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Economic Welfare and Efficiency: Applied Quiz Online Quiz Questions

Use this free practice quiz with 30 questions to review Economic Welfare and Efficiency: Applied, test your knowledge, and prepare for your next test or exam.

30 questions
01
True or false
1 point

True or false: An economic outcome can be allocatively efficient even if its distribution of income and benefits is considered unfair.

  1. A

    True

  2. B

    False

02
Choose one
1 point

Which area on a standard supply-and-demand graph represents consumer surplus?

  1. A

    Below the demand curve and above the market price, up to the quantity purchased.

  2. B

    Below the supply curve and above the market price, up to the quantity sold.

  3. C

    Above the demand curve and below the market price, up to the quantity purchased.

  4. D

    Below both curves and above the quantity axis, regardless of the quantity purchased.

03
Fill in the blank
1 point

Complete each statement: A binding price ceiling set below equilibrium creates a , while a binding price floor set above equilibrium creates a .

04
Choose all
1 point

Which two outcomes are typical of a binding price ceiling below the equilibrium price? Select all correct answers.

  1. A

    A shortage can occur

  2. B

    More units are exchanged than at equilibrium

  3. C

    Nonprice rationing may develop

  4. D

    The legal price is forced above equilibrium

05
True or false
1 point

True or false: Producer surplus is always identical to accounting profit because both subtract every cost of production.

  1. A

    True

  2. B

    False

06
Written response
1 point

A market has demand P = 80 − Q and supply P = 20 + Q. What is the competitive equilibrium quantity? Enter the value in units.

07
Fill in the blank
1 point

Complete the relationships: With a negative externality, exceeds marginal private cost. With a positive externality, exceeds marginal private benefit.

08
Choose one
1 point

Which procedure best describes how a profit-maximizing monopolist chooses its output and price?

  1. A

    Choose the quantity where price equals average total cost, then charge marginal cost

  2. B

    Choose the largest quantity consumers are willing to buy, then charge the lowest price

  3. C

    Choose the quantity where marginal revenue equals marginal cost, then use the demand curve to determine price

  4. D

    Choose the quantity where average total cost is highest, then charge the market price

09
Choose all
1 point

Which four items belong in the core welfare accounting of a policy intervention? Select all correct answers.

  1. A

    Changes in consumer surplus

  2. B

    Changes in producer surplus

  3. C

    The policymaker's preferred political slogan

  4. D

    Government revenue or cost

  5. E

    Deadweight loss

10
Open ended
1 point

A government is considering a subsidy for a basic food consumed mostly by low-income households. Analyze the likely effects on buyers and sellers, the government budget, equity, and efficiency. Explain why the policy should be evaluated using both equity and efficiency criteria.

11
Choose one
1 point

Which statement best describes how elasticity affects the incidence of a per-unit tax?

  1. A

    The more elastic side always bears the entire tax

  2. B

    The less elastic side generally bears more of the tax burden

  3. C

    Buyers and sellers always split the tax exactly equally

  4. D

    Tax incidence depends only on which side is legally required to remit the tax

12
Choose all
1 point

Which three statements correctly describe market structures? Select all correct answers.

  1. A

    Perfect competition generally involves many firms selling identical products

  2. B

    A monopoly is defined by many small firms selling differentiated products

  3. C

    An oligopoly has a small number of interdependent firms

  4. D

    Monopolistic competition involves many firms selling differentiated products

  5. E

    A monopoly necessarily produces at the efficient quantity

13
True or false
1 point

True or false: In an efficient allocation, the marginal benefit of the last unit produced equals its marginal cost.

  1. A

    True

  2. B

    False

14
Written response
1 point

A market has demand P = 100 − Q and supply P = 20 + Q. What is the competitive equilibrium quantity? Enter the quantity in units as a whole number.

15
Choose one
1 point

Which outcome is most directly associated with a binding price floor set above the market equilibrium?

