ECON - Market Efficiency

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 consumer __________ .

SURPLUS

When there is a binding price ceiling producer surplus will: A: always be less so producers always lose. B: always be more so producers always gain. C: be more or less so producers may gain or lose.

A: always be less so producers always lose.

In terms of the production possibilities curve allocative efficiency means that at any point in time: A: an ideal combination of production is based on consumer preferences. B: the price and the output are equal. C: consumer and producer preferences are equal. D: an ideal combination of production is based on producer preferences.

A: an ideal combination of production is based on consumer preferences.

An economy is productively efficient when: A: it is producing on the production possibilites frontier. B: all goods are sold. C: consumers are satisfied. D: there are surplus resources.

A: it is producing on the production possibilites frontier

When marginal benefit is measured by the demand curve and marginal cost is measured by the supply curve then: A: marginal benefit equals marginal cost at the point where demand equals supply. B: marginal benefit equals marginal cost at the point where the opportunity cost is zero. C: marginal price equals marginal output at the point where demand equals supply. D: there are no profits for the firms.

A: marginal benefit equals marginal cost at the point where demand equals supply.

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.

Blank 1: consumer

With a binding price floor __________ always lose.

Blank 1: consumers

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 (one word).

Blank 1: deadweight

The value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium is the __________ loss (one word).

Blank 1: deadweight

Marginal benefit is measured by the _________ curve.

Blank 1: demand

The unit used to measure consumer surplus is ___________

Blank 1: dollars, $, money, yen, euros, or currency

Graphically total__________ surplus is the entire area between the supply and demand curves from a quantity of zero to the quantity traded.

Blank 1: economic

The value of the ______________ surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium is the deadweight loss. (Use one word for the blank.)

Blank 1: economic, social, or total

A measure of the total welfare or wealth that trade creates for consumers and producers in a market is known as ___________ surplus.

Blank 1: economic, total, social, or total economic

When marginal benefit equals marginal cost the market is allocatively _____________ and is therefore maximizing economic surplus.

Blank 1: efficient

When marginal benefit equals marginal cost the market is allocatively ______________ and is therefore maximizing economic surplus.

Blank 1: efficient

If the rectangular area representing the tax revenue collected by the government is large and the deadweight-loss area is small the tax is relatively ______________ at raising revenue.

Blank 1: efficient or effective

Producers may gain a little but society as a whole will be worse off with a price ___________ because of the deadweight losses.

Blank 1: floor

When markets are taxed at high rates it generates a ____________ amount of deadweight loss in each of the markets.

Blank 1: high, large, big, or higher

Consumer surplus exists when the price that people are willing to pay is ___________ (lower/higher) than what they actually pay. (Choose your answer from the answer options given in brackets.)

Blank 1: higher

All else equal as the price of a good decreases consumer surplus ____________ (one word).

Blank 1: increases or rises

When markets are taxed at _______ rates it generates a small amount of deadweight loss in each of the markets.

Blank 1: low, lower, lesser, smaller, or small

All else equal ___________ surplus is higher at higher prices.

Blank 1: producer

The difference between the price producers receive for a good or a service and the minimum price they are willing and able to accept is ___________ surplus.

Blank 1: producer

High prices are good for _____________ if they occur naturally in a market.

Blank 1: producers, sellers, or firms

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.

Blank 1: resources

If the rectangular area representing the tax revenue collected by the government is __________ and the deadweight loss area is ______________ the tax is relatively inefficient at raising revenue.

Blank 1: small, little, low, lower, or smaller Blank 2: greater, larger, big, or high

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

Blank 1: supply Blank 2: zero

All else equal producer __________ increases at higher prices.

Blank 1: surplus

When marginal benefit equals marginal cost the market is allocatively efficient and is therefore maximizing economic _______________.

Blank 1: surplus or welfare

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

Blank 1: zero

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

Blank 1: zero or origin

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

Blank 1: zero, origin, or the origin

Which of the following is true? A: Productive efficiency means there is no deadweight loss. B: Allocative inefficiency means there is no deadweight loss. C: Allocative inefficiency means there is deadweight loss. D: Marginal efficiency means there is no deadweight loss.

C: Allocative inefficiency means there is deadweight loss.

