Professional Documents
Culture Documents
Efficiency QCM CH 0
Efficiency QCM CH 0
Efficiency QCM CH 0
1) Walmart has a limited number of day-after Thanksgiving Day special items on sale at prices well below their
typical price. Walmart opens at 5 AM. Walmart is using a ____ allocation method for these items.
A) first-come, first-served
B) market price
C) contest
D) majority rule
E) command
Answer: A
Topic: Allocation of resources
Skill: Level 3: Using models
Objective: Checkpoint 6.1
Author: MR
2) Honda will sell its vehicles to anyone who wants to and can buy one. Honda is using a ____ allocation
method.
A) first-come, first-served
B) market price
C) contest
D) majority rule
E) command
Answer: B
Topic: Allocation of resources
Skill: Level 2: Using definitions
Objective: Checkpoint 6.1
Author: MR
3) If a landlord will rent an apartment only to married couples, the landlord is using a ____ allocation method.
A) majority rule
B) market price
C) contest
D) personal characteristics
E) command
Answer: D
Topic: Allocation of resources
Skill: Level 2: Using definitions
Objective: Checkpoint 6.1
Author: MR
7) The principle of decreasing marginal benefit explains why the marginal benefit curve
A) is upward sloping.
B) has an infinite slope.
C) is vertical.
D) is downward sloping.
E) is horizontal.
Answer: D
Topic: Marginal benefit, a refresher
Skill: Level 2: Using definitions
Objective: Checkpoint 6.2
Author: PH
10) The marginal cost curves slope upward because of the principle of
A) decreasing marginal benefits.
B) increasing marginal cost.
C) increasing marginal benefits.
D) decreasing marginal cost.
E) decreasing total benefit.
Answer: B
Topic: Marginal cost, a refresher
Skill: Level 2: Using definitions
Objective: Checkpoint 6.2
Author: PH
11) As more of a good is consumed, marginal benefit ____ and as more of a good is produced, marginal cost
____.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) does not change; does not change
Answer: C
Topic: Marginal benefit versus marginal cost, a refresher
Skill: Level 2: Using definitions
Objective: Checkpoint 6.2
Author: WM
14) If the difference between the marginal benefit and the marginal cost of a good is as large as possible,
A) resources are being used with maximum efficiency.
B) resources would create more value producing other goods and hence the production of this good
should be decreased.
C) more of the good should be produced.
D) allocative efficiency has been attained.
E) Both answers A and D are correct.
Answer: C
Topic: Efficiency, a refresher
Skill: Level 2: Using definitions
Objective: Checkpoint 6.2
Author: SA
17) The figure above shows Kaley's marginal benefit from swimming with manatees and Scott's marginal cost of
providing manatee swimming tours. At 1 manatee swim per week, Kaley's marginal benefit is ____ and
Scott's marginal cost is ____.
A) $40; $10
B) $40; $40
C) $90; $50
D) None of the above answers is correct.
Answer: A
Topic: Efficiency, a refresher
Skill: Level 3: Using models
Objective: Checkpoint 6.2
Author: JC
18) The figure above shows Kaley's marginal benefit from swimming with manatees and Scott's marginal cost of
providing manatee swimming tours. If Scott offers two swim tours per week, he incurs a marginal cost of
A) more than $30.
B) $30.
C) $20.
D) $10.
E) $2
Answer: C
Topic: Efficiency, a refresher
Skill: Level 3: Using models
Objective: Checkpoint 6.2
Author: JC
19) The figure above shows Kaley's marginal benefit from swimming with manatees and Scott's marginal cost of
providing manatee swimming tours. For Kaley and Scott, allocative efficiency is achieved at what point?
A) A
B) B
C) C
D) D
E) Either point A or point D
Answer: C
Topic: Efficiency, a refresher
Skill: Level 3: Using models
Objective: Checkpoint 6.2
Author: JC
23) The maximum amount of other goods and services that people are willing to give up in order to get one
more unit of a good is defined as the good's
A) marginal benefit.
B) total benefit.
C) marginal cost.
D) total cost.
E) price.
Answer: A
Topic: Marginal benefit
Skill: Level 1: Definition
Objective: Checkpoint 6.2
Author: SA
29) The demand curve for Seattle Seahawk jerseys is the same as the marginal benefit curve of Seattle Seahawk
jerseys because demand represents
A) the minimum price we are willing to pay for a jersey.
B) the maximum price we are willing to pay for a jersey.
C) how many jerseys we want.
D) the marginal cost of each jersey.
