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 producer surplus in the market?

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 of $80 is imposed in the market?

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 total cost of the firm,when it produces the profit-maximizing level of output?

Which of the following statements is true?

Scenario: Suppose a competitive market has ten buyers and ten sellers. The product exchanged in this market is beach hats, which are indivisible. The following table shows the reservation values for both buyers and sellers. -Refer to the scenario above.Suppose the equilibrium price in this market is $10.What is the amount of consumer surplus in this market?

When an outcome is Pareto efficient,________.

The following figure illustrates the demand and supply curves for a good in a competitive market. -Refer to the figure above.Which areas on the graph represent the social surplus in this competitive market?

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.After the demand curve shifts to D₂,if the price is held below the new equilibrium,then ________.

Scenario: The following excerpts describe some practices of determining wages in the Soviet economy. "Centrally-fixed weightings based on an accurate comparison of the cost of living in different regions is one of the advantages of the current [1980s] method of wage regulation. In practice, however, even here we do not find what might have been expected. … government departments enjoying a high status fix higher weightings for their workers than the local average. … As a result, workers earn different rates for the same job. … All this indicates that the advantages of regulating wages centrally for the whole country are often illusory because in principle it cannot be done on the basis of overall productivity. … In the face of life's complexity, wage regulation is not feasible and actual wage trends become semi-random." (Source: Tatiana I. Zaslavskaia.1990. The Second Socialist Revolution: An Alternative Soviet Strategy. New York: I. B. Tauris.) -Refer to the scenario above.Which of the following best describes the problem of wage determination by central planners?

________ is the market value of final goods and services produced in a country in a given period of time.

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 both firms operate to maximize profits,the ________.

The problem of bringing economic agents together to trade is referred to as the ________.

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

The marginal cost and total revenue of a firm are $5 and $275,respectively.The reservation value of the seller in this case is ________.

Under Soviet collective farming after World War II,workers on collective farms were allowed to work small plots (no more than 1 hectare or about 2.5 acres)on which they could grow their own food and sell any surplus.Economist D.Gale Johnson found that while these small plots amounted to only 3.5 percent of agricultural land under cultivation in the Soviet Union,they produced more than one-third of the nation's agricultural output.Johnson's findings illustrate which of the following as it relates to central planning of agricultural production on large collective farms?

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 equilibrium price and quantity of the light bulbs?

If a seller enjoys a producer surplus of $30 when she sells a good for $79,her reservation value for the good is ________.

Define "reservation values." If a buyer of a product has a reservation value of $10,the seller of the product has a reservation value of $3,and the equilibrium price of the product is determined to be $5,calculate the consumer surplus and the producer surplus.

When the maximizing actions of two economic agents are not aligned,these agents face a(n)________.

The total surplus in a market is represented by the area between the ________.