Q: If the market price of ice-cream is $$4$$ and the market demand function is $$Q_d = -2P + 18$$, what is the total consumer surplus if the equilibrium quantity is $$7$$?

$$CS = \frac{1}{2} \times 7 \times 14 = 49$$

Q: Mark's supply function for ice-cream is $$Q_s = \frac{1}{2}P - 1. $$What is his marginal cost for producing the 2nd unit?

$$MC = \frac{1}{2} \times 2 + 1 = 2$$

Q: Given the supply function $$Q_s = \frac{1}{2}P + 3$$ and a market price of $$6$$, what is the total producer surplus if the equilibrium quantity is $$6$$?

$$PS = \frac{1}{2} \times (6) \times (6 - 3) = 9$$

Question 1

Which resource allocation method is most likely used when parking spots are given to those who arrive first?

Accepted Answer

First come, first served

Question 2

In microeconomics, allocative efficiency is achieved when:

Accepted Answer

Marginal benefit equals marginal cost

Question 3

Jane's demand function for ice-cream is $$Q_d = -2P + 6. $$What is her marginal benefit for the 2nd unit of ice-cream?

Accepted Answer

$$MB = -2 	imes 2 + 6 = 2$$

Question 4

The market demand curve is also known as:

Accepted Answer

Marginal social benefit (MSB) curve

Question 5

If the market price of ice-cream is $$4$$ and the market demand function is $$Q_d = -2P + 18$$, what is the total consumer surplus if the equilibrium quantity is $$7$$?

Accepted Answer

$$CS = \frac{1}{2} 	imes 7 	imes 14 = 49$$

Question 6

Mark's supply function for ice-cream is $$Q_s = \frac{1}{2}P - 1. $$What is his marginal cost for producing the 2nd unit?

Accepted Answer

$$MC = \frac{1}{2} 	imes 2 + 1 = 2$$

Question 7

Producer surplus is best described as:

Accepted Answer

The price received for a good minus its marginal cost, summed over all quantities sold

Question 8

Given the supply function $$Q_s = \frac{1}{2}P + 3$$ and a market price of $$6$$, what is the total producer surplus if the equilibrium quantity is $$6$$?

Accepted Answer

$$PS = \frac{1}{2} 	imes (6) 	imes (6 - 3) = 9$$

Question 9

If the marginal social benefit (MSB) of the 2nd unit of ice-cream is $$14$$ and the marginal social cost (MSC) is $$4$$, what should happen to the quantity produced to achieve allocative efficiency?

Accepted Answer

Increase the quantity produced

Question 10

At market equilibrium, which of the following is true?

Accepted Answer

Marginal social benefit equals marginal social cost

Question 11

Suppose the market demand for ice-cream is $$Q_d = -2P + 18$$ and the market supply is $$Q_s = \frac{1}{2}P + 3. $$What is the equilibrium price?

Accepted Answer

$$P^* = 6$$

Question 12

If the equilibrium quantity of ice-cream is $$6$$, what is the total surplus in the market given consumer surplus is $$36$$ and producer surplus is $$9$$?

Accepted Answer

$$Total\ Surplus = 36 + 9 = 45$$

Question 13

Which of the following statements about consumer surplus is correct?

Accepted Answer

Consumer surplus is the area under the demand curve and above the price paid, up to the quantity bought

Question 14

If $$MSB \u003c MSC$$ for the 8th unit of ice-cream, what does this imply about resource allocation?

Accepted Answer

Resources are being over-allocated to ice-cream production

Question 15

Which allocation method is best when there is no effective way to distinguish among potential users of a scarce resource?

Accepted Answer

Lottery

Question 16

The market supply curve is also known as:

Accepted Answer

Marginal social cost (MSC) curve

Question 17

If the price that producers receive for their goods exceeds marginal cost, what do they receive?

Accepted Answer

Producer surplus

Question 18

Which of the following is NOT a method of resource allocation discussed in the study materials?

Accepted Answer

Random Walk

Question 19

In the context of market equilibrium, what is maximized?

Accepted Answer

Total surplus (consumer surplus + producer surplus)

Efficiency and Equity: Resource Allocation, Surplus, and Market Efficiency

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