Chapter 5 Questions - lljd PDF

Preview

Summary

lljd...

Description

C h a p t e r

5

Topic: Marginal Benefit Skill: Conceptual

 Efficiency and Social Interest

3)

Which of the following are ways to express a marginal benefit? I. Marginal benefit is the benefit that a person receives from consuming one more unit of a good. II. The marginal benefit of a good is the amount of another good that people are willing to give up. A) Only I. B) Only II. C) Both I and II. D) Neither I nor II.

Topic: Marginal Benefit Skill: Recognition

1) A) B) C) D)

All of the following describe the concept of marginal benefit except the benefit that a person receives from consuming one more unit of a good or service. the maximum amount that a person is willing to pay for one more unit of a good or service. the opportunity cost of consuming one more unit of a good or service. the maximum amount of other goods and services that people are willing to give up to get one more unit of the good or service.

Answer: C

Answer: C

Topic: Marginal Benefit Skill: Conceptual

Topic: Marginal Benefit Skill: Recognition

2)

A) B) C) D)

EFFICIENCY AND EQUITY

4)

The maximum amount of other goods and services that people are willing to give up in order to get one more personal computer is the marginal cost of the personal computer. marginal benefit of the personal computer. marginal benefit of the other goods and services and the marginal cost of the personal computer. None of the above answers are correct.

A) B) C) D)

Answer: B

The principle of decreasing marginal benefit implies that the additional benefit from obtaining one more of a good or service decreases as more is consumed. additional benefit from obtaining one more of a good or service increases as more is consumed. total benefit from obtaining more of a good or service decreases as more is consumed. total benefit from obtaining more of a good or service remains the same as more is consumed.

Answer: A Topic: Marginal Benefit Skill: Conceptual

5) Marginal benefit is the A) opportunity cost of producing one more unit of a good and increases as production increases. B) opportunity cost of producing one more unit of a good and decreases as production increases. C) benefit from consuming one more unit of a good and increases as consumption increases. D) benefit from consuming one more unit of a good and decreases as consumption increases. Answer: D

145

146

CHAP T ER 5

Topic: Marginal Cost Skill: Conceptual

Topic: Efficiency And Inefficiency Skill: Conceptual

6) Marginal cost is the A) opportunity cost of producing one more unit of a good and increases as production increases. B) opportunity cost of producing one more unit of a good and decreases as production increases. C) benefit from consuming one more unit of a good and increases as consumption increases. D) benefit from consuming one more unit of a good and decreases as consumption increases.

10) An efficient allocation of resources occurs when we A) produce the goods and services that people need. B) cannot produce more of a good or service without giving up some other good or service that we value more highly. C) produce the goods and services that people want. D) cannot produce more of a good or service without giving up some other good or service that we need.

Answer: A Topic: Marginal Cost Skill: Conceptual

7) A) B) C) D)

Consider the market for soft drinks. If we produce one more bottle of soft drinks, we cannot be acting efficiently. we incur a marginal cost. we must move away from market equilibrium. the price of soft drinks must rise.

Answer: B Topic: Marginal Cost Skill: Conceptual

8) A) B) C) D)

All of the following describe the concept of marginal cost except the opportunity cost of producing one more unit of a good or service. the maximum amount that a person is willing to pay for one more unit of a good or service. the value of the best alternative forgone. the dollar value of other goods and services that must be forgone to consume one more unit of a good or service.

Answer: B Topic: Efficiency And Inefficiency Skill: Conceptual

11) Allocative efficiency occurs when the quantity produced is such that the A) marginal cost is greater than marginal benefit. B) marginal benefit is greater than marginal cost. C) marginal cost equals marginal benefit. D) None of the above answers are correct. Answer: C Topic: Efficiency And Inefficiency Skill: Conceptual

12) An outcome is efficient if A) the marginal benefit of the last unit is equal to marginal cost. B) the marginal benefit of the last unit exceeds marginal cost. C) the marginal benefit is less than the marginal cost. D) the total benefit is equal to the marginal cost.

Answer: B

Answer: A

Topic: Marginal Cost Skill: Conceptual

Topic: Efficiency And Inefficiency Skill: Conceptual

9)

13) Resource use is efficient if A) the goods and services people value most highly are produced. B) it is not possible to produce more of a good without giving up production of a good which is more highly valued. C) the marginal social benefit is equal to the marginal social cost of the last unit produced. D) All of the above answers are correct.

