Chapter 7 Consumers, Producers, and the Efficiency of Markets

Chapter 7 Consumers, Producers, and the Efficiency of Markets

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Chapter 7 Consumers, Producers, and the Efficiency of Markets MULTIPLE CHOICE 1. Welfare economics is the study of a. the well-being of less fortunate people. b. welfare programs in the United States. c. the effect of income redistribution on work effort. d. how the allocation of resources affects economic well-being. ANSWER: d. how the allocation of resources affects economic well-being. TYPE: M DIFFICULTY: 1 2. The study of how the allocation of resources affects economic well-being is called a. consumer economics. b. macroeconomics. c. welfare economics. d. supply-side economics. ANSWER: c. welfare economics. TYPE: M DIFFICULTY: 1 3. With respect to welfare economics, the equilibrium price of a product is considered to be the best price  because it a. maximizes total revenue to firms and total utility to buyers. b. maximizes the total welfare of buyers and sellers. c. minimizes costs and maximizes profits of sellers. d. minimizes the level of welfare payments to those who no longer live below the poverty line. ANSWER: b. it maximizes the total welfare of buyers and sellers. TYPE: M DIFFICULTY: 2 4. Positive analysis refers to what a. is. b. should be. c. could be. d. is politically correct. ANSWER: a. is. TYPE: M DIFFICULTY: 1
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5. Normative analysis refers to what a. is. b. should be. c. maximizes efficiency. d. is politically correct. ANSWER: b. should be. TYPE: M DIFFICULTY: 1 6. The equilibrium of supply and demand in a market a. maximizes the profits of producers. b. can only be achieved with government intervention. c. produces both an efficient and equitable market outcome. d. maximizes the total benefits received by buyers and sellers. ANSWER: d. maximizes the total benefits received by buyers and sellers. TYPE: M DIFFICULTY: 2 7. The particular price that results in quantity supplied being equal to quantity demanded is the best price  because it a. maximizes costs of the seller. b. maximizes the profit of buyers. c. maximizes the total welfare of buyers and sellers. d. minimizes the expenditure of buyers. ANSWER: c. maximizes the total welfare of buyers and sellers. TYPE: M DIFFICULTY: 2 8. Suppose that Larry, Moe and Curly are bidding in an auction for a mint-condition video of Charlie  Chaplin’s first movie. Each has in mind a maximum amount that he will bid. This maximum is called a. a resistance price. b. willingness to pay. c. consumer surplus. d. producer surplus. ANSWER: b.
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Chapter 7 Consumers, Producers, and the Efficiency of Markets

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