Question 1

A pure private good is such that
A)Rivalry holds but exclusivity does not.
B)Both rivalry and exclusivity hold.
C)Exclusivity holds but rivalry does not.
D)Neither rivalry nor exclusivity hold.

Accepted Answer

A pure private good is characterized by both rivalry and exclusivity. Rivalry refers to the fact that the consumption of the good by one individual reduces the amount available for others to consume. Exclusivity, on the other hand, implies that the owner of the good has the legal right to exclude others from consuming it. Examples of pure private goods include clothing, food, and electronic devices.

Question 2

-In Figure 3.2, what is the value to the consumer? 
A)0PCQ*
B)0ACQ*
C)P*AC
D)BP*C

Accepted Answer

The answer of 
-In Figure 3.2, what is the value...

Question 3

Consumer surplus is defined as
A)the value that the consumer places on a good over the amount they pay for it.
B)the money that the producer gets from a good over the amount they are willing to sell it for.
C)when quantity supplied is greater than quantity demanded.
D)when quantity demanded is greater than quantity supplied.

Accepted Answer

Consumer surplus refers to the difference between the maximum amount that a consumer is willing to pay for a good or service and the actual price they pay for it. Therefore, A is the correct choice, as it defines consumer surplus accurately. B, C and D are incorrect because they do not accurately define consumer surplus.

Question 4

-In Figure 3.2, what is the variable cost to the producer? 
A)0PCQ*
B)0BCQ*
C)P*AC
D)BP*C

Accepted Answer

Variable costs change with the level of output, and in the context of a graph typically associated with economic models, the area under the average variable cost curve up to the quantity produced (Q*) represents the total variable cost. Therefore, the area 0BCQ* corresponds to the total variable costs to the producer.

Question 5

Deadweight Loss is defined as
A)the loss to society that results from production being too high or too low.
B)the loss to society that results from incomes being too high or too low.
C)the loss to society that results from items costing more than some can afford.
D)none of these

Accepted Answer

Deadweight Loss specifically refers to the inefficiency in the market that results in the loss of potential social welfare from production being either too high or too low. It does not refer to income levels or affordability of items.

Question 6

A price excludable public good is such that
A)Rivalry holds but exclusivity does not.
B)Both rivalry and exclusivity hold.
C)Exclusivity holds but rivalry does not.
D)Neither rivalry nor exclusivity hold.

Accepted Answer

Exclusivity holds but rivalry does not in a price excludable public good, meaning that people can be prevented from using the good unless they pay for it, but one person's use does not diminish availability for others.

Question 7

Producer surplus is defined as
A)the value that the consumer places on a good over the amount they pay for it.
B)the money that the producer gets from a good over the amount they are willing to sell it for.
C)when quantity supplied is greater than quantity demanded.
D)when quantity demanded is greater than quantity supplied.

Accepted Answer

Producer surplus is the difference between the price the producer receives for a good and the minimum price the producer is willing to sell it for. This can be seen as the extra profit or benefit the producer receives from selling the good. Option A is describing consumer surplus, option C is describing a situation of excess supply, and option D is describing a situation of excess demand, which are not related to producer surplus.

Question 8

Suppose a satellite radio signal can be received by any number of devices without the quality being diminished but that the devices are only activated when consumers pay a subscription. Which recognized characteristic of goods does not hold
A)rivalry.
B)exclusivity.
C)lucidity.
D)morality.

Accepted Answer

Rivalry does not hold because the satellite radio signal can be received by any number of devices without the quality being diminished, meaning one person's use does not reduce availability or quality for others.

Question 9

Suppose a satellite radio signal can be received by any number of devices without the quality being diminished but that the devices are only activated when consumers pay a subscription. Which recognized characteristic of goods holds
A)rivalry.
B)exclusivity.
C)lucidity.
D)morality.

Accepted Answer

Exclusivity refers to the control a company has over who can access and use their product or service. In this scenario, the satellite radio signal can be accessed by any number of devices without diminishing quality, but the devices need to be activated through a paid subscription. This means that the satellite radio signal has exclusivity as it can only be accessed by those who have paid for the subscription.

Question 10

-In Figure 3.2, what is the money the consumer pays the producer? 
A)0PCQ*
B)0ACQ*
C)P*AC
D)BP*C

Accepted Answer

The money the consumer pays the producer is the price of the good, which is represented by the distance from the origin to the point on the demand curve that corresponds to the quantity purchased. In this case, the quantity purchased is OC, and the price is OP*. Therefore, the money the consumer pays the producer is 0PCQ*.

Question 11

-In Figure 3.2, what is the consumer surplus? 
A)0PCQ*
B)0ACQ*
C)P*AC
D)BP*C

Accepted Answer

The answer of 
-In Figure 3.2, what is the consumer...

Question 12

Policy makers have considered putting computer chips in cars that would allow tax collectors to charge people based on how often they drive during rush hours. These policy makers are dealing with the fact that public roads are
A)purely private good.
B)congestible public good.
C)purely public good.
D)excludable public good.

Accepted Answer

Public roads are congestible goods because their use by one person can lead to reduced efficiency and increased travel time for others. The proposed policy of using computer chips to charge people based on how often they drive during rush hours is aimed at reducing congestion during peak hours, which is a characteristic of congestible goods.

