Question 1

Which of the following best describes the relationship between the demand curve and marginal benefit?

Accepted Answer

The demand curve is a marginal benefit curve, representing the maximum price consumers are willing to pay for each unit.

Question 2

Suppose the market price for a good is $5, and a consumer is willing to pay $8 for the third unit. What is the consumer surplus for the third unit?

Accepted Answer

$3

Question 3

Which allocation method is most likely to be used for distributing places in a popular marathon where demand far exceeds supply and there is no fair way to distinguish among runners?

Accepted Answer

Lottery

Question 4

A competitive market is considered efficient when:

Accepted Answer

$MSB = MSC$

Question 5

If a government imposes a tax on a good, what is the most likely effect on market efficiency?

Accepted Answer

It decreases the quantity produced, leading to underproduction.

Question 6

Which of the following is an example of a market failure caused by an externality?

Accepted Answer

A factory emitting pollution that affects nearby residents.

Question 7

According to utilitarianism, when does the greatest happiness occur?

Accepted Answer

When income is distributed equally among all individuals.

Question 8

Which of the following best describes producer surplus?

Accepted Answer

The area below the market price and above the supply curve, summed over the quantity sold.

Question 9

A monopoly is likely to result in which of the following outcomes?

Accepted Answer

Underproduction and a deadweight loss.

Question 10

If the marginal social benefit of producing a good exceeds the marginal social cost, what should happen to the quantity produced to achieve efficiency?

Accepted Answer

Increase the quantity produced.

Question 11

Which of the following is NOT a method of allocating scarce resources discussed in the chapter?

Accepted Answer

Auction

Question 12

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

Accepted Answer

A shortage and underproduction.

Question 13

Which of the following statements about the symmetry principle is correct?

Accepted Answer

It requires that people in similar situations be treated similarly.

Question 14

A public good is likely to be underproduced in a free market because:

Accepted Answer

No one can be excluded from its benefits, leading to the free-rider problem.

Question 15

If the area under the demand curve and above the market price represents consumer surplus, what does the area below the market price and above the supply curve represent?

Accepted Answer

Producer surplus

Question 16

Which of the following is a real-world example of the 'tragedy of the commons'?

Accepted Answer

A city park that is overused and poorly maintained because no one owns it.

Question 17

Which of the following best describes the 'big tradeoff' discussed in the chapter?

Accepted Answer

The tradeoff between efficiency and fairness when redistributing income.

Question 18

If a market is characterized by high transactions costs, what is the likely outcome?

Accepted Answer

Underproduction due to the high cost of making trades.

Question 19

Which of the following is a necessary condition for a voluntary exchange to be considered fair according to Robert Nozick?

Accepted Answer

Private property may be transferred only by voluntary exchange.

Question 20

Suppose a government subsidy increases the price received by sellers and lowers the price paid by buyers. What is the most likely effect on the quantity produced?

Accepted Answer

The quantity produced will increase, leading to overproduction.

Efficiency and Equity in Microeconomics: Resource Allocation, Surplus, and Fairness

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