Section 2 Unit 2: Market Efficiency

Marginal benefit is greater than the marginal cost

A person will purchase a good or service so long as the person's: A) Marginal benefit is less than the average cost B) Marginal benefit is greater than the marginal cost C) Marginal cost is greater than the marginal benefit D) Marginal cost is less than the average cost

A minimum legal price at which a good, a service, or a resource can be sold.

A price floor is: A) The lowest equilibrium price in the market B) The lowest historical price of a good, service, or resource. C) A minimum legal price at which a good, a service, or a resource can be sold. D) A maximum legal price at which a good, a service, or a resource can be sold.

Efficiency

Allocative _____ refers to producing the goods people want most.

MB = MC

Allocative efficiency occurs when: A) Price = output B) MB = MP C) MB = MC D) MP = MC

It is producing on the production possibilities frontier

An economy is productively efficient when: A) Consumers are satisfied B) There are surplus resources C) It is producing on the production possibilities frontier D) All goods are sold

Maximum price consumers are willing and able to pay for a good or service and the price they actually to pay.

Consumer surplus is the difference between the: A) Minimum price consumers are willing and able to pay for a good or service and the price they used to pay. B) Minimum price consumers are willing and able to pay for a good or service and the price they actually to pay. C) Maximum price consumers are willing and able to pay for a good or service and the price they actually to pay. D) Maximum price consumers are willing and able to pay for a good or service and the price they used to pay.

Value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium

Deadweight loss is the: A) Unsold goods that become produced inventories B) Lost tax revenue from the underground economy C) Value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium D) Value of the economic surplus that is earned when a market is allowed to adjust to its competitive equilibrium

Demand and supply intersect

Equilibrium in a market occurs where: A) Willingness to pay equals demand B) Demand and supply intersect C) Willingness to accept equals supply D) Price equals marginal opportunity cost

Demand, zero

Graphically consumer surplus is the area above the _____ curve and below the equilibrium price from the _____ to the quantity traded.

Above, below

Graphically producer surplus is the area _____ the supply curve and _____ the equilibrium price from zero to the quantity traded.

Supply, zero

Graphically producer surplus is the area above the _____ curve and below the equilibrium price from the _____ to the quantity traded.

Zero

Graphically producer surplus is the area above the supply curve and below the equilibrium price from _____ to the quantity traded.

Supply, demand

Graphically total economic surplus is the entire area between the _____ and _____ curves from a quantity of zero to the quantity traded.

Producer surplus of $100

If you were willing to sell your used bike for $400 but someone paid you $500 for it, you received: A) Consumer surplus of $90 B) Producer surplus of $900 C) Producer surplus of $100 D) The consumer surplus cannot be determined E) Consumer surplus of $100

Producer

If you were willing to sell your used car for $3000 but someone paid you $3500 for it, you received _____ surplus of $500.

Subtracting

Producer surplus for an individual firm is calculated by _____ the minimum price at which a producer is willing to sell from the market price.

Productive

Producing output at the lowest possible total cost of production per unit is _____ efficiency

Productive efficiency

Producing output at the lowest possible total cost per unit of production is: A) Marginal efficiency B) Allocative efficiency C) Cost efficiency D) Productive efficiency

Allocative efficiency

Producing the goods and services that consumers most want in such a way that the marginal benefit equals the marginal cost is: A) Allocative efficiency B) Cost efficiency C) Productive efficiency D) Marginal effciencu

Deadweight

The difference between the economic surplus when the market is at its competitive equilibrium and the economic surplus when the market is not in equilibrium is the _____ loss.

Economic;total;social;market

When a market is not allowed to adjust to the equilibrium price and quantity traded, some _____ surplus will be lost

Allocative

When there is _____ efficiency, the ideal combination of production is based on consumer preferences.

Welfare Economics

_____ is a branch of economics that focuses on measuring the well-being of market participants and how changes in the market affect their well-being.

Consumer

_____ surplus can be thought of as the wealth that trade creates for consumers in a market

Demanded; supplied

Marginal benefit equals marginal cost at the point where quantity _____ equals quantity _____.

Price of the good

A person will purchase a good or service as long as the person's willingness to pay is greater than the: A) Quality of the good B) Cost of production of the good C) Price of the good

Benefit, cost

A person will purchase a good or service so long as the person's marginal _____ is greater than the marginal _____.

Wealth that trade creates for consumers in a market

Consumer surplus can be considered as the: A) Deficit that trade causes in a nation B) Wealth that trade creates for consumers in a market C) Loss that consumers in a market incur

On the PPF

Points that are productively efficient would be located where on the production possibilities frontier (PPF)? A) On the PPF B) Beyond the PPF C) Only at one point on the PPF D) Inside the PPF

Wealth;revenue

Producer surplus can be thought of as the _____ that trade creates for producers in a market.

Wealth; revenue

Producer surplus can be thought of as the _____ that trade creates for producers in the market

Deadweight loss

The difference between the economic surplus when the market is at its competitive equilibrium and the economic surplus when the market is not in equilibrium is the: A) Opportunity cost B) Marginal loss C) Deadweight loss D) Profit loss

Consumer

The difference between the maximum price consumers are willing and able to pay for a good or a service and the price they actually pay is the _____ surplus.

Resources

The production possibilities frontier (PPF) shows how much of two goods an economy can produce when it is using all available _____ as efficiently as possible.

Efficiently

The production possibilities frontier (PPF) shows how much of two goods an economy can produce when it is using all available resources as _____ as possible

Economic;total;social;market

The sum of consumer and producer surplus is _____ surplus.