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Exam 7: Consumers, Producers and the Efficiency of Markets

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Question 21

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The "generalised price" of a ticket is the sum of the monetary price of the ticket (the amount you pay in dollars) plus the other costs of obtaining that ticket (such as waiting in line).It can be written as: Generalised Price = Monetary price + time standing in line.Suppose everyone has the same opportunity cost of time.If there are laws against scalping, will tickets go to those individuals who value the ticket the most when we use generalised price? (HINT: Suppose there is one ticket left for a concert for $40, and person A values that ticket at $50 and person B at $60.Who will buy the ticket?)

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If scalping is outlawed and the price of...

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Question 22

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Even though participants in the economy are motivated by self-interest, the 'invisible hand' of the marketplace guides this self-interest into promoting general economic wellbeing.

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Question 23

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Which of the following is NOT correct?

Table 7-7 $\begin{array}{|c|c|c|}\hline \text { Price of pizza }&\text { Quantity of pizza demanded }\\\hline & \text { Fred } & \text { Frieda } \\\hline>\$ 15 & 0 & 0 \\\hline \$ 14 & 1 & 0 \\\hline \$ 13 & 3 & 1 \\\hline \$ 12 & 5 & 3 \\\hline \$ 11 & 7 & 5 \\\hline \$ 10 & 9 & 7 \\\hline \$ 9 & 11 & 9 \\\hline\end{array}$ Antonio's Pizza $\begin{array}{|c|c|}\hline \text { Price } & \text { Quantity supplied } \\\hline \$ 15 & 28 \\\hline \$ 14 & 24 \\\hline \$ 13 & 20 \\\hline \$ 12 & 16 \\\hline \$ 11 & 12 \\\hline \$ 10 & 8 \\\hline \$ 9 & 4 \\\hline<\$ 9 & 0 \\\hline\end{array}$ -Based on Table 7-7, if Fred and Frieda are the only buyers in the pizza market and Antonio's is the only seller, what is the: a.market equilibrium price? b.market equilibrium quantity? c.total consumer surplus at the market equilibrium? d.total producer surplus at the market equilibrium? e.total benefit to society of this market?

Table 7-3 Market supply and demand for good X $\begin{array}{|c|c|c|}\hline \text { Price (\$) } & \text { Quantity demanded } & \text { Quantity supplied } \\\hline 12.00 & 0 & 36 \\\hline 10.00 & 12 & 30 \\\hline 8.00 & 24 & 24 \\\hline 6.00 & 36 & 18 \\\hline 4.00 & 48 & 12 \\\hline 2.00 & 60 & 6 \\\hline 0.00 & 72 & 0 \\\hline\end{array}$ -Refer to Table 7-3.The equilibrium or market-clearing price is:

Suppose that the demand for coffee rises.This means that the producer surplus for coffee will:

Welfare economics is the study of the welfare system.

Graph 7-3 -According to Graph 7-3, area B represents:

Would a market that was characterised by unregulated pollution be classed as efficient? Why or why not?

Graph 7-4 -In Graph 7-4, at the market-clearing equilibrium, total surplus is represented by the area:

Graph 7-4 -In Graph 7-4, the efficient price-quantity combination is:

If Dale sells a shirt for $80 and his producer surplus from the sale is $13, his cost must have been:

Michele is willing to pay $12 to see St Trinians for the fourth time.She finds a theatre showing St Trinians for $12.00.Michele's consumer surplus is:

In a perfectly competitive market, consumer surplus and producer surplus are equal.

Producer surplus measures the:

Table 7-2 The costs of five possible sellers $\begin{array} { | c | c | } \hline \text { Seller } & \text { Cast(\$) } \\\hline \text { Kyle } & 18 \\\hline \text { Nathen } & 15 \\\hline \text { Chelsea } & 10 \\\hline \text { Hillary } & 7.50 \\\hline \text { Landon } & 5 \\\hline\end{array}$ -Refer to Table 7-2.If the market price is $8, the total cost in the market will be:

Consumer surplus is the:

For producers, the willingness to sell is equivalent to the marginal cost of the product.

An allocation of resources that maximises total surplus is said to be equitable.

If demand increases, the price of a product, as well as producer surplus: