Microeconomics Chapter 4 Practice Questions and Answers Latest Update Graded A+
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Microeconomics
Institution
Microeconomics
Microeconomics Chapter 4 Practice Questions and Answers Latest Update Graded A+
Market failure is said to occur whenever: - Answers private markets do not allocate resources in the most economically desirable way.
Which of the following is an example of market failure? - Answers all of these
Dem...
Microeconomics Chapter 4 Practice Questions and Answers Latest Update Graded A+
Market failure is said to occur whenever: - Answers private markets do not allocate resources in the
most economically desirable way.
Which of the following is an example of market failure? - Answers all of these
Demand-side market failures occur when: - Answers the demand and supply curves don't reflect
consumers' full willingness to pay for a good or service.
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: - Answers demand-side market
failure
Supply-side market failures occur when: - Answers the demand and supply curves don't reflect the full
cost of producing a good or service.
From society's perspective in the presence of a supply-side market failure the last unit of a good
produced typically: - Answers costs more to produce than it provides in benefits.
The trains of the Transcontinental Railway Company when shipping goods sometimes emit sparks that
start fires along the tracks and damage the property of others. If Transcontinental does not pay for the
damage it causes what has occurred? - Answers Supply-side market failure
What two conditions must hold for a competitive market to produce efficient outcomes? - Answers
Supply curves must reflect all costs of production, and demand curves must reflect consumers' full
willingness to pay.
If the demand curve reflects consumers' full willingness to pay and the supply curve reflects all costs of
production then which of the following is true? - Answers The benefit surpluses shared between
consumers and producers will be maximized.
Consumer surplus: - Answers is the difference between the maximum prices consumers are willing to
pay for a product and the lower equilibrium price.
Producer surplus: - Answers is the difference between the minimum prices producers are willing to
accept for a product and the higher equilibrium price.
Jennifer buys a piece of costume jewelry for $33 for which she was willing to pay $42. The minimum
acceptable price to the seller Nathan was $30. Jennifer experiences: - Answers a consumer surplus of $9
and Nathan experiences a producer surplus of $3.
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: - Answers a consumer surplus of $10 and Tony
experiences a producer surplus of $190.
, Graphically if the supply and demand curves are linear consumer surplus is measured as the triangle: -
Answers under the demand curve and above the actual price.
Graphically producer surplus is measured as the area: - Answers above the supply curve and below the
actual price.
A producer's minimum acceptable price for a particular unit of a good: - Answers equals the marginal
cost of producing that particular unit.
Refer to the above diagram. Assuming equilibrium price P1 consumer surplus is represented by areas: -
Answers a + b.
Refer to the above diagram. Assuming equilibrium price P1 producer surplus is represented by areas: -
Answers c + d.
Refer to the above diagram. The area that identifies the maximum sum of consumer surplus and
producer surplus is: - Answers a + b + c + d.
Refer to the above diagram. If actual production and consumption occur at Q1: - Answers an efficiency
loss (or deadweight loss) of b + d occurs.
Refer to the above diagram. If actual production and consumption occur at Q2: - Answers efficiency is
achieved.
Refer to the above diagram. If actual production and consumption occur at Q3: - Answers an efficiency
loss (or deadweight loss) of e + f occurs.
Allocative efficiency occurs only at that output where: - Answers the combined amounts of consumer
surplus and producer surplus are maximized.
At the output level defining allocative efficiency: - Answers the maximum willingness to pay for the last
unit of output equals the minimum acceptable price of that unit of output.
Which of the following conditions does not need to occur for a market to achieve allocative efficiency? -
Answers The total revenue received by producers equals the total cost of production.
At the output where the combined amounts of consumer and producer surplus are largest: - Answers
the maximum willingness to pay for the last unit of output equals the minimum acceptable price of that
unit of output.
An efficiency loss (or deadweight loss): - Answers is measured as the combined loss of consumer surplus
and producer surplus.
An efficiency loss (or deadweight loss) declines in size when a unit of output is produced for which: -
Answers maximum willingness to pay exceeds minimum acceptable price.
The two main characteristics of a public good are: - Answers nonrivalry and nonexcludability.
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