A) B) C) D)

The principle of increasing marginal cost implies that the total cost from producing more of a good or service decreases as more is produced. total cost of producing more of a good or service remains the same as more is produced. additional cost of producing one more of a good or service decreases as more is produced. additional cost of producing one more of a good or service increases as more is produced.

Answer: D

Answer: D

EFFICIENCY AND EQUIT Y

Topic: Efficiency And Inefficiency Skill: Conceptual*

14) Allocative efficiency occurs when it is A) possible to produce more of one good without giving up the production of some other good. B) possible to produce more of all goods. C) not possible to produce more of one good without giving up the production of some other good that is valued less highly. D) not possible to produce more of one good without giving up the production of some other good that is valued more highly. Answer: D Topic: Efficiency And Inefficiency Skill: Conceptual*

15) Allocative efficiency occurs when A) marginal social cost exceeds marginal social benefit. B) marginal social benefit exceeds marginal social cost. C) marginal social benefit equals marginal social cost. D) total social benefit exceeds total social cost. Answer: C Topic: Efficiency And Inefficiency Skill: Conceptual*

16) If the marginal benefit of pizza exceeds the marginal cost of pizza, then compared to the allocatively efficient quantity, we are producing too ____ pizza and too ____ of other goods. A) much; little B) much; much C) little; little D) little; much Answer: D Topic: Efficiency And Inefficiency Skill: Conceptual*

17) If the marginal cost of sandwiches exceeds the marginal benefit of sandwiches, then compared to the allocatively efficient quantity we are producing too ____ sandwiches and too ____ of other goods. A) much; little B) much; much C) little; little D) little; much Answer: A

147

 Value, Price, and Consumer Surplus Topic: Value, Willingness to Pay, and Demand Skill: Recognition

18) By “value,” we mean the A) amount that people are willing to pay for a good. B) price that people must pay for a good. C) opportunity cost of the good. D) price that producers receive for the good. Answer: A Topic: Value, Willingness to Pay, and Demand Skill: Conceptual

19) The relative price of a good I. shows the number of dollars’ worth of other goods and services that must be given up to obtain one more unit of the good. II. is the same value as the money price. A) I only. B) II only. C) I and II. D) Neither I nor II. Answer: A Topic: Value, Willingness to Pay, and Demand Skill: Conceptual

20) A demand curve measures A) how much people are willing to pay for an additional unit of the good. B) the marginal benefit of an additional unit of the good. C) the marginal cost of an additional unit of the good. D) Both answers A and B are correct. Answer: D Topic: Value, Willingness to Pay, and Demand Skill: Conceptual*

21) The demand curve for CDs shows the A) minimum price that consumers are willing to pay if a given quantity of CDs is available. B) maximum price that consumers are willing to pay if a given quantity of CDs is available. C) maximum price that producers must be offered to get them to produce a given quantity of CDs. D) minimum price that producers must be offered to get them to produce a given quantity of CDs. Answer: B

148

CHAP T ER 5

Topic: Marginal Benefit and Demand Skill: Conceptual

Topic: Marginal Benefit and Demand Skill: Recognition

22) Marginal benefit A) is the total benefit a consumer receives from consuming an assortment of goods and services. B) is the additional cost to a consumer of consuming another unit of good and, hence, is equal to supply. C) increases with increased consumption of a good and, hence, is depicted by an upward sloping curve. D) reflects the maximum willingness to pay for another unit of a good and, hence, is the same as the demand curve.

26) The demand curve also is A) a marginal cost curve. B) a marginal benefit curve. C) an opportunity cost curve. D) a consumer surplus curve.

Answer: D Topic: Marginal Benefit Skill: Recognition

23) Marginal benefit A) is the same as the total benefit received from consuming a good. B) is the maximum amount a person is willing to pay for one more unit of a good. C) increases as consumption increases. D) is the difference between total benefit and total cost. Answer: B Topic: Marginal Benefit and Demand Skill: Conceptual

24) The demand curve A) can also be the marginal cost curve. B) shows the value of a good that consumers must give up to get another unit of a different good. C) shows equilibrium prices. D) can also be the marginal benefit curve. Answer: D Topic: Marginal Benefit and Demand Skill: Conceptual*

25) A demand curve can be also A) a marginal cost curve. B) an opportunity cost curve. C) a marginal benefit curve. D) a minimum-demand-price curve. Answer: C

Answer: B Topic: Marginal Benefit and Demand Skill: Recognition

27) The demand curve for coffee is the same as the A) marginal cost curve of coffee. B) marginal benefit curve of coffee. C) opportunity cost curve of coffee. D) marginal benefit curve minus the marginal cost curve of coffee. Answer: B Topic: Consumer Surplus Skill: Recognition

28) Consumer surplus is the A) difference between the marginal benefit and the marginal cost. B) number of dollars’ worth of other goods and services forgone to obtain one more unit of a good or service. C) difference between the value of a good or service and the price paid for the good or service. D) difference between the total value of a good or service and the marginal cost. Answer: C Topic: Consumer Surplus Skill: Recognition

29) ____ is the difference between the value of a good and the price paid for it summed over the quantity bought. A) Producer surplus B) Consumer surplus C) Surplus D) Shortage Answer: B

EFFICIENCY AND EQUIT Y

149

Topic: Consumer Surplus Skill: Recognition

Topic: Consumer Surplus Skill: Analytic

30) Consumer surplus is the A) value of a good expressed in dollars. B) price of a good expressed in dollars. C) value of a good minus the price paid for it summed over the quantity bought. D) value of a good plus the price paid for it summed over the quantity bought.

33) Joe is willing to pay $4 for his first slice of pizza and $3 for his second slice of pizza. If the market price is $2, on his two slices of pizza Joe receives a total consumer surplus of A) $4. B) $3. C) $2. D) $1.

Answer: C Topic: Consumer Surplus Skill: Conceptual

31) Joe receives consumer surplus on the new computer he buys if A) the price of the computer is marked down by 25 percent. B) the price of the computer is equal to his willingness to pay for the computer. C) the price of the computer is less than the marginal benefit he receives from buying the computer. D) he pays for the computer with money he earned from the stock market. Answer: C Topic: Consumer Surplus Skill: Analytic

32) When the Smith’s were shopping for their present home, the asking price from the previous owner was $250,000.00. The Smith’s had decided they would pay no more than $245,000.00 for the house. After negotiations, the Smith’s actually purchased the house for $239,000.00. They, therefore, enjoyed consumer surplus of A) $239,000.00 B) $5,000.00 C) $6,000.00 D) $11,000.00 Answer: C

Answer: B Topic: Consumer Surplus Skill: Analytic

34) The latest model car in the dealer’s showroom has a sticker price of $35,000.00. Fred, the shopper, has decided that he would pay no more than $32,000.00 for the car. After two hours of bargaining with the saleswoman, Fred actually purchases the car for $31,000.00. Fred, therefore, has obtained a consumer surplus of A) $35,000.00 B) $32,000.00 C) $4,000.00 D) $1,000.00 Answer: D Topic: Consumer Surplus Skill: Analytic

35) The three-year old truck on the used car lot had a price tag of $21,000.00. Edna said to herself, “It’s nice, but if I had to pay more than $19,500 for this truck, then I would rather do without it.” Lucky Edna. She managed to bargain the dealer down to $19,250.00 and drove away happily, savoring her consumer surplus of A) $21,000.00. B) $19,500.00. C) $19,250.00. D) $250.00. Answer: D Topic: Consumer Surplus Skill: Analytic

36) If the market price of a new CD is $10, but Clara values the CD at $20, Clara A) will not buy the CD. B) receives $10 of producer surplus. C) receives $20 of consumer surplus. D) None of the above answers is correct. Answer: C

150

CHAP T ER 5

Topic: Consumer Surplus Skill: Conceptual

37) Suppose that Charlene is willing to pay $5.00 for a sandwich. If Charlene must pay ____ for a sandwich, she ____. A) $4.00; does not receive consumer surplus B) $4.00; receives consumer surplus C) $6.00; receives consumer surplus D) $6.00; receives a marginal cost Answer: B Topic: Consumer Surplus Skill: Recognition

