Reference no: EM13188020

1.)David is willing to pay $5 for one bottle of Gatorade, $3 for the second bottle and $1 for the third bottle. If the price of each bottle of Gatorade is $2, what is David's consumer surplus from consuming Gatorade? (Assume Gatorade can be purchased in whole units only.)
a) $3
b) $4
c) $5
d) None of the above.
e) There is not enough information to answer the question.

2.)When a deadweight loss occus in a market, we can be certain that

taxes have been imposed in a market
the market is a monopoly
production is not at its optimal level
every individual in society experiences a loss
None of the above

3.)Suppose the government decides to place a tax on competitive business profits that would cause businesses to decrease output and generate a deadweight loss. Revenues from the tax would be redsitributed to low-income individuals. The decision to levy this tax implies

government values people but not business
government values efficiency more than its view of fairness
government profits from taxes
government values its view of fairness more than efficiency
None of the above

4.)If the marginal cost to society from the last unit produced is greater than the marginal benefit to society for that unit then

a) there is no deadweight loss.
b) the output level is efficient.
c) the level of output is inefficient and more should be produced.
d) the level of output is inefficient and less should be produced.
e) the level of output is inefficient but more information is needed to recommend a change in quantity produced.

5.)The demand curve for Product A is Qd=100-2P, and the price of Product A is $40. What is the amount of consumer surplus? (Assume Product A can be purchased in infinitely divisible units.)

a) $10
b) $60
c) $100
d) $200
e) None of the above

6.)A market is currently in equilibrium. Which of the following statements is CORRECT?

a) The own-price elasticity of demand for the product is unit elastic.
b) The own-price elasticity of demand for the product is elastic.
c) The Consumer Surplus and Producer Surplus are equal.
d) The Consumer Surplus is less than the Producer Surplus.
e) None of the above.

7.)The market for potato chips faces upward sloping and downward sloping demand curves. If this market experiences an increase in demand, which of the following statements is CORRECT?

a) There may be an increase in the consumer surplus.
b) There will be an increase in the producer surplus.
c) There will be an increase in the level of social welfare.
d) All of the above.

8.)A market with a perfectly elastic demand curve and upward sloping supply curve experiences a decrease in supply. Which of the following statements is CORRECT?

a) There will be a decrease in consumer surplus.
b) There will be an increase in consumer surplus.
c) The consumer surplus will not change.
d) The producer surplus will increase.
e) None of the above.
e) None of the above.