Econ 4A

Which of the following are elements of a competitive equilibrium model? (multiple answers.) 1). Government controls market prices 2). Consumers maximize utility 3). Firms maximize profits 4). The "invisible hand" coordinates the market

2). Consumers maximize utility 3). Firms maximize profits 4). The "invisible hand" coordinates the market

Deadweight loss is A). the sum of producer and consumer surplus at an inefficient production level. B). the loss of producer and consumer surplus at an inefficient production level. C). the loss of producer and consumer surplus when a market is at equilibrium D). the sum of producer and consumer surplus when a market is at equilibrium.

B). the loss of producer and consumer surplus at an inefficient production level.

The sum of producer surplus and consumer surplus is maximized when A). producers produce at the point where marginal cost is equal to zero. B). consumers buy to the point that marginal benefit is equal to zero. C). marginal benefit and marginal cost are equal. D). the difference between marginal benefit and marginal cost is at its maximum.

C). marginal benefit and marginal cost are equal.

In a competitive market, buyers and sellers are coordinated through A). personal communication with each other. B). information gained from outside the market. C). the government D). the price signal.

D). the price signal.

A competitive market is at equilibrium when A). consumer surplus equals producer surplus. B). consumer surplus is greater than producer surplus. C). the sum of consumer surplus and producer surplus equals zero D). the sum of consumer surplus and producer surplus is maximized.

D). the sum of consumer surplus and producer surplus is maximized.

Suppose the market for sunglasses is not in equilibrium for some unknown reason. At the current level of output, the height of the supply curve is $15 and the height of the demand curve is $10. If one more pair of sunglasses is produced, the total surplus in this market would a). decrease by $5. b). decrease by $10. c). increase by $10. d). increase by $5.

a). decrease by $5.

If the economy is perfectly competitive in all markets, then the economy is producing a). on its production-possibilities curve. b). inside its production-possibilities curve. c). at the origin of the production-possibilities graph. d). outside its production-possibilities curve.

a). on its production-possibilities curve.

Suppose the rake industry has 40 sellers, while the hoe industry industry has 4 sellers. Which industry is more likely to be perfectly competitive? a). It depends on which industry has a higher price. b). The rake industry. c). It depends on which industry has greater output. d). The hoe industry.

b). The rake industry.

Suppose the market price of folding chair is $10. If this market is perfectly competitive, then each folding-chair producer perceives the demand for its own output to be a). perfectly inelastic. b). perfectly elastic at $10. c). downward-sloping, starting at $10. d). upward-sloping, starting at $10.

b). perfectly elastic at $10.

Suppose that in the hamburger market, consumers view the products of different producers as perfect substitutes, but in the hot dog market, consumers have strong preferences for one brand or another. Which market is less likely to be perfectly competitive? a). It depends on which product is more nutritious. b). The hamburger industry. c). The hot dog industry. d). It depends on which product has a higher price.

c). The hot dog industry.

Firms A and B produce identical lounge chairs, but for some unknown reason, Firm A's marginal cost is $100 while Firm B's marginal cost is $150. If one unit of output were shifted from Firm B to Firm A, then total industry costs would a). increase by $250. b). increase by $50. c). decrease by $50. d). remain constant.

c). decrease by $50.

Suppose the opportunity cost of a bushel of wheat is 2 bushels of corn, along the economy's production-possibilities curve. If the price of wheat is $6 per bushel and the economy is perfectly competitive in all markets, then the price of a a bushel of corn will be a). $12. b). $6. c). $2. d). $3.

d). $3.