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Unformatted text preview: s for Policy Analysis
1. Markets are critical to the functioning of an economy because
A. markets always achieve the best possible use of resources.
B. markets facilitate trade.
C. all important economic activity takes place in the context of markets.
D. Milton Friedman said so.
2. Suppose two agents engage in a trade. The willingness-to-pay (WTP) of the buyer is
100. The willingness-to-accept (WTA) of the seller is 80. The trading price is p. Then
the gains from trade are
A. 100 p
B. 80 p
D. 20 3. Recall the data from Question 2 above. We know that
A. p 20 .
B. p 80 .
C. p 100 .
D. None of the above.
4. Recall the data from Question 2 above. The private surplus to the seller is
A. p 80 .
B. 80 p .
C. no greater than 20.
D. Both A and C.
5. Recall the data from Question 2 above. The private surplus to the buyer is
A. p 100 .
B. at least 20.
C. 100 p .
D. Both B and C.
22 6. If the p is the price at which a trade is made, the social surplus created by the trade is
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- Spring '14