Consumer surplus: A: will decrease as a result of a price ceiling. B: will increase as a result of a price ceiling. C: can increase or decrease as a result of a price ceiling.

C: can increase or decrease as a result of a price ceiling.

A tax: A: decreases the cost of goods produced and shifts the supply curve up. B: increases the cost of goods produced and shifts the supply curve down. C: increases the cost of goods produced and shifts the supply curve up. D: decreases the cost of goods produced and shifts the supply curve down.

C: increases the cost of goods produced and shifts the supply curve up.

If a price ceiling in this market is set at P2, then A: deadweight loss equals area d. B: deadweight loss equals area h. C: no deadweight loss occurs. D: more information is needed to find deadweight loss.

C: no deadweight loss occurs.

If an economy is getting as much output as possible from its resources it must be: A: producing the most output. B: allocatively efficient. C: producing them at the lowest possible cost. D: providing high profits.

C: producing them at the lowest possible cost.

It is more efficient to tax: A: a few different markets at low rates than to tax several markets at higher rates. B: all markets at a flat rate. C: several different markets at low rates than to tax fewer markets at higher rates. D: all markets at increasing rates.

C: several different markets at low rates than to tax fewer markets at higher rates.

Gains from trade in the market are maximized when: A: the opportunity cost is zero. B: the maximum price is such that the quantity demanded is more than the quantity supplied. C: the equilibrium price is such that the quantity demanded equals the quantity supplied. D: the price is such that the marginal benefit equals the price.

C: the equilibrium price is such that the quantity demanded equals the quantity supplied.

If actual production and consumption occur at Q1 A: economic surplus is maximized. B: consumer surplus is maximized. C: there is deadweight loss of b + d. D: there is deadweight loss of e + d.

C: there is deadweight loss of b + d.

_______________ loss is the value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium.

DEADWEIGHT

If low prices are the result of government intervention: A: overall consumer surplus can increase or decrease depending on how much the price is forced to decrease and how much the quantity supplied falls. B: overall consumer surplus will decrease because the price is forced to decrease and the quantity supplied falls. C: overall consumer surplus will increase because the price is forced to decrease and the quantity supplied falls.

A: overall consumer surplus can increase or decrease depending on how much the price is forced to decrease and how much the quantity supplied falls.

With a binding price ceiling: A: producers always lose. B: consumers always gain. C: consumers always lose. D: producers always gain.

A: producers always lose.

The quantity traded times the tax equals: A: the tax revenue from a tax. B: the income earned by the sellers. C: the sum of buying and selling. D: the income spent by the buyers.

A: the tax revenue from a tax.

According to the graph, if a $3 tax is imposed in the market, what percentage of this $3 tax is borne by the consumers? A: 66.7% B: 25% C: 33.3% D: 75%

A:66.7% Reason: (To find the percentage borne by consumers, you first need to calculate the price increase that consumers have experienced. The price has increased by $2, or a change from $6 to $8. Given a $3 tax, the change in consumer price of $2 is 66.7% of the tax ($2/$3).

Suppose the price of sunglasses falls to $40. What would happen to consumer surplus? A: Consumer surplus would not change. B: Consumer surplus would increase. C: Consumer surplus would decrease.

B: Consumer surplus would increase.

Allocative efficiency occurs when: A: Price = Output. B: MB = MC. C: MB = MP. D: MP = MC.

B: MB = MC.

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

B: On the PPF

When calculating consumer surplus for an entire market: A: subtract the market price from a person's willingness to pay. B: calculate the area below the demand curve and above the equilibrium price from zero to the quantity traded. C: calculate the area above the demand curve and below the equilibrium price from zero to the quantity traded. D: add the market price to a person's willingness to pay.

B: calculate the area below the demand curve and above the equilibrium price from zero to the quantity traded.

Producer surplus: A: will increase as a result of a price floor. B: can increase or decrease as a result of a price floor. C: will decrease as a result of a price floor.

B: can increase or decrease as a result of a price floor.

When too much or too little output gets produced there is: A: forgone production. B: deadweight loss. C: a very high price. D: no profit.

B: deadweight loss.

Producer surplus is the: A: division of the price producers receive for a good or a service and the minimum price they are willing and able to accept. B: difference between the price producers receive for a good or a service and the minimum price they are willing and able to accept. C: difference between the price producers receive for a good or a service and the maximum price they are willing and able to accept. D: division of the price producers receive for a good or a service and the maximum price they are willing and able to accept.

