Question 1

Welfare economics is the study of

Accepted Answer

how the allocation of resources affects economic well-being.

Answer

the effect of income redistribution on work effort.

Answer

the well-being of less fortunate people.

Question 2

Producer surplus is

Accepted Answer

the amount a seller is paid minus the cost of production.

Answer

measured using the demand curve for a good.

Answer

the opportunity cost of production minus the cost of producing goods that go unsold.

Question 3

One of the basic principles of economics is that markets are usually a good way to organize economic activity. This principle is explained by the study of

Accepted Answer

welfare economics.

Answer

labor economics.

Answer

factor markets

Question 4

The particular price that results in the quantity supplied being equal to the quantity demanded is the best price because it

Accepted Answer

maximizes the combined welfare of buyers and sellers.

Answer

maximizes costs of the seller.

Answer

maximizes tax revenue for the government.

Question 5

Willingness to pay

Accepted Answer

measures the value that a buyer places on a good.

Answer

is the amount that a seller actually receives for a good minus the minimum amount that the seller is willing to accept

Answer

is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

Question 6

Consumer surplus is

Accepted Answer

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

Answer

the amount a buyer is willing to pay for a good minus the cost of producing the good.

Answer

the amount by which the quantity supplied of a good exceeds the quantity demanded of the good.

Question 7

Shreya buys a new printer for $195. She obtains a consumer surplus of $5on her purchase if her willingness to pay is

Accepted Answer

&#36;200

Answer

&#36;190

Answer

&#36;180

Question 8

Lai Yoke is willing to pay $1000 for a wedding dress. She finds a wedding dress that she really likes for $970. Lai Yoke’s consumer surplus is

Accepted Answer

&#36;30

Answer

&#36;15

Answer

&#36;35

Question 9

When a buyer’s willingness to pay for a good is equal to the price of the good,

Accepted Answer

the buyer is indifferent between buying the good and not buying it.

Answer

the buyer will buy as much of the good as the buyer’s budget allows.

Answer

the buyer’s consumer surplus for that good is maximized.

Question 10

Rani values a stainless steel dishwasher for her new house at $500. The actual price of the dishwasher is $650. Rani

Accepted Answer

does not buy the dishwasher and on her purchase, she experiences a consumer surplus of $0 on her non-purchase.

Answer

buys the dishwasher and on her purchase, she experiences a consumer surplus of $-150.

Answer

does not buy the dishwasher and on her purchase, she experiences a consumer surplus of $150 on her non-purchase.

Question 11

Producer surplus measures

Accepted Answer

the benefits to sellers of participating in a market.

Answer

the costs to sellers of participating in a market.

Answer

the price that buyers are willing to pay for sellers’ output of a good or service.

Question 12

The medical authority in a country announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate

Accepted Answer

decreases, and producer surplus decreases.

Answer

increases, and producer surplus decreases.

Answer

increases, and producer surplus increases.

Question 13

We can say that the allocation of resources is efficient if

Accepted Answer

total surplus is maximized.

Answer

producer surplus is maximized.

Answer

consumer surplus is maximized.

Question 14

Efficiency in a market is achieved when

Accepted Answer

the sum of producer surplus and consumer surplus is maximized.

Answer

all firms are producing the good at the same low cost per unit.

Answer

no buyer is willing to pay more than the equilibrium price for any unit of the good.

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