Question 1

Which of the following resource allocation methods is most likely to be used when the efforts of participants are difficult to monitor and reward directly, such as in sporting events or award competitions?

Accepted Answer

Contest

Question 2

Suppose a market for concert tickets is allocated by lottery. Which statement best describes the efficiency of this allocation method?

Accepted Answer

It is efficient only if all potential buyers have identical willingness to pay.

Question 3

A demand curve can be interpreted as which of the following?

Accepted Answer

A marginal benefit curve

Question 4

Lisa is willing to pay $$2 for her 10th slice of pizza, but the market price is 1 $$per slice. What is Lisa's consumer surplus from the 10th slice?

Accepted Answer

$$2 - 1$$ = $1

Question 5

If the market price of a good is $$5 and a producer's marginal cost for the 20th unit is 3$$, what is the producer surplus from selling the 20th unit?

Accepted Answer

$$5 - 3$$ = $2

Question 6

Which of the following best describes producer surplus?

Accepted Answer

The excess of the amount received from the sale of a good over the cost of producing it

Question 7

In a competitive market, efficiency is achieved when:

Accepted Answer

$$MSB = MSC$$

Question 8

Which of the following is NOT a source of market failure?

Accepted Answer

Perfect competition

Question 9

Suppose the government sets a price ceiling below the equilibrium price in a competitive market. What is the most likely result?

Accepted Answer

Underproduction and a loss of total surplus

Question 10

If the market supply curve is the horizontal sum of individual supply curves, what is the market quantity supplied at a price of $$P if $$Maria supplies $$Q_M$$ and Max supplies $$Q_X$$?

Accepted Answer

$$Q_{market} = Q_M + Q_X$$

Question 11

Which allocation method is most likely to be used in allocating landing slots at a busy airport where there is no effective way to distinguish among airlines?

Accepted Answer

Lottery

Question 12

A supply curve can be interpreted as which of the following?

Accepted Answer

A marginal cost curve

Question 13

If a market is in equilibrium, which of the following must be true?

Accepted Answer

Quantity demanded equals quantity supplied

Question 14

Which of the following is an example of resource allocation by personal characteristics?

Accepted Answer

Hiring based on gender or ethnicity

Question 15

Suppose Nick is willing to pay $$1.50 for his 5th slice of pizza, but the market price is 1.00. $$What is Nick's consumer surplus from the 5th slice?

Accepted Answer

$$1.50 - 1.00$$ = $$0.50$$

Question 16

Which of the following statements about consumer surplus is correct?

Accepted Answer

It is the area below the demand curve and above the market price

Question 17

If Uber uses surge pricing during peak hours, which resource allocation method is being used?

Accepted Answer

Market price

Question 18

Which of the following is a condition for market efficiency in a competitive market?

Accepted Answer

Total surplus is maximized

Question 19

Which of the following is an example of resource allocation by force?

Accepted Answer

A government redistributing wealth through taxation

Question 20

If a market fails due to high transaction costs, what is the likely result?

Accepted Answer

Resources are not allocated efficiently

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

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