The conclusion that the level of output is efficient

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The conclusion that the level of output is efficient at the market equilibrium rests on all of the following assumptions EXCEPT that __________ .

A. buyers and sellers are well-informed

B. there are no external costs or benefits

C. the government regulates price and output

D. the market is perfectly competitive

Suppose that you are willing to pay $25 for a new shirt and the market price is $35. In this case __________ .

A. you will not buy the good

B. you will buy the good and receive a consumer surplus of $5

C. you will buy the good and receive a consumer surplus of -$10

D. you will buy the good and receive a consumer surplus of -$35

Jody's bakery makes cakes and would be willing to sell each cake for $12.50. If Jody's bakery sells 10 cakes for $13 each, the total producer surplus for Jody's bakery would be equal to __________ .

A. $5.00

B. $12.50

C. $125.00

D. $130.00

A ban on imported avocados would result in __________ .

 

A. an increase in total surplus because domestic production will increase

B. no change in total surplus because the reduction in consumer surplus will offset the increase in producer surplus

C. a reduction in total surplus because a deadweight loss is created

D. It is impossible to say what will happen to total surplus.

You would be willing to pay a maximum of $1,000 for an airplane ticket to London during the summer, and you can buy an airplane ticket for $890. Your consumer surplus is __________ .

A. $90

B. $190

C. $110

D. $100

If the government sets a maximum price for insulin below the equilibrium price, __________ .

A. there will be an efficient level of insulin produced

B. there will be excess supply of insulin

C. total surplus will be lower than it would be at the market equilibrium price

D. total surplus will be greater than it would be at the market equilibrium price

Assume that linen pants are a normal good and consumer income rises. If the supply of linen pants remains constant, producer surplus __________ .

A. will decrease

B. will increase

C. will remain constant

D. may increase or decrease depending on the amount of the price increase

Producer surplus is equal to __________ .

A. the area under the supply curve

B. the area above the supply curve below the good's price

C. the area under the supply curve below the good's price

D. the good's price times the quantity purchased

Tom would be willing to pay a maximum of $2,500 to attend the Super Bowl this year, and he can buy a ticket for $2,050. His consumer surplus is __________ .  

A. $25

B. $50

C. $275

D. $450

Assume that production costs rise and demand remains constant. The equilibrium price will __________ and the producer surplus will __________ .

A. increase; increase

B. increase; decrease

C. decrease; decrease

D. decrease; increase

If the market price of salmon is $8.99 per pound but the government will not allow salmon farmers to charge more than $4.99 per pound, which of the following will happen?

A. The supply curve for salmon will shift to the left.

B. There will be an excess demand for salmon.

C. There will be an excess supply of salmon.

D. The market will be in equilibrium at a price of $4.99.

Consumer surplus can be defined as the __________ .

A. value a consumer receives from a good minus the price paid for that good

B. maximum amount the consumer would pay for a good

C. actual amount paid for a good minus the benefit of using that good

D. marginal utility of a good divided by its price

 

If the equilibrium price of gasoline is $2.75 per gallon and the government will not allow oil companies to charge more than $2.00 per gallon, which of the following will happen?

A. Demand must eventually decrease so that the market will come into equilibrium at a price of $2.00.

B. Supply must eventually increase so that the market will come into equilibrium at a price of $2.00.

C. Total surplus in the market will be lower than it would be if the price was $2.75 per gallon.

D. The market will be in equilibrium at a price of $2.00.

At the free market equilibrium, the efficient level of output is produced because __________ .

A. government regulates the output level that must be produced

B. firms are maximizing profit

C. willingness to pay is the same for all consumers

D. total surplus is maximized

Mary has an old house built in 1950 that she would be willing to sell for $100,000. If someone offers to buy her house for $110,000, Mary's producer surplus would be equal to __________ .  

A. $5,000

B. $10,000

C. $55,000

D. $100,000

If the government imposes a maximum price for milk that is above the equilibrium price __________ .

A. this maximum price for milk will have no economic impact

B. quantity demanded of milk will be less than quantity supplied

C. demand for milk will be greater than supply

D. the available milk supply will have to be rationed

 

Assume that the supply of smartphones remains constant, but the price of smartphones increases. Producer surplus __________ .

A. will decrease

B. will increase

C. will remain constant

D. may increase or decrease depending on the amount of the price increase

Reference no: EM13936685

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