4 Efficiency and Policy in Competitive Markets Online Quiz Questions

In the competitive-market model, an outcome that maximizes total surplus must also distribute goods and income equitably.

What is the term for the loss in total surplus caused by mutually beneficial trades that no longer occur?

Three possible trades have these buyer values and seller costs: A has value 10 and cost 4; B has value 7 and cost 8; C has value 6 and cost 3. If each trade can be chosen independently, which set of trades maximizes total surplus?

Select all statements that correctly describe allocative or productive efficiency.

The side of a market legally required to send a tax payment to the government necessarily bears the entire economic burden of that tax.

Select all outcomes that are typical when a per-unit tax reduces the quantity traded in a market.

Demand and supply are described by $P_b=12-Q$ and $P_s=2+Q$, where $P_b$ is the price buyers pay and $P_s$ is the price sellers receive. A tax of 2 per unit creates a gap of 2 between these prices. What quantity is traded after the tax?

After a policy, consumer surplus is 50, producer surplus is 40, and 30 units are sold with a tax of 3 per unit. What is total surplus including the government's tax revenue?

Suppose producing a good causes pollution that harms people who are not part of the transaction. Explain why the competitive market quantity may be socially inefficient and how a corrective tax could affect the outcome. What should be considered when comparing the policy outcome with the market outcome?

In the basic surplus model, a tax does not change the quantity traded. Which conclusion follows?

A buyer is willing to pay $30$ for a unit and pays $24$. What is the buyer's consumer surplus on that unit?

An outcome that maximizes total surplus must also distribute goods and income equitably.

A binding price ceiling is set below the competitive equilibrium price. Which outcome is expected in the basic supply-and-demand model?

Market A has consumer surplus of $18$ and producer surplus of $11$. Market B has consumer surplus of $15$ and producer surplus of $16$. Which market has greater total surplus, and by how much?

An industry continues to produce less than the socially efficient quantity, but its firms reorganize production so that the existing output is made at the lowest feasible cost. Which statement best describes the change?

What is the economics term for the remaining loss in total surplus when mutually beneficial trades no longer occur?

For a per-unit tax, buyers are less responsive to price changes than sellers. Which outcome is most likely regarding the economic burden of the tax?

Inverse demand is $P_b=12-Q$, and inverse supply is $P_s=2+Q$, where $P_b$ is the price buyers pay and $P_s$ is the price sellers receive. A per-unit tax of $2$ creates the wedge $P_b-P_s=2$. What is the quantity traded after the tax?