ECN101 Chapter 6 Key Terms

C. value most​ highly; without giving​ up; value more highly

Allocative efficiency is a situation in which the quantities of goods and services produced are those that people​ _____ - it is not possible to produce more of a good or service​ _____ some of another good that people​ _____. A. value the​ least; without giving​ up; don't value B. value most​ highly; without​ producing; value more highly C. value most​ highly; without giving​ up; value more highly D. value the​ least; without​ producing; value

B. marginal​ benefit; price paid for it

Consumer surplus is the​ _____ from a good or​ service, in excess of the​ _____, summed over the quantity consumed. A. marginal​ benefit; maximum value for it B. marginal​ benefit; price paid for it C. marginal​ benefit; cost D. utility; maximum willingness to pay for it

C. total​ surplus; underproduction; overproduction

Deadweight loss is the decrease in​ _____ that results from an inefficient​ _____ or​ _____. A. total​ surplus; market​ price; marginal cost B. producer​ surplus; overproduction; subsidy C. total​ surplus; underproduction; overproduction D. consumer​ surplus; underproduction; tax

D. His manager at McDonalds puts him on the​ drive-through window.

In a day in the life of​ Jack, the following four things occur. Which is an example of resources being allocated by the command system​? A. He waits in line for a table at Red Lobster. B. He buys tomatoes at Safeway for​ $3 per pound. C. He gets a ticket for a parking offense. D. His manager at McDonalds puts him on the​ drive-through window.

C. the opportunity cost of producing one more unit of output.

Marginal cost equals A. all the opportunity cost of producing the amount of output. B. productive efficiency. C. the opportunity cost of producing one more unit of output. D. the profitability derived from producing another unit of output. E. or exceeds the marginal benefit.

D. delivers an inefficient outcome

Market failure is a situation in which the market​ _____ . A. delivers an unfair outcome B. price fluctuates C. breaks down so that nothing gets produced D. delivers an inefficient outcome

C. price​ of; marginal cost

Producer surplus is the​ _____ a good or​ service, in excess of the​ _____ of producing​ it, summed over the quantity produced. A. price​ of; fixed cost B. marginal benefit​ from; variable cost C. price​ of; marginal cost D. total revenue​ from; total cost

A. price​ of; marginal cost

Producer surplus is the​ _____ a good or​ service, in excess of the​ _____ of producing​ it, summed over the quantity produced. A. price​ of; marginal cost B. marginal benefit​ from; variable cost C. total revenue​ from; total cost D. price​ of; fixed cost

A. the amount of another good a person is willing to give up to get one more taco.

The marginal benefit of a taco is measured by A. the amount of another good a person is willing to give up to get one more taco. B. the amount of another good a person must give up to get one more taco. C. the opportunity cost of producing another taco. D. the price of the taco. E. a point on the PPF.

E. competitive markets send resources to their highest valued uses.

The​ "invisible hand" refers to the notion that A. no matter what allocation method is​ used, the resulting production is efficient. B. government intervention is necessary to ensure efficiency. C. marginal benefit decreases as more is consumed. D. marginal cost increases as more is produced. E. competitive markets send resources to their highest valued uses.

B. consumer​ surplus; producer surplus

Total surplus is the sum of​ _____ and​ _____. A. total​ revenue; total cost B. consumer​ surplus; producer surplus C. marginal​ revenue; marginal benefit. D. marginal​ benefit; marginal cost

E. fewer bikes should be produced.

When the marginal cost of producing a bike is greater than the marginal benefit of the​ bike, for resource use to be allocatively efficient A. more bikes should be produced. B. people must be educated to demand more bikes. C. no more and no fewer bikes should be produced. D. it must be determined if the production of bikes can be increased. E. fewer bikes should be produced.

A. There is a deadweight loss

When there is market failure so that a market produces less than the efficient​ amount, A. there is a deadweight loss. B. consumer surplus definitely is larger than when the efficient quantity is produced. C. consumers definitely lose and producers definitely gain. D. consumers definitely gain and producers definitely lose. E. the sum of producer surplus and consumer surplus is larger than when the efficient quantity is produced.

A. The sum of consumer surplus and producer surplus is maximized.

Which of the following occurs when a market is​ efficient? A. The sum of consumer surplus and producer surplus is maximized. B. Consumer surplus is as large as possible. C. Consumer surplus equals producer surplus. D. Producer surplus is as large as possible. E. The marginal benefit exceeds the marginal cost by as much as possible.

A. makes it smaller.

Which of the following statements describes the big tradeoff​? Sharing the pie more equally​ _____ . A. makes it smaller. B. makes it bigger. C. is the right thing to do regardless of the size of the pie. D. has no influence on its size.

C. I paid a commission to the real estate broker when I bought my house.

Which of the following statements is an example of transaction costs​? A. An increase in wages has increased labor costs in China. B. A hike in taxes results in underproduction. C. I paid a commission to the real estate broker when I bought my house. D. Microsoft's profit dropped by 5 percent last quarter.