Question 1

-Refer to the diagram above.If the price in this market is initially $3.00 and the most dissatisfied supplier sells a unit of the good for $5.50 to the most eager buyer,by how much does economic surplus rise?
A) $1.50.
B) $2.50.
C) $4.00.
D) $5.50.
E) $7.00.

Accepted Answer

Economic surplus rises by the difference between the buyer's willingness to pay ($5.50) and the supplier's cost ($3.00), which is $2.50. However, since the question asks for the rise in economic surplus from the initial price of $3.00 to the transaction price of $5.50, the surplus increase is $5.50 - $3.00 = $2.50.

Question 2

-Refer to the diagram above.If the price in this market is initially $3.00 and the most dissatisfied supplier sells a unit of the good for $5.50 to the most eager buyer,by how much is the buyer better off?
A) $1.50.
B) $2.50.
C) $4.00.
D) $5.50.
E) $7.00.

Accepted Answer

The buyer is better off by $2.50 because they are able to purchase the good for $3.00, but the most dissatisfied supplier is willing to sell it for $5.50.

Question 3

Of the following characteristics,which one applies only to a perfectly competitive firm?
A) It always earns a profit.
B) It seeks only to minimize cost.
C) It can sell all it wants to at the market price.
D) It will never earn a profit.
E) It has a narrow range of prices it can charge for its output.

Accepted Answer

In a perfectly competitive market, firms are price takers and can sell all they want to at the prevailing market price. This is not necessarily the case for firms in other market structures such as monopolies or oligopolies. The other options are not applicable to all perfectly competitive firms.

Question 4

-Refer to the diagram above.If the price in this market is initially $7.00 and it is then allowed to move to the equilibrium,does the quantity demanded increase or decrease,and by how much?
A) The quantity demanded decreases by 40 units.
B) The quantity demanded decreases by 20 units.
C) The quantity demanded remains unchanged.
D) The quantity demanded increases by 20 units.
E) The quantity demanded increases by 40 units.

Accepted Answer

The answer of 
-Refer to the diagram above.If the price...

Question 5

-Refer to the diagram above.If the price in this market is initially $7.00 and it is then allowed to move to the equilibrium,does the quantity supplied increase or decrease,and by how much?
A) The quantity supplied decreases by 40 units.
B) The quantity supplied decreases by 20 units.
C) The quantity supplied remains unchanged.
D) The quantity supplied increases by 20 units.
E) The quantity supplied increases by 40 units.

Accepted Answer

If the price is initially $7.00 and it moves to equilibrium, the quantity supplied decreases by 20 units as the market adjusts to the equilibrium price where supply equals demand.

Question 6

-Refer to the diagram above.The equilibrium quantity is
A) 20 units.
B) 40 units.
C) 60 units.
D) 80 units.
E) 100 units.

Accepted Answer

The equilibrium quantity is the quantity where the supply and demand curves intersect, which is 60 units in this case.

Question 7

-Refer to the diagram above.If the price in this market is $3.00,what is the quantity demanded in the market?
A) 20 units.
B) 40 units.
C) 60 units.
D) 80 units.
E) 100 units.

Accepted Answer

The answer of 
-Refer to the diagram above.If the price...

Question 8

-Refer to the diagram above.If the price in this market is initially $3.00 and it is then allowed to move to the equilibrium,does the quantity demanded increase or decrease,and by how much?
A) The quantity demanded decreases by 40 units.
B) The quantity demanded decreases by 20 units.
C) The quantity demanded remains unchanged.
D) The quantity demanded increases by 20 units.
E) The quantity demanded increases by 40 units.

Accepted Answer

The answer of 
-Refer to the diagram above.If the price...

Question 9

-Refer to the diagram above.If the price in this market is $3.00,what is the quantity supplied in the market?
A) 20 units.
B) 40 units.
C) 60 units.
D) 80 units.
E) 100 units.

Accepted Answer

The answer of 
-Refer to the diagram above.If the price...

Question 10

-Refer to the diagram above.If the price in this market is initially $7.00 and the most dissatisfied supplier sells a unit of the good for $5.50 to the most eager buyer,by how much is the buyer better off?
A) $1.50.
B) $2.50.
C) $4.00.
D) $5.50.
E) $7.00.

Accepted Answer

The buyer is better off by the difference between the initial price ($7.00) and the price they actually pay ($5.50), which is $1.50.

Question 11

If the firm's demand curve is perfectly elastic,the firm must be a(n)
A) monopoly.
B) imperfect competitor.
C) oligopoly.
D) perfect competitor.
E) revenue maximizer.

Accepted Answer

A demand curve that is perfectly elastic means that consumers are willing to purchase any amount of the good at a given price, and any increase in price will result in a complete loss of demand. In such a market, a single firm cannot influence the market price, and must accept the market price as given. This is characteristic of a perfectly competitive market, where many firms are selling an identical product and have no market power.

Question 12

-Refer to the diagram above.If the price in this market is initially $3.00 and the most dissatisfied supplier sells a unit of the good for $5.50 to the most eager buyer,by how much is the supplier better off?
A) $1.50.
B) $2.50.
C) $4.00.
D) $5.50.
E) $7.00.

Accepted Answer

The supplier initially sells at $3.00. If they sell at $5.50, they are better off by $5.50 - $3.00 = $2.50.

Question 13

-Refer to the diagram above.If the price in this market is initially $3.00 and it is then allowed to move to the equilibrium,does the quantity supplied increase or decrease,and by how much?
A) The quantity supplied decreases by 40 units.
B) The quantity supplied decreases by 20 units.
C) The quantity supplied remains unchanged.
D) The quantity supplied increases by 20 units.
E) The quantity supplied increases by 40 units.

