Chapter 7
The price at which a seller is indifferent between making a sale and not doing so is known as his ____________. If you are the only buyer, and you know that the lowest ask price is $3, should you accept this offer? A) willingness-to-sell B) breakeven point. C) reservation price. D) A and C only.
D
In a competitive market equilibrium, the allocation of the social surplus is such that____________. A) equity among the participants is attained. B) all participants are equally satisfied with the outcome. C) no individual can be made better off without making someone else worse off. D) no individual can be made better off or worse off
C
Sara and Jim are going to lunch together and rank the restaurant options in the following way. Which of the following restaurant choices are Pareto efficient for Sara and Jim? A) Blaze B) Panera C) Naf Naf D) Both A and C are correct
D
Assume there are two industries in our economy: the production of pizza and the production of calzones. Each of these products is produced in a similar way with similar ingredients and requires similar skills. If the market price of pizza in this competitive market is below the ATC curve and the price of calzones is above the ATC curve, ____________. A) firms currently making pizza will switch to making calzones. B) firms currently making calzones will switch to making pizza. C) firms will increase their productivity to lower their marginal costs. D) firms will continue making their current product since demand curves will adjust to equilibrate prices in both markets.
A
The government of a certain country decides that all its citizens should be equally well off. It decides to redistribute money so that each person has a roughly equal share of the total income. How would this policy affect economic activity in the country? A) It would be adversely affected since incentives to work or seek profits would be greatly diminished. B) It would be boosted since the poor will now be spending funds the rich would have otherwise saved. C) It would be adversely affected since the poor are generally incapable of wisely investing money D) It would be enhanced by the euphoria and sense of unity brought about by the creation of an egalitarian society.
A
The tables below show the reservation values of buyers and sellers in the market for used iPhones. Suppose the minimum price is given as $55 (a "price floor"). Which of the following statements is true in the market for used iPhones? A) Madeline and Katie will each be willing to buy an iPhone. B) Sean and Dave will each be willing to buy an iPhone. C) Dave and Ian will each be willing to buy an iPhone. D) Kim and Ty will each be willing to buy an iPhone.
A
Does price gouging have the same effect as setting prices above equilibrium level? A) No, price gouging harmsbuyers, while prices set above equilibrium damages sellers. B) No, price gouging is actually an equilibrium outcome, while the setting of prices above equilibrium is not. C) Yes, both result in unjustifiably high prices given underlying supply and demand conditions. D) Yes, both produce an excess of quantity supplied over quantity demanded.
B
Once planners have successfully brought economic agents together, a second problem of aligning the interests of the economic agents must be solved. This is known as the ____________ problem. A) integration B) incentive C) alignment D) coordination
B
Social surplus is the ____________. A) excess of aggregate demand over aggregate supply. B) Total value from trade in a market C) difference between the amount that buyers actually pay and what they wish to pay D) difference between the consumer surplus and producer surplus.
B
Social surplus is maximized when the ___________. A) competitive market is in equilibrium. B) highest-value buyers are making a purchase and the lowest-cost sellers are selling. C) buyers and sellers as distinct groups are doing as well as they possibly can D) all of the above.
D
Imagine you are a buyer in a double oral auction with a reservation value of $13 and there is a seller asking for $9. If you are the only buyer, and you know that the lowest ask price is $3, should you accept this offer? A) Yes, accepting an offer from any other seller will reduce your surplus. B) No, as the only buyer you can extract a lower ask price. C) Yes, since you will gain $10. D) Both A and C are correct.
D
In assessing the performance of a perfectly competitive market, we can say that ____________. A) price efficiently allocates goods and services to buyers and sellers. B) any departure from the equilibrium necessarily reduces social surplus. C) no individual can be made better off without making someone else worse off. D) all of the above.
D
