Exam 7: Perfect Competition and the Invisible Hand

The following figure illustrates the demand and supply of decorative light bulbs in a perfectly competitive market. -Refer to the figure above.What is the maximum possible social surplus?

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 quantity is ________.

If a seller's reservation value for a good is $10 and the price at which the good is sold is $15,his producer surplus is ________.

If restrictions on entry and exit of firms are introduced in free markets,________.

The following figure represents the cost curves of two firms operating in different perfectly competitive industries. This economy consists only of industries 1 and 2. -Refer to the figure above.If the market price in industry 1 is $3 and the market price in industry 2 is $4,we should expect ________ in the long run.

The tables below show reservation values of buyers and sellers in a market. There are three buyers and two sellers. Each buyer's reservation values for the fourth unit and above are negative, and each seller can produce at most four units. -Refer to the tables above.Suppose that the price is $34 per unit.What is the sum of the three buyers' surplus? What is the sum of the two sellers' surplus? What is the social surplus?

After the imposition of the price controls, consumer surplus is represented in the graph below. -In the graph above,the deadweight loss arising from the Argentine government's price control on beef is given by which areas?

The social surplus in a market is $50.If another economic agent enters the market such that the marginal cost he incurs is $10 and the marginal benefit he receives from the trade is $5,then which of the following statements is true?

The reservation value of a buyer reflects her ________.

Which of the following statements is true?

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.Assuming a market price of $140 per card,producer surplus in this market is ________.

Scenario: A small firm manufactures maple baseball bats in two small production facilities, with the following marginal cost and average total cost equations: Plant 1: Marginal cost: MC₁ = 10 + 2Q, Plant 1: Average total cost: ATC₁ = 10 + Q. Plant 2: Marginal cost: MC₂ = 10 + 2Q, Plant 2: Average total cost: ATC₂ = 10 + Q. -Refer to the scenario above.Now suppose the plant is sold to a new owner with an undergraduate degree in economics and an MBA in finance.The new owner plans to follow the profit-maximizing rule (produce the level of output at which Marginal Cost = Price)rather than equalize production across both plants.Under this new guidance,production levels at each firm are ________.Explain your answer.

The following figure shows the marginal cost curve and the average total cost curve of a firm operating in a perfectly competitive market. -Refer to the figure above.Suppose the price in this market is $5.What is the revenue of the firm,when it sells the profit-maximizing level of output?

A price control is ________.

When existing firms leave a perfectly competitive market,it causes ________.

The following table displays the reservation values of eight buyers and eight sellers, who each want to buy or sell a calculator. -Refer to the table above.If the market is perfectly competitive,the equilibrium quantity of calculators is ________.

The following table displays the reservation values of eight buyers and eight sellers, who each want to buy or sell a calculator. You are in charge of deciding which buyer trades (or not) with which seller at what price as you see fit. You could prescribe different prices to each pair of a buyer and a seller. -Refer to the table above.To achieve efficiency,which group of buyers should trade with which group of sellers?

The following figure shows the marginal cost curve and the average total cost curve of a firm operating in a perfectly competitive market. All of the other firms in this market have a cost structure similar to this firm's. -Refer to the figure above.Suppose the price in this market is $5.We expect ________.

Suppose a market has only one seller and only one buyer of a good in the market.The buyer is willing to pay $50 for the good and the seller is willing to accept $15.The market price of the good is determined to be $30.If they trade,the social surplus will be ________.

The following figure illustrates the demand and supply curves for a good. -Refer to the figure above.Which of the following is likely to happen if a price control below the equilibrium price is imposed?