  1. A

    It creates a shortage because quantity demanded exceeds quantity supplied

  2. B

    It leaves the equilibrium unchanged because floors affect only sellers

  3. C

    It creates a surplus because quantity supplied exceeds quantity demanded

  4. D

    It guarantees that every unit supplied will be sold

16
True or false
1 point

True or false: A binding price ceiling below equilibrium causes quantity demanded to exceed quantity supplied.

  1. A

    True

  2. B

    False

17
Written response
1 point

Demand is P = 80 − Q and supply is P = 20 + Q. What is consumer surplus at competitive equilibrium? Enter the numerical value in dollars as a whole number.

18
Choose one
1 point

Which statement best describes tax incidence when a per-unit tax is imposed?

  1. A

    The side that is more elastic generally bears more of the burden

  2. B

    The side that is less elastic generally bears more of the burden

  3. C

    The government bears the entire burden because it collects the tax

  4. D

    The burden is always divided equally between buyers and sellers

19
Fill in the blank
1 point

Complete both statements: A negative externality makes social marginal cost private marginal cost and usually causes unregulated output to be than the efficient level.

20
True or false
1 point

True or false: National defense is a standard example of a public good because it is generally nonexcludable and nonrival.

  1. A

    True

  2. B

    False

21
Choose one
1 point

How does a profit-maximizing monopolist determine its output and price?

  1. A

    Set price equal to average total cost, then produce where demand is highest

  2. B

    Choose the quantity where price equals marginal cost, then charge marginal revenue

  3. C

    Choose the quantity where marginal revenue equals marginal cost, then find price on the demand curve

  4. D

    Produce the competitive quantity and charge the price at the demand intercept

22
Written response
1 point

Demand is P = 80 − Q and supply is P = 20 + Q. A $10 per-unit tax is imposed. What quantity is traded after the tax? Enter the quantity in units as a whole number.

23
Written response
1 point

The price of a product rises from $20 to $24, and quantity demanded falls from 100 units to 80 units. Using the midpoint method, what is the absolute price elasticity of demand? Enter the answer as a simplified fraction.

24
Choose one
1 point

Which condition characterizes long-run equilibrium in perfect competition under the standard model?

  1. A

    P is greater than MC and firms produce above minimum ATC

  2. B

    P equals MC and minimum ATC

  3. C

    P is less than MC and firms produce at maximum ATC

  4. D

    P equals average total cost only, regardless of marginal cost

25
Choose one
1 point

Which condition best describes allocative efficiency in a competitive market without market failures?

  1. A

    Producing every good at the lowest possible average total cost

  2. B

    Producing the quantity at which marginal benefit equals marginal cost

  3. C

    Ensuring that every consumer pays the same price

  4. D

    Distributing income equally among all households

26
Choose one
1 point

On a standard supply-and-demand graph, which area represents consumer surplus?

  1. A

    Above the supply curve and below the market price

  2. B

    Below the demand curve and below the market price

  3. C

    Below the demand curve and above the market price

  4. D

    Above the demand curve and below the market price

27
Choose one
1 point

Which statement correctly distinguishes producer surplus from accounting profit?

  1. A

    Producer surplus generally excludes fixed costs, whereas accounting profit subtracts relevant fixed costs.

  2. B

    Producer surplus is always exactly equal to accounting profit.

  3. C

    Producer surplus measures consumers' willingness to pay above price.

  4. D

    Producer surplus exists only when a firm has monopoly power.

28
Choose one
1 point

A market has demand P = 100 − Q and supply P = 20 + Q. If the government imposes a $20 per-unit tax, how many units will be traded?

  1. A

    10 units

  2. B

    20 units

  3. C

    40 units

  4. D

    30 units

29
Choose one
1 point

If demand is substantially less elastic than supply, which prediction about a per-unit tax is most accurate?

  1. A

    The more elastic side always bears the entire tax.

  2. B

    The less elastic side generally bears more of the tax burden.

  3. C

    Buyers and sellers always split the tax exactly equally.

  4. D

    The government bears the tax burden because it collects the revenue.

30
Written response
1 point

A market has demand P = 80 − Q and supply P = 20 + Q. What is the equilibrium price, in dollars?