers of the good will ________.

The following figure shows the marginal cost curve and the average total cost curve of a firm operating in a perfectly competitive industry. -Refer to the figure above.At what level of output does the firm maximize profits?

What role does the invisible hand play when two firms are producing in the same competitive industry?

The following figure shows the demand and supply curves for a good. The initial demand curve is D₁ and the supply curve is S. Later, due to an external shock, the demand curve shifts to D₂. -Refer to the figure above.What is the initial equilibrium price of the good?

The following figure depicts the market for a certain good. -Refer to the figure above.For what price would a price ceiling policy create a deadweight loss of $10?

Consider the two economies of Lithasia and Barylia.Economic agents in Lithasia have coordination and incentive problems,while social surplus is maximized in Barylia.Which economic system does each economy most likely have? Explain your answer.

In a perfectly competitive market,if market price is lower than the average total cost of production,________.

The following table displays the reservation values of buyers and sellers in the market for notebooks, where each individual either wants to buy or sell one notebook. -Refer to the table above.If the market for notebooks is perfectly competitive,the equilibrium price is ________.

The following figure depicts the market for a certain good. -Refer to the figure above.If the supply were to shift 10 units to the left at any price,what would be the new deadweight loss if the price must be kept at $6?

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, supply, and Equilibrium

Consumers and Incentives

Sellers and Incentives

Trade

Externalities and Public Goods

The Government in the Economy: Taxation and Regulation

Markets for Factors of Production

Monopoly

Game Theory and Strategic Play

Oligopoly and Monopolistic Competition

Trade-Offs Involving Time and Risk

The Economics of Information

Auctions and Bargaining

Social Economics

Filters

Exam 7: Perfect Competition and the Invisible Hand

When buyers and sellers optimize in a perfectly competitive market,________.

Which is NOT a feature of the market economy?

Which of the following statements is true of a perfectly competitive market?

An outcome is Pareto efficient if ________.

Is the invisible hand likely to work better in a market with price controls or without price controls? Explain your answer.

Without any restrictions in a perfectly competitive market,if there is a sudden rightward shift in the demand for a good,sellers of the good will ________.

The following figure shows the marginal cost curve and the average total cost curve of a firm operating in a perfectly competitive industry. -Refer to the figure above.At what level of output does the firm maximize profits?

What role does the invisible hand play when two firms are producing in the same competitive industry?

The following figure shows the demand and supply curves for a good. The initial demand curve is D₁ and the supply curve is S. Later, due to an external shock, the demand curve shifts to D₂. -Refer to the figure above.What is the initial equilibrium price of the good?

The following figure depicts the market for a certain good. -Refer to the figure above.For what price would a price ceiling policy create a deadweight loss of $10?

Consider the two economies of Lithasia and Barylia.Economic agents in Lithasia have coordination and incentive problems,while social surplus is maximized in Barylia.Which economic system does each economy most likely have? Explain your answer.

In a perfectly competitive market,if market price is lower than the average total cost of production,________.

The following table displays the reservation values of buyers and sellers in the market for notebooks, where each individual either wants to buy or sell one notebook. -Refer to the table above.If the market for notebooks is perfectly competitive,the equilibrium price is ________.

The following figure depicts the market for a certain good. -Refer to the figure above.If the supply were to shift 10 units to the left at any price,what would be the new deadweight loss if the price must be kept at $6?

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, supply, and Equilibrium

Consumers and Incentives

Sellers and Incentives

Trade

Externalities and Public Goods

The Government in the Economy: Taxation and Regulation

Markets for Factors of Production

Monopoly

Game Theory and Strategic Play

Oligopoly and Monopolistic Competition

Trade-Offs Involving Time and Risk

The Economics of Information

Auctions and Bargaining

Social Economics

Filters