E) the consumer surplus we get from the jerseys.
Answer: B
Topic: Demand curve and marginal benefit curve
Skill: Level 1: Definition
Objective: Checkpoint 6.2
Author: JC
30) The total benefit from buying a particular unit of a good
A) is the amount paid for the unit plus the consumer surplus of the unit.
B) increases as market price increases.
C) is the difference between the amount paid for the unit and the market price of the unit.
D) is the difference between the marginal benefit of the unit and the marginal cost of producing that unit.
E) None of the above answers is correct.
Answer: A
Topic: Total benefit
Skill: Level 2: Using definitions
Objective: Checkpoint 6.2
Author: SA
35) If a seller charges a buyer the exact price the buyer is willing to pay, then the buyer would
A) not buy the good.
B) receive the maximum consumer surplus.
C) receive no benefit from the good.
D) receive no consumer surplus from that unit of the good.
E) suffer a deadweight loss from buying the good.
Answer: D
Topic: Consumer surplus
Skill: Level 3: Using models
Objective: Checkpoint 6.2
Author: SA
36) In the figure above, for the 3,000th unit, the maximum price a consumer is willing to pay is
A) $5.
B) $10.
C) $15.
D) $0.
E) None of the above answers is correct.
Answer: B
Topic: Marginal benefit
Skill: Level 3: Using models
Objective: Checkpoint 6.2
Author: PH
37) In the figure above, at the market price of $15, the consumer surplus equals
A) $10,000.
B) $30,000.
C) $40,000.
D) 2,000 units
E) None of the above answers is correct.
Answer: A
Topic: Consumer surplus
Skill: Level 3: Using models
Objective: Checkpoint 6.2
Author: PH
38) The figure above shows Lauren's demand curve for Barbie dolls and the market price for Barbie dolls. Using
the area of the consumer surplus triangle, Lauren's total consumer surplus from purchasing 3 dolls is
A) $5.50.
B) $10.00.
C) $22.50.
D) $45.00.
E) 3 dolls
Answer: C
Topic: Consumer surplus
Skill: Level 3: Using models
Objective: Checkpoint 6.2
Author: JC
39) The figure above shows Lauren's demand curve for Barbie dolls and the market price for Barbie dolls. In
order for Lauren to avoid paying more for dolls than they are worth to her, she must not purchase any more
than
A) 0 dolls.
B) 1 doll.
C) 3 dolls.
D) 5 dolls.
E) 4 dolls.
Answer: C
Topic: Consumer surplus
Skill: Level 3: Using models
Objective: Checkpoint 6.2
Author: JC
40) In the figure above, suppose that $20 is the market equilibrium price. Which area is the consumer surplus?
A) A
B) B
C) A + B
D) B - A
E) B ÷ A.
Answer: A
Topic: Consumer surplus
Skill: Level 3: Using models
Objective: Checkpoint 6.2
Author: SA
41) In the figure above, suppose that $20 is the market equilibrium price. What is the amount of the consumer
surplus?
A) $3,375.
B) $3,000.
C) $375.
D) 150 units
E) $1,500.
Answer: C
Topic: Consumer surplus
Skill: Level 3: Using models
Objective: Checkpoint 6.2
Author: SA
42) To a seller, the cost of a good or service is ____ and the price is ____.
A) what must be given up to produce the good or service; what is received for the good or service
B) what is received for the good or service; what must be given up to produce the good or service
C) the producer surplus the seller receives; the consumer surplus the buyer receives
D) the producer surplus the buyer receives; the consumer surplus the seller receives
E) None of the above answers is correct.
Answer: A
Topic: Cost versus price
Skill: Level 1: Definition
Objective: Checkpoint 6.3
Author: JC
43) The additional cost a producer incurs from producing one more unit of a product is referred to as the
A) marginal benefit.
B) consumer surplus.
C) marginal utility.
D) marginal cost.
E) marginal profit.
Answer: D
Topic: Marginal cost
Skill: Level 1: Definition
Objective: Checkpoint 6.3
Author: PH
51) In the above figure, what is the marginal cost of the 8th pizza?
A) $1.50
B) $12
C) $6
D) $96
E) 8 pizzas
Answer: B
Topic: Supply curve and marginal cost curve
Skill: Level 3: Using models
Objective: Checkpoint 6.3
Author: PH
52) Producer surplus definitely exists when the
A) price exceeds marginal benefit.
B) price exceeds marginal cost.
C) marginal cost exceeds the price.
D) marginal benefit exceeds the price.
E) marginal benefit exceeds the marginal cost.
Answer: B
Topic: Producer surplus
Skill: Level 2: Using definitions
Objective: Checkpoint 6.3
Author: JC
53) When the price of a product exceeds the marginal cost of producing it, producers have a
A) consumer surplus.
B) producer surplus.
C) consumer shortage.
D) producer shortage.
E) deadweight surplus.
Answer: B
Topic: Producer surplus
Skill: Level 2: Using definitions
Objective: Checkpoint 6.3
Author: PH
54) The producer surplus is found by subtracting the ____ and then adding the difference for all units sold.
A) marginal cost from price
B) price from marginal cost
C) marginal benefit from total benefit
D) marginal cost from marginal benefit
E) deadweight loss from the price
Answer: B
Topic: Producer surplus
Skill: Level 2: Using definitions
Objective: Checkpoint 6.3
Author: WM
57) Bill and Krista sell potted plants from a roadside stand. The figure above shows their supply curve and the
market price. If Bill and Krista want to avoid selling plants for which the marginal cost exceeds the price,
they should sell no more than how many plants per week?
A) 0
B) 60
C) 90
D) 150
E) More information is needed to answer the question.
Answer: B
Topic: Producer surplus
Skill: Level 3: Using models
Objective: Checkpoint 6.3
Author: JC
58) In the figure above, the equilibrium market price is $20. $20 is the
A) marginal cost of 150th unit.
B) willingness to pay for the 1st unit.
C) producer surplus.
D) consumer surplus.
E) deadweight loss.
Answer: A
Topic: Marginal cost
Skill: Level 3: Using models
Objective: Checkpoint 6.3
Author: SA
59) In the figure above, the equilibrium market price is $20. Area A is the
A) marginal cost of 150th unit.
B) willingness to pay for the 150th unit.
C) producer surplus.
D) consumer surplus.
E) marginal benefit of 150th unit.
Answer: C
Topic: Producer surplus
Skill: Level 3: Using models
Objective: Checkpoint 6.3
Author: SA
60) In the figure above, the equilibrium market price is $20. The producer surplus is shown by the area
A) A.
B) B.
C) A + B.
D) A ÷ B.
E) A - B.
Answer: A
Topic: Producer surplus
Skill: Level 3: Using models
Objective: Checkpoint 6.3
Author: SA
61) In the figure above, the equilibrium market price is $20. The producer surplus equals
A) $20.
B) $1,500.
C) $3,000.
D) 150.
E) $4,500.
Answer: B
Topic: Producer surplus
Skill: Level 3: Using models
Objective: Checkpoint 6.3
Author: SA
65) At the market equilibrium, when efficiency is attained, the marginal benefit ____ the marginal cost.
A) is equal to
B) is greater than
C) is less than
D) has no necessary relationship with
E) is equal to the marginal deadweight loss which is equal to
Answer: A
Topic: Market efficiency
Skill: Level 1: Definition
Objective: Checkpoint 6.4
Author: PH
66) When efficiency is attained, the sum of the total amount of consumer surplus and producer surplus is
A) minimized.
B) maximized.
C) equal to the deadweight loss.
D) undefined.
E) equal to zero.
Answer: B
Topic: Market efficiency
Skill: Level 2: Using definitions
Objective: Checkpoint 6.4
Author: PH
67) The figure above represents the competitive market for slices of key lime pie. If the production is 40 slices per
day, someone is willing to buy another slice of pie for
A) more than it costs to produce the slice.
B) less than it costs to produce the slice.
C) an amount equal to the cost of producing the slice .
D) an amount equal to the cost of producing all 40 slices.
E) an amount that is not comparable to the cost of producing the slice.
Answer: A
Topic: Market efficiency
Skill: Level 3: Using models
Objective: Checkpoint 6.4
Author: JC
68) The figure above represents the competitive market for slices of key lime pie. If the production is 80 slices per
day, the cost of the 80th slice is
A) less than anyone is willing to pay for it.
B) more than anyone is willing to pay for it.
C) equal to what someone is willing to pay for it.
D) indetermine.
E) equal to the deadweight loss from the 80th slice.
Answer: B
Topic: Market efficiency
Skill: Level 3: Using models
Objective: Checkpoint 6.4
Author: JC
69) The figure above represents the competitive market for slices of key lime pie. When 60 slices are produced,
the marginal cost
A) exceeds the marginal benefit.
B) is less than the marginal benefit.
C) equals the marginal benefit.