B: difference between the price producers receive for a good or a service and the minimum price they are willing and able to accept.

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.

Blank 1: consumer

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

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

A maximum legal price at which a good a service or a resource can be sold is a A: rent control B: price ceiling C: price floor D: minimum wage

B: price ceiling

PRODUCER - MIN.ACCEPT. PRODUCT $ - ACT. PROD. $ KIMBERLY $6 $13 DRAKE $7 $13 NICKI $9 $13 VICTORIA $11 $13 If the equilibrium price increases, the A: producer surplus will decrease. B: producer surplus will increase. C: consumer surplus will increase. D: allocative efficiency will increase.

B: producer surplus will increase.

Allocative efficiency means: A: producing such that the average cost is minimized. B: producing such that the marginal benefit of the last unit is equal to the marginal cost of that unit. C: scarcity is not experienced. D: producing such that the marginal cost is minimized.

B: producing such that the marginal benefit of the last unit is equal to the marginal cost of that unit.

Producing output at the lowest possible total cost per unit of production is: A: marginal efficiency. B: productive efficiency. C: allocative efficiency. D: cost efficiency.

B: productive efficiency.

A tax on suppliers shifts the: A: supply curve down vertically. B: supply curve up vertically. C: demand curve up vertically. D: demand curve down vertically.

B: supply curve up vertically.

What area represents producer surplus after the government imposes the excise tax on the market? A: triangle abc B: triangle $1c$9 C: square $13ac$9 D: triangle $21a$13

B: triangle $1c$9

A branch of economics that focuses on measuring the welfare of market participants and how changes in the market change their well-being is known as: A: market economics. B: welfare economics. C: capitalist economics. D: microeconomics.

B: welfare economics.

You paid $25 for a concert ticket and received a consumer surplus of $10. You were willing to pay $

Blank 1: $35, thirty-five, or 35

Refer to the graph to calculate the amount of producer surplus generated in the market after the imposition of the $3 tax. Producer surplus is $ __________

Blank 1: 100 or $100

Refer to the graph to calculate the amount of consumer surplus generated in the market after the imposition of the $3 tax. Consumer surplus is $______

Blank 1: 200 or $200

Assuming supply and demand are not perfectly elastic if an excise tax doubles the deadweight loss increases by a factor of _____________.

Blank 1: 4 or four

If you are willing and able to pay up to $400 for a new pair of skis and you then find out that they are on sale for $350 you will receive $ __________ in consumer surplus if you purchase the skis.

Blank 1: 50, $50, or fifty

Suppose the government imposes a tax on suppliers of plastic drink cups equal to $1 per 100 cups. Before the tax 10,000 cups were sold. After the tax, 8,000 cups are sold. The tax revenue is equal to $ _____________.

Blank 1: 80 (8,000/100)*$1

________________efficiency means producing the level of output at which the marginal benefit of the last unit is equal to the marginal cost of that unit. Listen to the complete question

Blank 1: Allocative

__________ losses occur when too much or too little output gets produced.

Blank 1: Deadweight or Dead-weight

__________ in the market occurs where the supply and demand curves intersect.

Blank 1: Equilibrium

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

Blank 1: Producer

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

Blank 1: above or over Blank 2: below, under, or beneath

The gains from trade are maximized when there is _____________ efficiency.

Blank 1: allocative

______________ efficiency is producing the goods and services that consumers most want in such a way that the marginal benefit equals the marginal cost.

Blank 1: allocative

_____________efficiency refers to producing the goods people want most.

Blank 1: allocative

When the marginal benefit of the last unit equals the marginal cost of the last unit, production is ___________ efficient.

Blank 1: allocatively or allocative

Graphically consumer surplus is the area _________ the demand curve and ____________ the equilibrium price from zero to the quantity traded.

Blank 1: below, under, beneath, or lower than Blank 2: above, greater than, or higher than

The market is allocatively efficient and is maximizing economic surplus in market equilibrium where marginal _____________________ equals marginal ________________ .

Blank 1: benefit Blank 2: revenue or cost

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

Blank 1: benefit or benefits Blank 2: cost or costs

A maximum legal price at which a good a service or a resource can be sold is a price ______________ (ONE WORD).

