Question 1

Allocative efficiency occurs when

Accepted Answer

A) the most highly valued goods and services are produced. 
B) all citizens have equal access to goods and services. 
C) the environment is protected at all cost. 
D) goods and services are free. 
E) production takes place at any point on the PPF. 
A) the most highly valued goods and services are produced. 
B) all citizens have equal access to goods and services. 
C) the environment is protected at all cost. 
D) goods and services are free. 
E) production takes place at any point on the PPF.

Question 2

"Allocative efficiency requires that the maximum number of people have access to all of the goods and services that our economy produces." Is this statement true or false? Explain your answer.

Accepted Answer

The statement is false.Allocative effici

Question 3

Producer surplus

Accepted Answer

A) increases if market price rises and the supply curve does not shift. 
B) decreases if market price rises and the supply curve does not shift. 
C) is equal to the maximum price consumers are willing to pay. 
D) is the same as the marginal cost. 
E) always must equal consumer surplus. 
A) increases if market price rises and the supply curve does not shift. 
B) decreases if market price rises and the supply curve does not shift. 
C) is equal to the maximum price consumers are willing to pay. 
D) is the same as the marginal cost. 
E) always must equal consumer surplus.

Question 4

If a seller charges a buyer the exact price the buyer is willing to pay, then the buyer would

Accepted Answer

A) not buy the good. 
B) receive the maximum consumer surplus. 
C) receive no benefit from the good. 
D) receive no consumer surplus from that unit of the good. 
E) suffer a deadweight loss from buying the good. 
A) not buy the good. 
B) receive the maximum consumer surplus. 
C) receive no benefit from the good. 
D) receive no consumer surplus from that unit of the good. 
E) suffer a deadweight loss from buying the good.

Question 5

Which of the following situations describing a resource allocation method most resembles the market price method?

Accepted Answer

A) Food from the Weld County Food Bank is distributed to families in need. 
B) Lattes are sold at Starbucks. 
C) Jose works at Intel. His manager tells him what work needs to be completed each month. 
D) Matt's mother had the rule that whoever cuts the cake chooses their slice last. 
E) Seventy percent of Austin's chess club wanted to purchase new chess sets and thirty percent did not. The club purchased the sets. 
A) Food from the Weld County Food Bank is distributed to families in need. 
B) Lattes are sold at Starbucks. 
C) Jose works at Intel. His manager tells him what work needs to be completed each month. 
D) Matt's mother had the rule that whoever cuts the cake chooses their slice last. 
E) Seventy percent of Austin's chess club wanted to purchase new chess sets and thirty percent did not. The club purchased the sets.

Question 6

The "invisible hand" refers to the notion that

Accepted Answer

A) competitive markets send resources to their highest valued uses. 
B) government intervention is necessary to ensure efficiency. 
C) marginal benefit decreases as more is consumed. 
D) marginal cost increases as more is produced. 
E) no matter what allocation method is used, the resulting production is efficient. 
A) competitive markets send resources to their highest valued uses. 
B) government intervention is necessary to ensure efficiency. 
C) marginal benefit decreases as more is consumed. 
D) marginal cost increases as more is produced. 
E) no matter what allocation method is used, the resulting production is efficient.

Question 7

Jose works at Intel.His manager tells him what work needs to be completed each month.Jose's resource, labor, is allocated with which of the following methods?

Accepted Answer

A) command 
B) majority rule 
C) force 
D) personal characteristics 
E) lottery 
A) command 
B) majority rule 
C) force 
D) personal characteristics 
E) lottery

Question 8

Redistributing income from the rich to the poor creates inefficiency because

Accepted Answer

A) of wasteful expenditures by people receiving welfare grants. 
B) of the administrative costs to operate the government redistribution agencies. 
C) the redistribution creates an incentive to produce less output. 
D) Both answers B and C are correct. 
E) Both answers A and C are correct. 
A) of wasteful expenditures by people receiving welfare grants. 
B) of the administrative costs to operate the government redistribution agencies. 
C) the redistribution creates an incentive to produce less output. 
D) Both answers B and C are correct. 
E) Both answers A and C are correct.

Question 9

Which of the following is true?
I∙Production efficiency occurs only when resources are used to produce the combination of goods that has the greatest value.
Ii∙Allocative efficiency occurs when marginal benefit equals marginal cost.
Iii∙A demand curve is a marginal cost curve.

