Q&A Hero

Q: When a competitive equilibrium is achieved in a market A) all individuals are better off than they would be if a price ceiling or price floor was imposed by government. B) the total net benefit to society is maximized. C) the total benefits to consumers are equal to the total benefits to producers. D) economic surplus equals the deadweight loss.

Q: The graph below represents the market for lychee nuts. The equilibrium price is $7.00 per bushel, but the market price is $5.00 per bushel. Identify the areas representing consumer surplus, producer surplus, and deadweight loss at the equilibrium price of $7.00 and at the market price of $5.00.

Q: The graph below represents the market for walnuts. Identify the values of the marginal benefit and the marginal cost at the output levels of 2,000 pounds, 4,000 pounds and 6,000 pounds. At each of these output levels, state whether output is inefficiently high, inefficiently low, or economically efficient.

Q: Will equilibrium in a market always result in an outcome that is economically efficient? Explain.

Q: What is economic surplus? When is economic surplus at a maximum?

Q: The sum of consumer surplus and producer surplus is called economic surplus.

Q: If the market price is at equilibrium, the producer surplus is minimized.

Q: If the market price is at equilibrium, the deadweight loss is maximized.

Q: Deadweight loss refers to the reduction in economic surplus resulting from a market not being in competitive equilibrium.

Q: If marginal benefit is greater than marginal cost, output is inefficiently high.

Q: Economic efficiency is a market outcome in which the marginal benefit of consumers is equal to the marginal cost of production and the sum of consumer surplus and producer surplus is maximized.

Q: If there is a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and consumer surplus plus producer surplus is maximized, then A) maximum deadweight loss occurs. B) economic efficiency is achieved. C) profits are maximized. D) costs are minimized.

Q: If equilibrium is achieved in a competitive market A) there is no deadweight loss. B) the deadweight loss will be maximized. C) the deadweight loss will equal the sum of consumer surplus and producer surplus. D) the deadweight loss will be the same as the opportunity cost of the last unit of output sold.

Q: Figure 4-4 Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. Which of the following is true? A) If the price of pecans is $3 the output will be economically efficient but there will be a deadweight loss. B) If the price of pecans is $9 consumers will purchase more than the economically efficient output. C) Both 4,000 pounds and 12,000 pounds are economically inefficient rates of output. D) If the price of pecans is $3 producers will sell 12,000 pounds of pecans but this output will be economically inefficient.

Q: Figure 4-4 Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. If 4,000 pounds of pecans are sold A) the deadweight loss is equal to $12,000. B) consumer surplus equals zero. C) the marginal benefit of each of the 4,000 pounds of pecans equals $3. D) marginal benefit is equal to marginal cost.

Q: Figure 4-4 Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. If 8,000 pounds of pecans are sold A) the deadweight loss is equal to economic surplus. B) producer surplus equals consumer surplus. C) the marginal benefit of each of the 8,000 pounds of pecans equals $9. D) marginal benefit is equal to marginal cost.

Q: Figure 4-4 Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. If the price of pecans is $9, what changes in the market would result in an economically efficient output? A) The price would decrease, the quantity supplied would decrease, and the quantity demanded would increase. B) The quantity supplied would increase, the quantity demanded would decrease and the equilibrium price would decrease. C) The price would decrease, the demand would increase and the supply would decrease. D) The price would increase, the quantity demanded would decrease and the quantity supplied would increase.

Q: Figure 4-4 Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. If the price of pecans is $3, what changes in the market would result in an economically efficient output? A) The price would increase, the quantity supplied would decrease, and the quantity demanded would increase. B) The quantity supplied would increase, the quantity demanded would decrease and the equilibrium price would increase. C) The price would increase, the demand would decrease and the supply would increase. D) The price would increase, the quantity demanded would decrease and the quantity supplied would increase.

Q: Figure 4-4 Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. If the price of pecans is $9 A) economic surplus is maximized. B) too many consumers want to buy pecans. C) the quantity supplied is greater than the economically efficient quantity. D) the quantity demanded is economically efficient but the quantity supplied is economically inefficient.

Q: Figure 4-4 Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. If the price of pecans is $3 A) economic surplus is maximized. B) not enough consumers want to buy pecans. C) the quantity supplied is less than the economically efficient quantity. D) the quantity supplied is economically efficient but the quantity demanded is economically inefficient.

Q: Figure 4-4 Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. At a price of $3 A) the marginal cost of pecans is greater than the marginal benefit; therefore, output is inefficiently low. B) producers should raise the price to $9 in order to sell the quantity demanded of 12,000. C) the marginal benefit of pecans is greater than the marginal cost; therefore, output is inefficiently high. D) the marginal benefit of pecans is greater than the marginal cost; therefore, output is inefficiently low.

Q: Figure 4-4 Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. At a price of $9 A) the marginal cost of pecans is greater than the marginal benefit; therefore, output is inefficiently low. B) producers should lower the price to $3 in order to sell the quantity demanded of 4,000. C) the marginal benefit of pecans is greater than the marginal cost; therefore, output is inefficiently high. D) the marginal benefit of pecans is greater than the marginal cost; therefore, output is inefficiently low.

Q: In a competitive market the demand curve shows the ________ received by consumers and the supply curve shows the ________. A) utility; average cost. B) marginal benefit; marginal cost C) economic surplus; opportunity cost D) net benefit; net cost

Q: If, in a competitive market, marginal benefit is less than marginal cost A) the net benefit to consumers from participating in the market is less than the net benefit to producers. B) the government must force producers to raise prices in order to achieve economic efficiency. C) the quantity sold is greater than the equilibrium quantity. D) the quantity sold is less than the equilibrium quantity.

Q: Economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production, and in which A) the sum of consumer surplus and producer surplus is at a maximum. B) economic surplus is minimized. C) the sum of the benefits to firms is equal to the sum of the benefits to consumers. D) the sum of consumer surplus and producer surplus is minimized.

Q: ________ is maximized in a competitive market when marginal benefit equals marginal cost. A) Deadweight loss B) Marginal profit C) Economic surplus D) Selling price

Q: Economic surplus A) does not exist when a competitive market is in equilibrium. B) is equal to the sum of consumer surplus and producer surplus. C) is the difference between quantity demanded and quantity supplied when the market price for a product is greater than the equilibrium price. D) is equal to the difference between consumer surplus and producer surplus.

Q: ________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium. A) Marginal cost B) Producer atrophy C) Deadweight loss D) Economic shortage

Q: Figure 4-3 Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40in order to raise the price to $18. Refer to Figure 4-3. At the equilibrium price of $15 consumers are willing to buy 80pounds of tiger shrimp. Is this an economically efficient quantity? A) No, the marginal benefit of the 80th unit exceeds the marginal cost of the 80th unit. B) Yes, because marginal cost is zero at the 80th unit. C) Yes, because $15 is the price where the marginal benefit is equal to the marginal cost. D) No, the marginal cost of the 80th unit exceeds the marginal benefit of the 80th unit.

Q: Figure 4-3 Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40in order to raise the price to $18. Refer to Figure 4-3. What is the value of the deadweight loss at the equilibrium price of $15? A) $0 B) $40 C) $60 D) $100

Q: Figure 4-3 Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40in order to raise the price to $18. Refer to Figure 4-3. What is the value of producer surplus at the equilibrium price of $15? A) $80 B) $160 C) $240 D) $400

Q: Figure 4-3 Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40in order to raise the price to $18. Refer to Figure 4-3. What is the value of consumer surplus at the equilibrium price of $15? A) $60 B) $120 C) $180 D) $240

Q: Figure 4-3 Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40in order to raise the price to $18. Refer to Figure 4-3. At a price of $18 consumers are willing to buy 40pounds of tiger shrimp. Is this an economically efficient quantity? A) No, the marginal benefit of the 40th unit exceeds the marginal cost of that 80th unit. B) Yes, otherwise consumers would not buy 40 units. C) Yes, because $18 shows what consumers are willing to pay for the product. D) No, the marginal cost of the 40th unit exceeds the marginal benefit of the 40th unit.

Q: Figure 4-3 Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40in order to raise the price to $18. Refer to Figure 4-3. What is the value of the deadweight loss at a price of $18? A) $100 B) $180 C) $660 D) $1,040

Q: Figure 4-3 Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40in order to raise the price to $18. Refer to Figure 4-3. What is the value of producer surplus at a price of $18? A) $240 B) $300 C) $340 D) $720

Q: Figure 4-3 Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40in order to raise the price to $18. Refer to Figure 4-3. What is the value of consumer surplus at a price of $18? A) $60 B) $120 C) $180 D) $240

Q: Economic efficiency in a competitive market is achieved when A) economic surplus is equal to consumer surplus. B) consumers and producers are satisfied. C) the marginal benefit equals the marginal cost from the last unit sold. D) producer surplus equals the total amount firms receive from consumers minus the cost of production.

Q: In a competitive market equilibrium A) total consumer surplus equals total producer surplus. B) marginal benefit and marginal cost are maximized. C) consumers and producers benefit equally. D) the marginal benefit equals the marginal cost of the last unit sold.

Q: The marginal cost for Java Joe's to produce its first cup of coffee is $0.75. Its marginal cost to produce its second cup of coffee is $1.25. Its marginal cost increases by $0.50 for each additional cup of coffee it produces. Suppose the market price for coffee is $2.25. Construct a graph showing the producer surplus for each cup of coffee Java Joe's will sell. How many cups of coffee will Java Joe's sell? What is the value of the producer surplus Java Joe's receives for each cup of coffee it sells?

Q: Assume the market price for lemon grass is $4.00 per pound, but most buyers are willing to pay more than the market price. At the market price of $4.00, the quantity of lemon grass demanded is 1,500 pounds per month, and quantity demanded does not reach zero until the price reaches $30.00 per pound. Construct a graph showing this data, calculate the total consumer surplus in the market for lemon grass, and show the consumer surplus on the graph.

Q: What area on a supply and demand graph represents consumer surplus?

Q: What is marginal benefit? Which curve is also referred to as a marginal benefit curve?

Q: What is producer surplus? What does producer surplus measure?

Q: Marginal benefit is the total benefit to a consumer from consuming one more unit of a good or service.

Q: Marginal cost is the additional cost to a firm of producing one more unit of a good or service.

Q: The total amount of producer surplus in a market is equal to the area below the supply curve.

Q: The total amount of consumer surplus in a market is equal to the area below the demand curve.

Q: Producer surplus is the difference between the lowest price a firm is willing to accept for a product and the price it actually receives for the product.

Q: Consumer surplus is the difference between the highest price someone is willing to pay for a product and the price he actually pays for the product.

Q: Two economists from Northwestern University estimated the benefit households received from subscribing to broadband Internet service. The economists found that A) the consumer surplus from dial-up Internet service exceeded the consumer surplus from broadband Internet service. B) the average consumer of broadband Internet service received a marginal benefit equal to $36. C) most consumers of broadband Internet service were not willing to pay more than $36 per month. D) one month's benefit to consumers who subscribe to broadband Internet service is about $890 million.

Q: Figure 4-2 Refer to Figure 4-2. What area represents the increase in producer surplus when the market price rises from P1to P2? A) B + D B) A + C + E C) C + E D) A + B

Q: Figure 4-2 Refer to Figure 4-2. What area represents producer surplus at a price of P2? A) A + B B) B + D C) A + B + C D) A + B + C + D + E

Q: The difference between the ________ and the ________ from the sale of a product is called producer surplus. A) lowest price a firm would have been willing to accept; price it actually receives B) highest price a firm wold have been willing to accept; lowest price it was willing to accept C) cost to produce a product; price a firm actually receives D) cost to produce a product; profit received

Q: Suppliers will be willing to supply a product only if A) the price received is less than the additional cost of producing the product. B) the price received is at least equal to the additional cost of producing the product. C) the price is higher than the average cost of producing the product. D) the price received is at least double the additional cost of producing the product.

Q: Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. If the market price is $3.00, what is the maximum number of burritos that Arnold will buy? A) 0 B) 2 C) 3 D) 4

Q: Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. If the market price is $1.00, what is the maximum number of burritos that Arnold will buy? A) 1 B) 2 C) 3 D) 4

Q: Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. What is the total amount that Arnold is willing to pay for 4 burritos? A) $1.00 B) $4.00 C) $7.00 D) $10.00

Q: Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. What is the total amount that Arnold is willing to pay for 3 burritos? A) $1.50 B) $6.00 C) $7.00 D) $10.00

Q: Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. What is the total amount that Arnold is willing to pay for 2 burritos? A) $2.00 B) $4.50 C) $7.50 D) $10.00

Q: Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. If the market price is $2.00, what is Arnold's consumer surplus? A) $0.50 B) $1.00 C) $1.50 D) $3.00

Q: Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. If the market price is $2.00, what is the consumer surplus on the second burrito? A) $0 B) $1.00 C) $2.00 D) $4.50

Q: Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. If the market price is $2.00, what is the consumer surplus on the first burrito? A) $0.50 B) $1.00 C) $2.00 D) $7.50

Q: Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. If the market price is $1.50, what is Arnold's consumer surplus? A) $1.50 B) $2.25 C) $3.00 D) $4.75

Q: Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. If the market price is $1.50, what is the consumer surplus on the second burrito? A) $0.50 B) $1.00 C) $1.50 D) $3.50

Q: Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. If the market price is $1.50, what is the consumer surplus on the first burrito? A) $0.50 B) $1.00 C) $1.50 D) $7.50

Q: Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. If the market price is $1.00, what is Arnold's consumer surplus? A) $1.00 B) $2.00 C) $6.00 D) $7.00

Q: Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. If the market price is $1.00, what is the consumer surplus on the fourth burrito? A) $0 B) $0.50 C) $1.50 D) $2.25

Q: Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. If the market price is $1.00, what is the consumer surplus on the third burrito? A) $0.50 B) $1.00 C) $1.50 D) $7.50

Q: Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. Arnold's marginal benefit from consuming the fourth burrito is A) $0. B) $1.00. C) $2.50. D) $3.00.

Q: Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. Arnold's marginal benefit from consuming the second burrito is A) $1.00. B) $1.50. C) $2.00. D) $4.50.

Q: Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. Refer to Figure 4-1. Arnold's marginal benefit from consuming the third burrito is A) $1.25. B) $1.50. C) $2.50. D) $6.00.

Q: A demand curve shows A) the willingness of consumers to buy a product at different prices. B) the willingness of consumers to substitute one product for another product. C) the relationship between the price of a product and the demand for the product. D) the relationship between the price of a product and the total benefit consumers receive from the product.

Q: A ________ curve shows the marginal cost of producing one more unit of a good or service. A) demand B) supply C) production possibilities D) marginal benefit

Q: Which of the following statements is true? A) Consumer surplus measures the total benefit from participating in a market. B) When a market is in equilibrium consumer surplus equals producer surplus. C) Consumer surplus measures the net benefit from participating in a market. D) Producer surplus measures the total benefit received by producers from participating in a market.

Q: Consumer surplus in a market for a product would be equal to ________ if the market price was zero. A) zero B) the area between the supply curve and the demand curve C) the area above the supply curve D) the area under the demand curve

Q: The total amount of producer surplus in a market is equal to A) the difference between quantity supplied and quantity demanded. B) the area above the market supply curve and below the market price. C) the area above the market supply curve. D) the area between the demand curve and the supply curve below the market price.

Q: The area ________ the market supply curve and ________ the market price is equal to the total amount of producer surplus in a market. A) above; above B) above; below C) below; above D) below; below

Q: Table 4-3The Waco Kid's Cowboy HatsMarginal Cost (dollars)1st hat$242nd hat303rd hat384th hat46Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the price of cowboy hats decreases from $38 to $30A) consumer surplus will rise by $6.B) the marginal cost of producing the third cowboy hat will fall to $30.C) producer surplus will fall from $22 to $6.D) producer surplus will rise from $8 to $24.

Q: Table 4-3The Waco Kid's Cowboy HatsMarginal Cost (dollars)1st hat$242nd hat303rd hat384th hat46Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of cowboy hats is $50, producer surplus isA) $0.B) $4.C) $62.D) $138.

Q: Table 4-3The Waco Kid's Cowboy HatsMarginal Cost (dollars)1st hat$242nd hat303rd hat384th hat46Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco Kid, a firm that specializes in producing western wear. If the market price of cowboy hats is $50, how many hats will be produced?A) 0B) 1C) 2D) 4