D) is not defined.
E) equals the deadweight loss on the 60th slice.
Answer: C
Topic: Market efficiency
Skill: Level 3: Using models
Objective: Checkpoint 6.4
Author: JC
70) The figure above represents the competitive market for slices of key lime pie. When the price equals $3
A) there is a shortage of slices of pie.
B) there is a surplus of slices of pie.
C) the efficient quantity of slices is being produced.
D) the quantity produced is inefficient.
E) the deadweight loss is maximized.
Answer: C
Topic: Market efficiency
Skill: Level 3: Using models
Objective: Checkpoint 6.4
Author: JC
71) In the figure above, if the market price is $12, then the total consumer surplus is
A) $12.
B) $10.
C) minimized.
D) $240.
E) $480.
Answer: D
Topic: Consumer surplus
Skill: Level 4: Applying models
Objective: Checkpoint 6.4
Author: SA
72) In the figure above, if the market is at equilibrium, then the total consumer surplus equals the area ____ and
the total producer surplus equals the area ____.
A) A; B
B) B; C
C) C; B
D) A; C
E) A + B; C
Answer: A
Topic: Consumer surplus and producer surplus
Skill: Level 4: Applying models
Objective: Checkpoint 6.4
Author: SA
73) In the figure above, if the market is at equilibrium, the sum of the total consumer surplus and the total
producer surplus is
A) $240.
B) $600.
C) $1,000.
D) $0.
E) $60.
Answer: B
Topic: Total surplus
Skill: Level 5: Critical thinking
Objective: Checkpoint 6.4
Author: MR
74) In the figure above, suppose the market is at equilibrium. Then area A is the
A) marginal benefit.
B) marginal cost.
C) amount of the consumer surplus.
D) amount of the producer surplus.
E) deadweight loss.
Answer: C
Topic: Consumer surplus
Skill: Level 4: Applying models
Objective: Checkpoint 6.4
Author: PH
75) In the figure above, suppose the market is at equilibrium. Then area B is the
A) marginal benefit.
B) marginal cost.
C) amount of the consumer surplus.
D) amount of the producer surplus.
E) deadweight loss.
Answer: D
Topic: Producer surplus
Skill: Level 4: Applying models
Objective: Checkpoint 6.4
Author: PH
77) Adam Smith's Wealth of Nations, written in 1776, describes the market's invisible hand representing the
A) King of England's control over the colonies.
B) control all governments have in organizing the market.
C) efficiency the market achieves without the interference of governments.
D) inefficiency of markets when governments do not organize them.
E) invisible command system that efficiently allocates resources.
Answer: C
Topic: Invisible hand
Skill: Level 2: Using definitions
Objective: Checkpoint 6.4
Author: WM
78) The concept of "the invisible hand" suggests that to attain efficiency, the government should
A) guide economic activity.
B) set prices.
C) leave prices and output decisions to the competitive market.
D) regulate all production decisions, but not price decisions.
E) make sure that a command system is used to allocate resources.
Answer: C
Topic: Invisible hand
Skill: Level 2: Using definitions
Objective: Checkpoint 6.4
Author: JC
79) In a competitive market for a private good with no price or quantity regulations, no external cost nor
external benefit, low transactions costs, and no taxes or subsidies,
A) the allocation of resources is planned by the government.
B) production is organized by government organizations.
C) efficiency can be attained in the market with no government intervention.
D) efficiency is usually be achieved by majority rule.
E) efficiency is generally obtained by using a command system.
Answer: C
Topic: Invisible hand
Skill: Level 3: Using models
Objective: Checkpoint 6.4
Author: SA
81) When the cost of producing a product is paid, at least in part, by someone other than the producer, the cost is
referred to as
A) an external cost.
B) an external profit
C) an external benefit.
D) an external/internal cost.
E) a public cost.
Answer: A
Topic: External cost
Skill: Level 1: Definition
Objective: Checkpoint 6.4
Author: PH
82) A cost not borne by the producer but borne by other people is known as ____ cost.
A) a marginal
B) an internal
C) an external
D) a nonessential
E) a subsidized
Answer: C
Topic: External cost
Skill: Level 1: Definition
Objective: Checkpoint 6.4
Author: JC
83) Which of the following is an example of an external cost?
A) a grove of trees planted in a park in Seattle
B) a library built in Philadelphia
C) a new, faster computer chip
D) an oil spill off the coast of South America
E) a student graduating from college
Answer: D
Topic: External cost
Skill: Level 2: Using definitions
Objective: Checkpoint 6.4
Author: JC
84) When a product benefits people other than the buyer of the product, the product is said to have
A) an external cost.