Accepted Answer

A) Only ii 
B) Only i 
C) Only iii 
D) i and ii 
E) ii and iii 
A) Only ii 
B) Only i 
C) Only iii 
D) i and ii 
E) ii and iii

Question 10

The concept of "the invisible hand" suggests that

Accepted Answer

A) products are produced out of a seller's sense of charity. 
B) when the seller is better off, the buyer is worse off. 
C) sellers exploit consumers with high prices. 
D) buyers and sellers are self-interested. 
E) the command system is the only way of efficiently allocating resources. 
A) products are produced out of a seller's sense of charity. 
B) when the seller is better off, the buyer is worse off. 
C) sellers exploit consumers with high prices. 
D) buyers and sellers are self-interested. 
E) the command system is the only way of efficiently allocating resources.

Question 11

A demand curve can be interpreted as

Accepted Answer

A) a marginal benefit curve. 
B) a total benefit curve. 
C) an average benefit curve. 
D) a marginal cost curve. 
E) None of the above answers is correct. 
A) a marginal benefit curve. 
B) a total benefit curve. 
C) an average benefit curve. 
D) a marginal cost curve. 
E) None of the above answers is correct.

Question 12

Graphically, producer surplus is the area under the

Accepted Answer

A) demand curve and above the supply curve, up to the relevant quantity. 
B) price and above the demand curve, up to the relevant quantity. 
C) price and above the supply curve, up to the relevant quantity. 
D) price and above the quantity axis, up to the relevant quantity. 
E) demand curve and above the price, up to the relevant quantity. 
A) demand curve and above the supply curve, up to the relevant quantity. 
B) price and above the demand curve, up to the relevant quantity. 
C) price and above the supply curve, up to the relevant quantity. 
D) price and above the quantity axis, up to the relevant quantity. 
E) demand curve and above the price, up to the relevant quantity.

Question 13

What must be true for a consumer to buy a good or service?

Accepted Answer

A) The price must be equal to or less than the marginal benefit. 
B) The total benefit received must equal the total spent to buy the good or service. 
C) The consumer must be able to obtain some consumer surplus. 
D) The consumer must not be able to produce the product. 
E) The price must be equal to or greater than the marginal benefit. 
A) The price must be equal to or less than the marginal benefit. 
B) The total benefit received must equal the total spent to buy the good or service. 
C) The consumer must be able to obtain some consumer surplus. 
D) The consumer must not be able to produce the product. 
E) The price must be equal to or greater than the marginal benefit.

Question 14

What is the impact of a government subsidy to producers?

Accepted Answer

A) Less is produced relative to the efficient level, creating a deadweight loss. 
B) More is produced relative to the efficient level, creating a deadweight loss. 
C) Producer surplus is increased, which creates a larger consumer surplus. 
D) Producers are able to sell the product at a higher price. 
E) Consumers must pay a higher price for the good. 
A) Less is produced relative to the efficient level, creating a deadweight loss. 
B) More is produced relative to the efficient level, creating a deadweight loss. 
C) Producer surplus is increased, which creates a larger consumer surplus. 
D) Producers are able to sell the product at a higher price. 
E) Consumers must pay a higher price for the good.

Question 15

-The figure above shows Kaley's marginal benefit from swimming with manatees and Scott's marginal cost of providing manatee swimming tours.For Kaley and Scott, allocative efficiency is achieved at what point?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
E) Either point A or point D 
A) A 
B) B 
C) C 
D) D 
E) Either point A or point D

Question 16

If society can produce more of one good but must forgo some of another good to do so, it is definitely achieving

Accepted Answer

A) both production and allocative efficiency. 
B) only production efficiency. 
C) only allocative efficiency. 
D) neither production nor allocative efficiency. 
E) None of the above answers is correct because when society must forgo another good to produce more of one good, then society might be production efficient or it might be allocatively efficient. 
A) both production and allocative efficiency. 
B) only production efficiency. 
C) only allocative efficiency. 
D) neither production nor allocative efficiency. 
E) None of the above answers is correct because when society must forgo another good to produce more of one good, then society might be production efficient or it might be allocatively efficient.

Question 17

-Suppose a factory can be designed to produce either trucks or cars.The figure above shows the marginal cost and marginal benefit of producing trucks in terms of the forgone cars.
a∙What is the marginal benefit of the 25th truck?
b∙What is the marginal cost of the 25th truck?
c∙Should the 25th truck be produced? Why or why not.
d∙What is the marginal benefit of the 75th truck?
e∙What is the marginal cost of the 75th truck?
f∙Should the 75th truck be produced? Why or why not?
g∙What is the allocatively efficient quantity of trucks?

