Econ Homework 4

Which of the following is true when a market is in equilibrium and there is no outside intervention to change the equilibrium price? a) Total surplus is minimized. b) Inefficiency is maximized. c) Some mutually beneficial trades may be missed. d) No mutually beneficial trades are missed.

No mutually beneficial trades are missed.

When a market is efficient: a) there is no way to make some people better off without making other people worse off. b) there are ways to make everyone better off. c) producers whose willingness to accept a price that is greater than the market price are able to sell their good. d) consumers who value buying a good the least are the ones who are able to purchase the good.

a) there is no way to make some people better off without making other people worse off.

Adie wants to take some online classes this semester. She is willing to pay $1,000 for the first class, $800 for the second, $700 for the third, and $500 for the fourth. If online classes cost $750, Adie will take ________ online classes and her consumer surplus will equal ________. a) 4; $600 b) 2; $400 c) 2; $300 d) 3; $350

c) 2; $300

Mountain River Adventures offers whitewater rafting trips down the Colorado River. It costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third, and $160 for the fourth. If the market price for a raft trip is $150, Mountain River Adventures will offer ________ trips per day and will have producer surplus equal to ________. a) 4; $80 b) 3; $10 c) 3; $90 d) 2; $220

c) 3; $90

Along a given demand curve, an increase in the price of a good will cause consumer surplus to: a) not change. b) cannot be determined without information about the supply curve. c) decrease. d) increase.

c) decrease

Along a given supply curve, an increase in the price of a good will: a) decrease producer surplus. b) increase consumer surplus. c) increase producer surplus. d) decrease producer surplus and increase consumer surplus.

c) increase producer surplus.

Total surplus is a) determined by the costs for each producer and the benefits for each consumer. b) equal to the area below the demand curve. c) the sum of consumer and producer surplus. d) the difference between price and the cost to the seller.

c) the sum of consumer and producer surplus.

Producer surplus for an individual seller is equal to: a) the marginal cost of the good minus the willingness to pay for the good. b) the willingness to pay for the good minus the price of the good. c) the marginal cost of the good minus the price of the good. d) the price of the good minus the marginal cost of producing the good.

d) the price of the good minus the marginal cost of producing the good.