38) Which of the following is the best definition of consumer surplus? A) The difference between the value of the good and the price paid for it summed over the quantity bought. B) The difference between the value of the good and the opportunity cost of producing it summed over the quantity bought. C) The difference between the price paid for the good and the opportunity cost of producing it summed over the quantity bought. D) The difference between the highest and lowest prices paid by any pair of customers within a specified period of time. Answer: A Topic: Consumer Surplus Skill: Analytical

39) Stefano has just completed an original oil painting. After considering the production costs for brushes, paint, canvas, and the value of Stefano’s labor time, the opportunity cost of the painting is $1,000. Lucky Stefano. One art lover paid him $1,500. How much consumer surplus did that art lover obtain? A) The amount of consumer surplus cannot be determined from the information given. B) $1,500 C) $500 D) Zero Answer: A

Topic: Marginal Benefit Skill: Analytical

40) In the above figure, the marginal benefit of the 4 millionth gallon of milk is A) $2.00. B) $1.50. C) $1.25. D) $1.00. Answer: B Topic: Consumer Surplus Skill: Analytical

41) In the above figure, what is the consumer surplus from the 4 millionth gallon of milk if the price of milk is $1.00 per gallon? A) $1.50 B) $1.00 C) $0.50 D) $0.00 Answer: C Topic: Consumer Surplus Skill: Analytical

42) In the above figure, what is the total consumer surplus from all the milk bought if the price of milk is $1.50 per gallon? A) $8 million B) $6 million C) $2 million D) $1 million Answer: C

EFFICIENCY AND EQUIT Y

151

 Cost, Price, and Producer Surplus Topic: Marginal Cost Skill: Conceptual

46) Consider the market for pizza. The ____ curve shows how much people ____ give up to get another pizza. A) demand; must B) supply; must C) supply; are willing D) Both answers A and C are correct. Answer: B Topic: Marginal Cost Skill: Conceptual

Topic: Marginal Benefit Skill: Recognition

43) In the figure above, for each CD the price a consumer is willing to pay is equal to the A) economy’s marginal cost of producing that CD. B) consumer’s own marginal benefit from consuming that CD. C) consumer’s total consumer surplus. D) Both answers A and B are correct. Answer: B Topic: Marginal Benefit Skill: Analytical

44) In the figure above, what is the marginal benefit of the 3,000,000th CD per month? A) $11.00 B) $8.00 C) $6.00 D) None of the above answers are correct. Answer: C Topic: Consumer Surplus Skill: Analytical

45) In the figure above, when the price of a CD is $8.00 per CD, total consumer surplus on all the CDs bought will be A) greater than $30 million. B) less than at any other price. C) $20 million. D) less than $15 million. Answer: C

47) Which of the following statements about supply curves is correct? I. A supply curve also can be a marginal cost curve. II. A supply curve tells the quantity of other goods and services that sellers must give up to produce another unit of the good. A) I only. B) II only. C) Both I and II. D) Neither I nor II. Answer: C Topic: Supply Curve Skill: Conceptual*

48) The supply curve for CDs shows the A) minimum price that consumers are willing to pay if a given quantity of CDs is available. B) maximum price that consumers are willing to pay if a given quantity of CDs is available. C) maximum price that producers must be offered to get them to produce a given quantity of CDs. D) minimum price that producers must be offered to get them to produce a given quantity of CDs. Answer: D Topic: Supply Curve Skill: Conceptual*

49) A supply curve is also a A) marginal cost curve. B) marginal value curve. C) marginal benefit curve. D) maximum-supply-price curve. Answer: A

152

CHAP T ER 5

Topic: Producer Surplus Skill: Recognition

Topic: Producer Surplus Skill: Recognition

50) Which of the following is the best definition of producer surplus? A) The difference between the price a firm actually received and the minimum price the firm would have accepted. B) The difference between the price a firm received and the lowest price received by its competitors. C) The difference between the price a firm received and the amount consumers were willing to pay. D) The difference between the highest and lowest prices received by any pair of producers within a specified period of time.

53) Which of the following is the definition of producer surplus? A) The difference between the price of a good and the opportunity cost of producing it summed over the quantity sold. B) The difference between the price of a good and the lower price received by a competitor. C) The difference between the marginal benefit of the good and its marginal cost summed over the quantity sold. D) The difference between the marginal cost of the good and its opportunity cost of production summed over the quantity sold.

Answer: A Topic: Producer Surplus Skill: Recognition

51) Producer surplus is the A) cost of ...