Accepted Answer

a∙3 cars
b∙1 car
c∙This truck should be

Question 18

If a firm is willing to supply the 1,000th unit of a good at a price of $23 or more, we know that $23 is the

Accepted Answer

A) highest price the seller hopes to realize for this output. 
B) minimum price the seller must receive to produce this unit. 
C) average price of all the prices the seller could charge. 
D) price that sets the marginal benefit equal to the price. 
E) only price for which the seller is willing to sell this unit of the good. 
A) highest price the seller hopes to realize for this output. 
B) minimum price the seller must receive to produce this unit. 
C) average price of all the prices the seller could charge. 
D) price that sets the marginal benefit equal to the price. 
E) only price for which the seller is willing to sell this unit of the good.

Question 19

The cost of producing one more unit of a good or service is equal to its

Accepted Answer

A) marginal benefit. 
B) producer surplus. 
C) marginal expenditure. 
D) consumer surplus. 
E) marginal cost. 
A) marginal benefit. 
B) producer surplus. 
C) marginal expenditure. 
D) consumer surplus. 
E) marginal cost.

Question 20

At a competitive equilibrium, if there are no taxes, subsidies, price regulations, quantity regulations, or externalities

Accepted Answer

A) the marginal benefit is greater than the marginal cost. 
B) resource use is efficient. 
C) the marginal benefit is less than the marginal cost. 
D) both the marginal benefit and the marginal cost of the last unit produced equal zero. 
E) the marginal benefit is greater than the marginal cost by as much as possible. 
A) the marginal benefit is greater than the marginal cost. 
B) resource use is efficient. 
C) the marginal benefit is less than the marginal cost. 
D) both the marginal benefit and the marginal cost of the last unit produced equal zero. 
E) the marginal benefit is greater than the marginal cost by as much as possible.

Allocative efficiency occurs when

"Allocative efficiency requires that the maximum number of people have access to all of the goods and services that our economy produces." Is this statement true or false? Explain your answer.

Producer surplus

If a seller charges a buyer the exact price the buyer is willing to pay, then the buyer would

Which of the following situations describing a resource allocation method most resembles the market price method?

The "invisible hand" refers to the notion that

Jose works at Intel.His manager tells him what work needs to be completed each month.Jose's resource, labor, is allocated with which of the following methods?

Redistributing income from the rich to the poor creates inefficiency because

Which of the following is true? I∙Production efficiency occurs only when resources are used to produce the combination of goods that has the greatest value. Ii∙Allocative efficiency occurs when marginal benefit equals marginal cost. Iii∙A demand curve is a marginal cost curve.

The concept of "the invisible hand" suggests that

A demand curve can be interpreted as

Graphically, producer surplus is the area under the

What must be true for a consumer to buy a good or service?

What is the impact of a government subsidy to producers?

-The figure above shows Kaley's marginal benefit from swimming with manatees and Scott's marginal cost of providing manatee swimming tours.For Kaley and Scott, allocative efficiency is achieved at what point?

If society can produce more of one good but must forgo some of another good to do so, it is definitely achieving

If a firm is willing to supply the 1,000th unit of a good at a price of $23 or more, we know that $23 is the

The cost of producing one more unit of a good or service is equal to its

At a competitive equilibrium, if there are no taxes, subsidies, price regulations, quantity regulations, or externalities

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 6: Efficiency and Fairness of Markets

Allocative efficiency occurs when

"Allocative efficiency requires that the maximum number of people have access to all of the goods and services that our economy produces." Is this statement true or false? Explain your answer.

Producer surplus

If a seller charges a buyer the exact price the buyer is willing to pay, then the buyer would

Which of the following situations describing a resource allocation method most resembles the market price method?

The "invisible hand" refers to the notion that

Jose works at Intel.His manager tells him what work needs to be completed each month.Jose's resource, labor, is allocated with which of the following methods?

Redistributing income from the rich to the poor creates inefficiency because

Which of the following is true? I∙Production efficiency occurs only when resources are used to produce the combination of goods that has the greatest value. Ii∙Allocative efficiency occurs when marginal benefit equals marginal cost. Iii∙A demand curve is a marginal cost curve.

The concept of "the invisible hand" suggests that

A demand curve can be interpreted as

Graphically, producer surplus is the area under the

What must be true for a consumer to buy a good or service?

What is the impact of a government subsidy to producers?

-The figure above shows Kaley's marginal benefit from swimming with manatees and Scott's marginal cost of providing manatee swimming tours.For Kaley and Scott, allocative efficiency is achieved at what point?

If society can produce more of one good but must forgo some of another good to do so, it is definitely achieving

If a firm is willing to supply the 1,000th unit of a good at a price of $23 or more, we know that $23 is the

The cost of producing one more unit of a good or service is equal to its

At a competitive equilibrium, if there are no taxes, subsidies, price regulations, quantity regulations, or externalities

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters