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Chapter 5 Econ

Chapter 5 Econ

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Published by Matt Jordan

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Published by: Matt Jordan on Aug 01, 2012
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06/29/2013

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Chapter 51.
Market failure is said to occur whenever:
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 government intervenes in the functioning of private markets.some consumers who want a good do not obtain it because the price is higher than they are willing to pay.private markets do not allocate resources in the most economically desirable way.prices rise.
MC Qu. 2 Which of the following is an example of mark...
Which of the following is an example of market failure?
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 negative externalitiespositive externalitiespublic goodsall of these
MC Qu. 4 People enjoy outdoor holiday lighting displa...
People enjoy outdoor holiday lighting displays, and would be willing to pay to see these displays, but can't be made to pay.Because those who put up lights are unable to charge others to view them, they don't put up as many lights as people would like.This is an example of a:
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 demand-side market failuresupply-side market failuregovernment failurenegative externality
MC Qu. 6 From society's perspective...
From society's perspective, in the presence of a supply-side market failure, the last unit of a good produced typically:
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 produces a benefit exactly equal to the cost of producing the last unit.generates more of a benefit than it costs to produce.maximizes the net benefit to society.costs more to produce than it provides in benefits.8.What two conditions must hold for a competitive market to produce efficient outcomes?
 
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 Demand curves must reflect all costs of production, and supply curves must reflect consumers' full willingness topay.Supply curves must reflect all costs of production, and demand curves must reflect consumers' full willingness topay.Firms must minimize production costs, and consumers must minimize total expenditures.Firms must maximize profits, and consumers must all pay prices equal to their maximum willingness to pay.
9.
If the demand curve reflects consumers' full willingness to pay, and the supply curve reflects all costs of production, thenwhich of the following is true?
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 The benefit surpluses shared between consumers and producers will be maximized.The benefit surpluses received by consumers and producers will be equal.There will be no consumer or producer surplus.Consumer surplus will be maximized, and producer surplus will be minimized.
MC 11.
Producer surplus:
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 is the difference between the maximum prices consumers are willing to pay for a product and the lowerequilibrium price.rises as equilibrium price falls.is the difference between the minimum prices producers are willing to accept for a product and the higherequilibrium price.is the difference between the maximum prices consumers are willing to pay for a product and the minimum pricesproducers are willing to accept.
12.
Jennifer buys a piece of costume jewelry for $33 for which she was willing to pay $42. The minimum acceptable price to theseller, Nathan, was $30. Jennifer experiences:
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 a consumer surplus of $12 and Nathan experiences a producer surplus of $3.a producer surplus of $9 and Nathan experiences a consumer surplus of $3.a consumer surplus of $9 and Nathan experiences a producer surplus of $3.a producer surplus of $9 and Nathan experiences a producer surplus of $12.
13.
Amanda buys a ruby for $330 for which she was willing to pay $340. The minimum acceptable price to the seller, Tony, was$140. Amanda experiences:
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a consumer surplus of $10 and Tony experiences a producer surplus of $190.a producer surplus of $200 and Tony experiences a consumer surplus of $10.a consumer surplus of $670 and Tony experiences a producer surplus of $200.a producer surplus of $10 and Tony experiences a consumer surplus of $190.
14.
Graphically, if the supply and demand curves are linear, consumer surplus is measured as the triangle:
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 under the demand curve and below the actual price.under the demand curve and above the actual price.above the supply curve and above the actual price.above the supply curve and below the actual price.
15.
Graphically, producer surplus is measured as the area:
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 under the demand curve and below the actual price.under the demand curve and above the actual price.above the supply curve and above the actual price.
 
above the supply curve and below the actual price.
17.
Refer to the above diagram. Assuming equilibrium price
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, consumer surplus is represented by areas:
 
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a
+
b
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a
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b
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c
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c
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a
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c.
 
19.
Refer to the above diagram. The area that identifies the maximum sum of consumer surplus and producer surplus is:
 
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a
+
b
+
c
+
+
e
+
 f 
.
c
+
+
 f 
.
a
+
b
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e
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a
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b
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c
+
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