Q: Suppose the marginal benefit curve for a good is given by $MB = 55 - \frac{2.5}{6}Q$. If the market price is $40$, what is the consumer surplus when $Q = 36$?

$CS = \frac{1}{2} \times (55 - 40) \times 36 = 270$

Question 1

Which resource allocation method is most likely to be used when a scarce resource cannot be effectively distinguished among potential users, such as in the allocation of university dorm rooms?

Accepted Answer

Allocation by lottery

Question 2

Suppose the marginal benefit curve for a good is given by $MB = 55 - \frac{2.5}{6}Q$. If the market price is $40$, what is the consumer surplus when $Q = 36$?

Accepted Answer

$CS = \frac{1}{2} 	imes (55 - 40) 	imes 36 = 270$

Question 3

Which of the following best describes producer surplus?

Accepted Answer

The difference between the price producers receive and the opportunity cost of producing the good, summed over the quantity sold.

Question 4

In a market for lawn services, six producers have minimum acceptable prices of $12, $10, $8, $6, $4, and $2. If the market price is $10, what is the total producer surplus?

Accepted Answer

$(10-12) + (10-10) + (10-8) + (10-6) + (10-4) + (10-2) = -2 + 0 + 2 + 4 + 6 + 8 = 18$

Question 5

Allocative efficiency in a market occurs when:

Accepted Answer

Marginal benefit equals marginal cost.

Question 6

Which of the following is NOT an obstacle to achieving an efficient allocation of resources in a market?

Accepted Answer

Perfect competition

Question 7

A deadweight loss in a market is best described as:

Accepted Answer

The decrease in consumer surplus and producer surplus resulting from producing an inefficient quantity of a good.

Question 8

According to utilitarianism, fairness in the market requires:

Accepted Answer

Achieving the greatest happiness for the greatest number.

Question 9

John Rawls' theory of equity suggests that redistribution should:

Accepted Answer

Strive to make the poorest as well off as possible.

Question 10

Which of the following best illustrates the tradeoff between equity and efficiency?

Accepted Answer

Redistributive taxes may decrease incentives to work, reducing the size of the economic pie.

Question 11

If the marginal social benefit (MSB) curve coincides with the demand curve and the marginal social cost (MSC) curve coincides with the supply curve, what does the equilibrium quantity represent?

Accepted Answer

The allocatively efficient quantity

Question 12

Which allocation method is most appropriate for allocating resources in a business where authority is clearly defined?

Accepted Answer

Command structure

Question 13

Suppose a market for hats has a consumer surplus of $318$ and a producer surplus of $12$. What is the total market surplus?

Accepted Answer

$330$

Question 14

Which principle states that people in similar situations should be treated equally, and is used to define fairness in terms of rules?

Accepted Answer

Symmetry principle of equity

Question 15

If a market is perfectly competitive and there are no obstacles to efficiency, according to Robert Nozick, the market is fair because:

Accepted Answer

Property rights are enforced and voluntary exchange is allowed.

Question 16

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

Accepted Answer

Casting a role for a movie based on the actor's appearance

Question 17

If the marginal cost of producing a good is $MC = 2 + \frac{Q^2}{6}$ and the market price is $10$, what is the producer surplus for $Q = 6$ units?

Accepted Answer

$PS = (10 - (2 + \frac{36}{6})) 	imes 6 = (10 - 8) 	imes 6 = 12$

Question 18

Which allocation method is most likely to be used for allocating seats in a popular restaurant with limited capacity?

Accepted Answer

First-come, first-serve

Question 19

Which of the following statements about consumer surplus is correct?

Accepted Answer

Consumer surplus is the net benefit to consumers from participating in a market.

Efficiency and Equity in Microeconomics: Resource Allocation, Surplus, and Market Outcomes

Study Guide - Practice Questions

Study Guide - Flashcards