B) an excludable cost.
C) an external benefit.
D) an excludable benefit.
E) a subsidized benefit.
Answer: C
Topic: External benefit
Skill: Level 1: Definition
Objective: Checkpoint 6.4
Author: PH
85) A benefit that accrues to people other than the buyer of a good is known as ____ benefit.
A) an internal
B) an external
C) a marginal
D) a total
E) a subsidized
Answer: B
Topic: External benefit
Skill: Level 1: Definition
Objective: Checkpoint 6.4
Author: JC
88) When people cannot be excluded from consuming a good, even if they have not paid for the good,
competitive markets would
A) produce more of the good than society needs.
B) allocate more resources than the efficient amount to the production of the good.
C) produce the good so that people could enjoy a "free ride."
D) produce less than the efficient quantity.
E) eliminate the deadweight loss.
Answer: D
Topic: Public good
Skill: Level 1: Definition
Objective: Checkpoint 6.4
Author: PH
89) A monopoly is
A) the single buyer of some good or service.
B) a firm that has control of a market because it is the only seller.
C) a firm that creates enormous external costs.
D) a firm that faces intense competition.
E) a cost of producing a good or service.
Answer: B
Topic: Monopoly
Skill: Level 1: Definition
Objective: Checkpoint 6.4
Author: JC
90) If one producer has control over an entire market and underproduces, the producer will
A) increase producer surplus by lowering pollution costs.
B) increase consumer surplus by lowering producer surplus.
C) increase both consumer and producer surplus.
D) create a deadweight loss.
E) decrease the deadweight loss that would exist if the market were efficient.
Answer: D
Topic: Monopoly
Skill: Level 1: Definition
Objective: Checkpoint 6.4
Author: WM
91) Deadweight loss is created when a market produces
A) either more or less than the efficient quantity.
B) more than the efficient quantity but not when less than the efficient quantity is produced.
C) less than the efficient quantity but not when more than the efficient quantity is produced.
D) the efficient quantity.
E) None of the above answers is correct because deadweight loss has nothing to do with the efficient
quantity.
Answer: A
Topic: Deadweight loss
Skill: Level 2: Using definitions
Objective: Checkpoint 6.4
Author: WM
92) The figure above shows the market for bell-bottom pants. If the efficient quantity is produced
A) there will be no consumer surplus.
B) the sum of consumer and producer surplus will be maximized.
C) a small deadweight loss will result.
D) the sum of consumer and producer surplus will be minimized.
E) the consumer surplus on all the pants must equal the producer surplus on all the pants.
Answer: B
Topic: Market efficiency
Skill: Level 4: Applying models
Objective: Checkpoint 6.4
Author: WM
93) The figure above shows the market for bell-bottom pants. If 6 million pairs of pants are produced the
deadweight loss is
A) zero.
B) the triangle ABE.
C) the triangle BCE.
D) the triangle ACE.
E) the triangle BCE minus the triangle ABE.
Answer: A
Topic: Deadweight loss
Skill: Level 4: Applying models
Objective: Checkpoint 6.4
Author: WM
94) The figure above shows the market for bell-bottom pants. If the production of the pants caused an external
cost from pollution that is the result of the dye used, then
A) 6 million pairs is the efficient quantity.
B) fewer than 6 million pairs is the efficient quantity.
C) more than 6 million pairs is the efficient quantity.
D) None of the above answers are necessarily correct because more information is needed about the size of
the external cost.
E) None of the above answers are correct because it is impossible to tell whether the external cost results
in underproduction or overproduction.
Answer: B
Topic: External cost
Skill: Level 4: Applying models
Objective: Checkpoint 6.4
Author: WM
95) The figure above shows the market for bell bottom pants. If the government subsidizes the production of
bell-bottom pants so that production expands from 6 million pairs to 7 million pairs,
A) there would be no deadweight loss.
B) the government's policy would have no effect on the sum of consumer surplus and producer surplus.
C) a deadweight loss would result.
D) the government's policy would increase the sum of consumer surplus and producer surplus.
E) production would be even more efficient than if 6 million pairs of pants are produced because more is
always better than less.
Answer: C
Topic: Subsidies
Skill: Level 3: Using models
Objective: Checkpoint 6.4
Author: WM
96) The idea that we should try to achieve the greatest happiness for the greatest number of people
A) is called "Utilitarianism."
