If an economist states that not enough of a good is being produced, she usually means that A) not everyone can afford the good. B) price exceeds marginal cost. C) consumer surplus equals zero. D) at equilibrium, some people who still wish to sell the good cannot find a buyer. ANSWER B
Date: September 9th, 2020
Measuring society’s welfare as 2*CS + 0.5*PS A) gives heavier weight to consumer gains. B) gives heavier weight to producer gains. C) treats the gains to consumers and producers equally. D) treats gains and losses with different weight. ANSWER A
Date: September 9th, 2020
An increase in the deadweight loss (DWL) means A) an additional reduction in welfare by one group that is not offset by a gain to another group. B) an additional reduction in welfare by one group that is offset by a gain to another group. C) an additional increase in welfare by one group that […]
Date: September 9th, 2020
If a market produces a level of output that exceeds the competitive equilibrium output, then A) social welfare will be higher. B) producer surplus will be higher. C) marginal cost will exceed price. D) All of the above. ANSWER C
Date: September 9th, 2020
While producing less than the competitive output decreases social welfare, the same cannot be said about producing more than the competitive output. Indicate whether the statement is true or false ANSWER False. When more than the competitive output is produced each unit sold cost more than it is valued at. This reduces social welfare […]
Date: September 9th, 2020
In the short run, if a firm operates, it earns a profit of $500. The fixed costs of the firm are $100. This firm has a producer surplus of A) $500. B) $100. C) $400. D) $600. ANSWER D
Date: September 9th, 2020
Consumers who are more sensitive to changes in price suffer a greater loss of consumer surplus from any given price increase. Indicate whether the statement is true or false ANSWER False. Consumers who are more sensitive to the price increase will reduce their purchase of the good by a greater extent than those who […]
Date: September 9th, 2020
The change in total welfare from a 10% increase in price will depend only on the elasticity of demand. Indicate whether the statement is true or false ANSWER False. The effect of a price change also depends on revenue changes.
Date: September 9th, 2020
Producer surplus is the sum of the profits earned by all firms in a market. Indicate whether the statement is true or false ANSWER False. This definition ignores fixed costs. Producer surplus minus fixed costs equals profits.
Date: September 9th, 2020
An individual’s ________ surplus is the area ________ the ________ curve and ________ the ________ up to the quantity ________. A) consumer; above; supply; below; market price, produced. B) producer; above; supply; below; market price, produced. C) consumer; below; demand; above; choke price, purchased. D) producer; below; supply; choke price, below; the producer sells. […]
Date: September 9th, 2020