Question 13

A pure public good is such that
A)Rivalry holds but exclusivity does not.
B)Both rivalry and exclusivity hold.
C)Exclusivity holds but rivalry does not.
D)Neither rivalry nor exclusivity hold.

Accepted Answer

A pure public good is non-rivalrous and non-excludable, meaning that consumption by one individual does not reduce the availability of the good for others, and it cannot be restricted from being consumed by anyone.Option D is the only choice that reflects this definition.

Question 14

Suppose a dyke is constructed in a river city to prevent floods from affecting the city. In this way all occupants are made equally safe regardless of whether they pay taxes. Which characteristics of goods hold or do not hold.
A)Rivalry holds but exclusivity does not.
B)Both rivalry and exclusivity hold.
C)Exclusivity holds but rivalry does not.
D)Neither rivalry nor exclusivity hold.

Accepted Answer

A dyke that prevents floods affects all occupants equally and does not exclude anyone from its benefits, making it non-excludable. Additionally, one person's safety from the dyke does not diminish another's, making it non-rivalrous.

Question 15

The value of the market to society is
A)the consumer surplus it generates.
B)the producer surplus it generates.
C)the sum of the producer and consumer surpluses.
D)consumer surplus minus producer surplus.

Accepted Answer

Consumer and producer surpluses are both important components of the overall value of a market to society. Consumer surplus represents the difference between what consumers are willing to pay for goods or services and what they actually pay, while producer surplus represents the difference between what producers receive for goods or services and their cost of production. The sum of these surpluses represents the total value created by the market to both consumers and producers, and therefore to society as a whole.

Question 16

The value to the consumer is
A)the area under the demand curve form the origin to the quantity purchased.
B)the area under the supply curve form the origin to the quantity produced.
C)the area under the demand curve but above the price line from the origin to the quantity purchased.
D)the area under the supply curve but below the price line from the origin to the quantity purchased.

Accepted Answer

The value to the consumer is the area under the demand curve from the origin to the quantity purchased. This is because the demand curve shows the consumer's willingness to pay for different quantities of a good. The area under the demand curve represents the total amount of money that consumers are willing to pay for the quantity of the good that they purchase.

Question 17

A congestible public good is such that
A)Rivalry holds but exclusivity does not.
B)Both rivalry and exclusivity hold.
C)Exclusivity holds but rivalry does not.
D)Neither rivalry nor exclusivity hold.

Accepted Answer

A congestible public good is one that is non-excludable but is subject to congestion or depletion, meaning that its use by one person reduces its availability for others. Therefore, rivalry holds (use by one person affects others) but exclusivity does not (cannot be easily limited to certain individuals).

Question 18

-In Figure 3.2, what is the producer surplus? 
A)0PCQ*
B)0ACQ*
C)P*AC
D)BP*C

Accepted Answer

The answer of 
-In Figure 3.2, what is the producer...

Question 19

When a satellite television company gains a subscriber there is no impact on existing subscribers. That is there is no rivalry in the consumption for their service. This is an example of a
A)purely private good.
B)congestible public good.
C)purely public good.
D)excludable public good.

Accepted Answer

The answer of When a satellite television company gains a...

Question 20

Without a belief that the market has failed, which of the following will result in deadweight loss?
A)A price below equilibrium.
B)A price at equilibrium.
C)A price above equilibrium.
D)A price below or above equilibrium.

Accepted Answer

A price set below or above the equilibrium leads to a deadweight loss because it prevents the market from allocating resources efficiently. At equilibrium, supply equals demand, and there is no deadweight loss. Prices set artificially higher or lower disrupt this balance, leading to either excess supply or demand, respectively.

Quiz 3: The Concept of Elasticity and Consumer and Producer Surplus

A pure private good is such that

-In Figure 3.2, what is the value to the consumer?

Consumer surplus is defined as

-In Figure 3.2, what is the variable cost to the producer?

Deadweight Loss is defined as

A price excludable public good is such that

Producer surplus is defined as

Suppose a satellite radio signal can be received by any number of devices without the quality being diminished but that the devices are only activated when consumers pay a subscription. Which recognized characteristic of goods does not hold

Suppose a satellite radio signal can be received by any number of devices without the quality being diminished but that the devices are only activated when consumers pay a subscription. Which recognized characteristic of goods holds

-In Figure 3.2, what is the money the consumer pays the producer?

-In Figure 3.2, what is the consumer surplus?

Policy makers have considered putting computer chips in cars that would allow tax collectors to charge people based on how often they drive during rush hours. These policy makers are dealing with the fact that public roads are

A pure public good is such that

Suppose a dyke is constructed in a river city to prevent floods from affecting the city. In this way all occupants are made equally safe regardless of whether they pay taxes. Which characteristics of goods hold or do not hold.

The value of the market to society is

The value to the consumer is

A congestible public good is such that

-In Figure 3.2, what is the producer surplus?

When a satellite television company gains a subscriber there is no impact on existing subscribers. That is there is no rivalry in the consumption for their service. This is an example of a

Without a belief that the market has failed, which of the following will result in deadweight loss?