B) was developed by Robert Nozick.
C) accounts for the tradeoff between efficiency and equity.
D) Both answers A and B are correct.
E) Both answers A and C are correct.
Answer: A
Topic: Utilitarianism
Skill: Level 1: Definition
Objective: Checkpoint 6.5
Author: SA
97) The principle that states that society should strive to achieve "the greatest happiness for the greatest number
of people" is referred to as
A) egalitarianism.
B) utilitarianism.
C) authoritarianism.
D) totalitarianism.
E) the big principle.
Answer: B
Topic: Utilitarianism
Skill: Level 1: Definition
Objective: Checkpoint 6.5
Author: PH
99) The idea of the "big tradeoff" points out the costs of
A) using a results approach to fairness when the rules approach is correct
B) transferring income under the idea of utilitarianism.
C) price hikes during natural disasters.
D) using a rules approach to fairness when the results approach is correct.
E) None of the above answers is correct.
Answer: B
Topic: Big tradeoff
Skill: Level 2: Using definitions
Objective: Checkpoint 6.5
Author: WM
100) When economists use the term "big tradeoff" when discussing efficiency they are referring to the tradeoff
between
A) external costs and external benefits.
B) marginal cost and marginal benefits.
C) producer surplus and consumer surplus.
D) efficiency and fairness.
E) deadweight loss and producer/consumer surplus
Answer: D
Topic: Big tradeoff
Skill: Level 1: Definition
Objective: Checkpoint 6.5
Author: PH
101) Which philosopher suggests that fairness should obey two rules: (1) private property must be protected; (2)
the exchange of private property should be voluntary?
A) John Rawls
B) Adam Smith
C) Robert Nozick
D) Babe Ruth
E) Bade Parkin
Answer: C
Topic: Robert Nozick
Skill: Level 2: Using definitions
Objective: Checkpoint 6.5
Author: SA
102) The figure above shows the market for brooms. If the market is efficient, ____
A) 0 brooms are produced.
B) 600 brooms are produced.
C) more than 1000 brooms are produced.
D) between 0 and 600 brooms are produced.
E) between 600 and 1000 brooms are produced.
Answer: B
Topic: Integrative
Skill: Level 3: Using models
Objective: Integrative
Author: CD
103) The figure above shows the market for brooms. If 800 brooms are produced,
A) consumer surplus is maximized.
B) producer surplus is maximized.
C) a deadweight loss occurs.
D) marginal cost is less than marginal benefit.
E) there is no deadweight loss.
Answer: C
Topic: Integrative
Skill: Level 3: Using models
Objective: Integrative
Author: CD
104) The figure above shows the market for brooms. If 800 brooms are produced,
A) marginal cost exceeds marginal benefit.
B) a deadweight loss does not occur because everyone who wants to buy a broom can.
C) the "big tradeoff" occurs.
D) value exceeds price.
E) the "fair results" approach to fairness is definitely not violated.
Answer: A
Topic: Integrative
Skill: Level 3: Using models
Objective: Integrative
Author: CD
105) The figure above shows the market for brooms. If 400 brooms are produced,
A) consumer surplus is maximized.
B) producer surplus is maximized.
C) a deadweight loss occurs.
D) marginal cost is greater than marginal benefit.
E) consumer surplus equals zero.
Answer: C
Topic: Integrative
Skill: Level 3: Using models
Objective: Integrative
Author: CD
106) The figure above shows the market for brooms. Which of the following could lead to the production of fewer
than 600 brooms?
A) a monopoly
B) a deadweight loss
C) subsidies
D) an external cost
E) a big tradeoff
Answer: A
Topic: Integrative
Skill: Level 3: Using models
Objective: Integrative
Author: CD
107) When marginal benefit exceeds marginal cost in a market,
A) only consumer surplus is reduced.
B) only producer surplus is reduced.
C) consumer surplus and producer surplus are not affected compared to when production is such that
marginal cost equals marginal benefit.
D) the deadweight loss is negative.
E) None of the above answers is correct.
Answer: E
Topic: Integrative
Skill: Level 3: Using models
Objective: Integrative
Author: CD
113) Suppose a market produces 5,000 tons of wheat. At this quantity, the marginal cost exceeds the marginal
benefit. This outcome could be the result of
A) a quantity regulation limiting the amount that can be produced.
B) a monopoly.
C) a subsidy.
D) an external benefit.
E) producing a public good.
Answer: C
Topic: Integrative
Skill: Level 3: Using models
Objective: Integrative
Author: CD