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Exam 5: Efficiency and Equity

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Question 191

Multiple Choice

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A drought in the Midwest over the summer decreased the supply of corn and, as a result, brought a sharp increase in the price of corn. The increase in the price of corn

A) always increases consumer surplus.
B) always decreases consumer surplus.
C) does not affect consumer surplus because this change reflects only a movement along the demand curve.
D) increases consumer surplus if demand is elastic and decreases consumer surplus if demand is inelastic.

E) A) and C)
F) A) and B)

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Question 192

Multiple Choice

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Consider a market that has linear supply and demand curves, and is in equilibrium. The area above the price line and below the demand curve is

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

E) C) and D)
F) All of the above

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Question 193

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What other curve is the same as the market supply curve? Why are the curves the same?

What is the relationship between the marginal social benefit curve and the market demand curve. Explain.

Jason hires Maria to tutor him in economics. Jason is willing to pay $30 for the first hour of tutoring, $25 for the second, $20 for the third, $15 for the fourth, and $10 for the fifth. Maria has an opportunity cost per hour of $6 for the first, $9 for the second, $12 for the third, $15 for the fourth, and $18 for the fifth. What will be the equilibrium quantity of hours tutored and the equilibrium price? Explain why this quantity and price is the equilibrium. What is Jason's consumer surplus and what is Maria's producer surplus?

-In the table above, if there are 80 umbrellas produced, the deadweight loss from the 80th umbrella is

Among the sources of economic inefficiency are all of the following EXCEPT

-In the above figure, what is the marginal social cost to the economy of producing the four-hundredth pretzel?

A deadweight loss

-The table gives the demand and supply schedules for ice cream in Sweetsville in July and November. Assume that the only people who benefit from ice cream are the people who consume it and the only people who bear the cost of ice cream are the people who produce it. a) Draw the market demand and market supply curves. What are the equilibrium price and equilibrium quantity of ice cream in July and November? Is the allocation of resources efficient in July? Is it efficient in November? Explain. b) What is the maximum price that consumers are willing to pay for the 100th gallon of ice cream in July? In November? What is the minimum price that producers are willing to accept for the 100th gallon in July and November? Explain. c) What happens to consumer surplus and producer surplus in November compared to July? Why?

Which of the following ideas describes the concept of "utilitarianism"? I. Utilitarianism gained popularity in the 1930s. II) Utilitarians believed that a society should use only competitive markets to allocate resources. III) Utilitarians claimed that taking money from rich people and giving it to poorer people would make the economy more fair.

When the competitive market is using its resources efficiently, the

-Using the above figure, which of the following quantities of CDs has the largest deadweight loss?

Which of the following represents the marginal cost of a soda? I. The opportunity cost of producing another soda. II) The minimum price someone is willing to pay for another soda.

The symmetry principle states that

-In the figure above, when the market is in equilibrium, total consumer surplus on all the CDs bought will be

-In the above figure, at the equilibrium price and quantity, producer surplus is

-The figure above shows Clara's demand for CDs. If the price for a CD is $15, then Clara

The Wii is a wildly popular home video game console released by Nintendo. The Wii system was first available in the U.S. in November, 2006 and has sold more than 30 million units as of August 2010. The Wii retails for $199. Suppose Ahmed is willing to pay $230, Lana is willing to pay $175, and Bodie is willing to pay $300 for a Wii. What is the value of Ahmed's consumer surplus?

-The figure above shows the market for coffee. If the efficient quantity of coffee is produced, the consumer surplus is