Blank 1: ceiling or cap

Social welfare is not maximized if the amount of output produced is greater than the equilibrium quantity because: A: prices are too low the number of consumers is too high and producers flee the market. B: consumers want too much of the product so the marginal benefit exceeds the marginal cost. C: unsold production results in a waste of resources that could have been employed to produce other goods and services more wanted by consumers. D: unsold production results in excess inventories that drive prices below the marginal cost.

C: unsold production results in a waste of resources that could have been employed to produce other goods and services more wanted by consumers.

Deadweight loss is the: A: lost tax revenue from the underground economy. B: unsold goods that become produced inventories. 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.

C: value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium.

A person will purchase a good or service so long as the person's: A: willingness to pay (marginal cost) is greater than the marginal benefit. B: willingness to pay (marginal cost) is less than the marginal benefit. C: willingness to pay (marginal benefit) is greater than the marginal cost. D: willingness to pay (marginal benefit) is less than the marginal cost.

C: willingness to pay (marginal benefit) is greater than the marginal cost.

If you are willing and able to pay up to $40 for a new pair of jeans and you then find out that they are on sale for $30 you will receive $10 in _____________ surplus if you purchase the jeans.

CONSUMER

If you are willing and able to pay up to $40 for a new pair of jeans and you then find out that they are on sale for $30 you will receive $10 in ___________________ surplus if you purchase the jeans.

CONSUMER

When calculating _______________ surplus for an individual the market price is subtracted from that person's willingness to pay.

CONSUMER

______________ (Consumer/Producer) surplus will always be less with a binding price floor than without.

Consumer

According to the graph, if a $3 tax is imposed in the market, what percentage of this $3 tax is borne by the producers? A: 75% B: 66.7% C: 25% D: 33.3%

D: 33.3% Reason: (To find the percentage borne by consumers, you first need to calculate the price decrease that producers have experienced. The price has decreased by $1, or a change from $6 to $5. Given a $3 tax, the change in price producers receive of $1 is 33.3% of the tax ($1/$3).

At equilibrium, economic surplus is represented by the area A: A + B + E B: C + D + F C: A + B + C + D D: A + B + C + D + E + F

D: A + B + C + D + E + F Reason: (Economic surplus consists of the entire area between the demand curve and supply curves up to the equilibrium quantity. In this market, the equilibrium quantity is 600. You can also find economic surplus by adding the Consumer Surplus of A+B+E to the Producer Surplus of C+D+F.)

When calculating consumer surplus for an entire market: A: calculate the area above the demand curve and below the equilibrium price from zero to the quantity traded. B: add the market price to a person's willingness to pay. C: subtract the market price from a person's willingness to pay. D: calculate the area below the demand curve and above the equilibrium price from zero to the quantity traded.

D: calculate the area below the demand curve and above the equilibrium price from zero to the quantity traded.

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: marginal loss. B: profit loss. C: opportunity cost. D: deadweight loss.

D: deadweight loss.

As tax rates change: A: consumers flee the market. B: producers flee the market. C: deadweight losses increase. D: deadweight losses change.

D: deadweight losses change.

A minimum legal price at which a good a service or a resource can be sold is a A: minimum wage B: rent control C: price ceiling D: price floor

D: price floor

Producing output at the lowest possible total cost per unit of production is: A: cost efficiency. B: allocative efficiency. C: marginal efficiency. D: productive efficiency.

D: productive efficiency.

Economic surplus is also known as: A: welfare surplus or social revenue. B: social welfare or consumer surplus. C: total surplus or producer surplus. D: social welfare or total surplus.

D: social welfare or total surplus.

When a tax is imposed on market participants the result will most likely be: A: tax losses for the government and a deadweight loss for the market. B: tax revenue for the government and a higher price for producers in the market. C: tax revenue for the government and a lower price for consumers in the market. D: tax revenue for the government and a deadweight loss for the market.

D: tax revenue for the government and a deadweight loss for the market.

The revenue collected from a tax equals: A: the quantity traded times the number of buyers. B: the price times the quantity traded. C: the income minus the tax. D: the tax times the quantity traded.

D: the tax times the quantity traded.

_________________ 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.

Welfare