Accepted Answer

The answer of 
-Refer to the diagram above.If the price...

Question 14

-Refer to the diagram above.If the price in this market is $7.00,what is the quantity supplied in the market?
A) 20 units.
B) 40 units.
C) 60 units.
D) 80 units.
E) 100 units.

Accepted Answer

The answer of 
-Refer to the diagram above.If the price...

Question 15

If markets are perfectly competitive and price has a value other than its equilibrium value,then is it possible to identify an unrealized transaction that would make the buyer and the seller better off?
A) Yes,always.
B) Yes,often.
C) Yes,occasionally.
D) Yes,but only if the government intervenes to set the price.
E) No,under no circumstances.

Accepted Answer

In a perfectly competitive market, if the price is not at equilibrium, there are buyers willing to pay more and sellers willing to accept less, leading to unrealized transactions that could benefit both parties.

Question 16

-Refer to the diagram above.If the price in this market is $7.00,what is the quantity demanded in the market?
A) 20 units.
B) 40 units.
C) 60 units.
D) 80 units.
E) 100 units.

Accepted Answer

The answer of 
-Refer to the diagram above.If the price...

Question 17

Which of the following statements is true for both General Motors and a locally-owned restaurant?
A) Both are perfect competitors.
B) Both confront perfectly elastic demand for their products.
C) Neither is able to influence the price of their products.
D) Both seek to maximize profit.
E) Both seek to maximize revenue.

Accepted Answer

Both General Motors and a locally-owned restaurant seek to maximize profit. However, they differ in their ability to influence the price of their products. General Motors may have some market power and be able to set prices, whereas a small local restaurant may have less price-setting ability and face more competition. A and B are incorrect because neither General Motors nor a locally-owned restaurant necessarily face perfect competition or perfectly elastic demand. C is incorrect because some firms may have some market power and be able to influence prices to some extent. E is incorrect because maximizing revenue may not necessarily result in maximizing profit.

Question 18

-Refer to the diagram above.The equilibrium price is ________ per unit.
A) $9.00
B) $7.00
C) $5.00
D) $3.00
E) $1.00

Accepted Answer

The equilibrium price is where the supply and demand curves intersect, which is at $5.00 per unit.

Question 19

-Refer to the diagram above.If the price in this market is initially $7.00 and the most dissatisfied supplier sells a unit of the good for $5.50 to the most eager buyer,by how much does economic surplus rise?
A) $1.50.
B) $2.50.
C) $4.00.
D) $5.50.
E) $7.00.

Accepted Answer

The answer of 
-Refer to the diagram above.If the price...

Question 20

-Refer to the diagram above.If the price in this market is initially $7.00 and the most dissatisfied supplier sells a unit of the good for $5.50 to the most eager buyer,by how much is the supplier better off?
A) $1.50.
B) $2.50.
C) $4.00.
D) $5.50.
E) $7.00.

Accepted Answer

The answer of 
-Refer to the diagram above.If the price...

Quiz 7: The Quest for Profit and the Invisible Hand

-Refer to the diagram above.If the price in this market is initially $3.00 and the most dissatisfied supplier sells a unit of the good for $5.50 to the most eager buyer,by how much does economic surplus rise?

-Refer to the diagram above.If the price in this market is initially $3.00 and the most dissatisfied supplier sells a unit of the good for $5.50 to the most eager buyer,by how much is the buyer better off?

Of the following characteristics,which one applies only to a perfectly competitive firm?

-Refer to the diagram above.If the price in this market is initially $7.00 and it is then allowed to move to the equilibrium,does the quantity demanded increase or decrease,and by how much?

-Refer to the diagram above.If the price in this market is initially $7.00 and it is then allowed to move to the equilibrium,does the quantity supplied increase or decrease,and by how much?

-Refer to the diagram above.The equilibrium quantity is

-Refer to the diagram above.If the price in this market is $3.00,what is the quantity demanded in the market?

-Refer to the diagram above.If the price in this market is initially $3.00 and it is then allowed to move to the equilibrium,does the quantity demanded increase or decrease,and by how much?

-Refer to the diagram above.If the price in this market is $3.00,what is the quantity supplied in the market?

-Refer to the diagram above.If the price in this market is initially $7.00 and the most dissatisfied supplier sells a unit of the good for $5.50 to the most eager buyer,by how much is the buyer better off?

If the firm's demand curve is perfectly elastic,the firm must be a(n)

-Refer to the diagram above.If the price in this market is initially $3.00 and the most dissatisfied supplier sells a unit of the good for $5.50 to the most eager buyer,by how much is the supplier better off?

-Refer to the diagram above.If the price in this market is initially $3.00 and it is then allowed to move to the equilibrium,does the quantity supplied increase or decrease,and by how much?

-Refer to the diagram above.If the price in this market is $7.00,what is the quantity supplied in the market?

If markets are perfectly competitive and price has a value other than its equilibrium value,then is it possible to identify an unrealized transaction that would make the buyer and the seller better off?

-Refer to the diagram above.If the price in this market is $7.00,what is the quantity demanded in the market?

Which of the following statements is true for both General Motors and a locally-owned restaurant?

-Refer to the diagram above.The equilibrium price is ________ per unit.

-Refer to the diagram above.If the price in this market is initially $7.00 and the most dissatisfied supplier sells a unit of the good for $5.50 to the most eager buyer,by how much does economic surplus rise?

-Refer to the diagram above.If the price in this market is initially $7.00 and the most dissatisfied supplier sells a unit of the good for $5.50 to the most eager buyer,by how much is the supplier better off?