Question 1

Suppose Jack waits in line and gets in to see a movie he values at $6, while Sam, farther back in line, does not get to see the movie he values at $12 because the theater fills up. Which of the following statements is true?

Accepted Answer

A) The movie theater management needs to install more seats. 
B) Pareto efficiency is a concept that is not applicable here. 
C) Pareto efficiency is achieved because Jack can tell Sam about the movie. 
D) Jack must have stolen his ticket from Sam. 
E) Pareto efficiency is not achieved.

Question 2

Consider the following supply and demand schedule:

Accepted Answer

The answer of Consider the following supply and demand schedule:...

Question 3

The market system

Accepted Answer

A) was born during the first Industrial Revolution in Great Britain. 
B) arises spontaneously when individuals wish to trade. 
C) is totally absent in state-run economies such as Cuba. 
D) was created by Adam Smith in 1776. 
E) is forced on a society by government and the capitalists who run it.

Question 4

Exhibit 7-12 
-Refer to Exhibit 7-12. Calculate the deadweight loss if the government imposes a maximum price of $3 per unit.

Accepted Answer

The answer of Exhibit 7-12 
-Refer to Exhibit 7-12. Calculate...

Question 5

A market is an easy way for

Accepted Answer

A) buyers and sellers to communicate costs and benefits. 
B) sellers to earn profits without any risk of losses. 
C) each seller to control his or her selling price. 
D) sellers to provide false information to buyers. 
E) the government to control sellers.

Question 6

Exhibit 7-11 
-Refer to Exhibit 7-11. If the government limited wheat output to 3 million bushels, the deadweight loss would be illustrated by area

Accepted Answer

A) A. 
B) D. 
C) C. 
D) E. 
E) B.

Question 7

A price floor for a product results in a

Accepted Answer

A) gain in consumer surplus. 
B) decrease in producer surplus. 
C) deadweight loss. 
D) decrease in deadweight loss. 
E) shortage.

Question 8

The invisible hand is term that describes the power of a government.

Accepted Answer

A) True 
 B)False

Question 9

Exhibit 7-10 
-Refer to Exhibit 7-10. What would the new equilibrium quantity be if the government assessed a tax of $3 per unit purchased on consumers?

Accepted Answer

A) 50 
B) 60 
C) 55 
D) 45 
E) 65

Question 10

A market is efficient if the price that buyers pay is equal to the marginal cost of producers.

Accepted Answer

A) True 
 B)False

Question 11

Exhibit 7-13 
-Refer to Exhibit 7-13. If the government imposes a tax of $10 per unit on producers, tax revenue will be

Accepted Answer

A) $1,000. 
B) $3,000. 
C) $6,000. 
D) $5,000. 
E) $0.

Question 12

Pareto efficiency is defined as a state where

Accepted Answer

A) poverty does not exist. 
B) no one can possibly be made worse off. 
C) everyone can benefit from a change. 
D) no one can benefit from a change without someone being harmed. 
E) the lowest cost of production is achieved.

Question 13

If a market is in equilibrium, then we know that price equals marginal benefit because

Accepted Answer

A) the market supply curve reflects marginal cost. 
B) marginal benefit never changes. 
C) the market demand curve reflects marginal benefit. 
D) consumers are required by law to equate marginal benefit to price. 
E) every consumer experiences the same benefits.

Question 14

A strength of the market system is that cooperation must occur for everyone to be able to meet together and trade.

Accepted Answer

A) True 
 B)False

Question 15

At any given market price, a consumer

Accepted Answer

A) will never be able to buy a quantity of a good that maximizes utility. 
B) holds out (refuses to buy) until the price falls. 
C) will feel cheated by the individual seller. 
D) will seek to buy a quantity of a good that maximizes utility. 
E) will always be able to buy a quantity of a good that maximizes utility.

Question 16

Market equilibrium leads to the largest difference between consumer surplus and producer surplus.

Accepted Answer

A) True 
 B)False

Question 17

What three conditions for Pareto efficiency are met when market equilibrium is reached?

Accepted Answer

The answer of What three conditions for Pareto efficiency are...

Question 18

Exhibit 7-12 
-Refer to Exhibit 7-12. Calculate the deadweight loss that will occur when a tax of $4 per unit is imposed in the market.

Accepted Answer

The answer of Exhibit 7-12 
-Refer to Exhibit 7-12. Calculate...

Question 19

Exhibit 7-2 
-Refer to Exhibit 7-2. What is the least cost for the production of 8 units of output?

Accepted Answer

The answer of Exhibit 7-2 
-Refer to Exhibit 7-2. What...

Question 20

A shortage

Accepted Answer

A) occurs when sellers are willing to sell more than consumers are willing to buy. 
B) can never occur in a market that is functioning properly and without interference. 
C) occurs when the market price is below the equilibrium price. 
D) is an example of market failure. 
E) causes a price decrease in a market.

Exam 7: The Efficiency of Markets

Suppose Jack waits in line and gets in to see a movie he values at $6, while Sam, farther back in line, does not get to see the movie he values at $12 because the theater fills up. Which of the following statements is true?

Consider the following supply and demand schedule:

The market system

Exhibit 7-12 -Refer to Exhibit 7-12. Calculate the deadweight loss if the government imposes a maximum price of $3 per unit.

A market is an easy way for

Exhibit 7-11 -Refer to Exhibit 7-11. If the government limited wheat output to 3 million bushels, the deadweight loss would be illustrated by area

A price floor for a product results in a

The invisible hand is term that describes the power of a government.

Exhibit 7-10 -Refer to Exhibit 7-10. What would the new equilibrium quantity be if the government assessed a tax of $3 per unit purchased on consumers?

A market is efficient if the price that buyers pay is equal to the marginal cost of producers.

Exhibit 7-13 -Refer to Exhibit 7-13. If the government imposes a tax of $10 per unit on producers, tax revenue will be

Pareto efficiency is defined as a state where

If a market is in equilibrium, then we know that price equals marginal benefit because

A strength of the market system is that cooperation must occur for everyone to be able to meet together and trade.

At any given market price, a consumer

Market equilibrium leads to the largest difference between consumer surplus and producer surplus.

What three conditions for Pareto efficiency are met when market equilibrium is reached?

Exhibit 7-12 -Refer to Exhibit 7-12. Calculate the deadweight loss that will occur when a tax of $4 per unit is imposed in the market.

Exhibit 7-2 -Refer to Exhibit 7-2. What is the least cost for the production of 8 units of output?

A shortage