Q1F08 - Name Test Form A Economics 1 Quiz 1 True-False...

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Name Test Form A Economics 1 Quiz 1 October 22, 2008 True-False Questions: Fill in Bubble A for True, Bubble B for False. 1. A market outcome is said to be efficient if no other possible arrangement of trades will result in higher total profits for all participants. 2. If trades are arranged between buyers and sellers so that each buyer who makes a trade has a higher buyer value than the seller cost of the person with whom he or she trades, the outcome of these trades must be efficient. 3. If the demand curve slopes down and the supply curve slopes up, then when the demand curve shifts, the equilibrium price and quantity move in the same direction. 4. In a competitive equilibrium, the seller cost of any seller who does not sell is at least as high as the buyer value of any buyer who does not buy. 5. If the supply curve shifts out (more supplied at every price) and the total revenue of suppliers decreases, the demand curve must be elastic. Multiple Choice Questions 6. A small tropical island’s banana market has 35 banana growers and 65 banana consumers. Each banana grower can sell at most one sack of bananas. Each consumer can consume either 0 or 1 sack of bananas. There are 25 low-cost banana producers, each of whom can produce bananas at a cost of $25 per sack and 10 high-cost banana producers, each of whom can produce bananas at a cost of $50 per sack. There are 35 consumers who are willing to pay up to $40 a sack and 30 consumers who are willing to pay up to $20 a sack for bananas. What is the competitive equilibrium price of bananas on this island? (a) $20 (b) $50 (c) $25 (d) $45 (e) $40
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Economics 1 2 7. In competitive equilibrium in the previous question, the total amount of profit made by ba- nana growers will be:
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