60) Allocative efficiency is achieved when the marginal benefit of a good
A) exceeds the marginal cost regardless of how much the difference is.
B) is less than its marginal cost.
C) is equal to its marginal cost.
D) equals zero.
E) exceeds the marginal cost by as much as possible.
61) Suppose the nation is producing at a point on its PPF. If the marginal cost of producing one
more computer is greater than the marginal benefit, the nation is producing
A) too few computers to be allocatively efficient.
B) too many computers to be allocatively efficient.
C) the correct number of computers to be allocatively efficient.
D) at the point of allocative efficiency.
E) More information is needed to determine if the nation is or is not producing at the allocatively
efficient point.
62) The figure above shows Kaley’s marginal benefit from swimming with manatees and Scott’s
marginal cost of providing manatee swimming tours. At 1 manatee swim per week, Kaley’s
marginal benefit is ________ and Scott’s marginal cost is ________.
A) $40; $10
B) $40; $40
C) $90; $50
D) None of the above answers is correct.
63) The figure above shows Kaley’s marginal benefit from swimming with manatees and Scott’s
marginal cost of providing manatee swimming tours. If Scott offers two swim tours per week, he
incurs a marginal cost of
A) more than $30.
B) $30.
C) $20.
D) $10.
E) $2
64) The figure above shows Kaley’s marginal benefit from swimming with manatees and Scott’s
marginal cost of providing manatee swimming tours. For Kaley and Scott, allocative efficiency
is achieved at what point?
A) A
B) B
C) C
D) D
E) Either point A or point D
65) The figure above shows a nation’s production possibilities frontier. If the marginal cost
equals the marginal benefit at point A when 4 million pizzas are produced,
A) allocative efficiency is achieved but production efficiency is not achieved because there are
no tacos being produced.
B) both allocative and production efficiency are achieved.
C) production efficiency is achieved but allocative efficiency is not achieved because there are
no tacos being produced.
D) production efficiency is achieved but allocative efficiency is not achieved because the number
of tacos produced is at its absolute maximum.
E) neither allocative nor production efficiency has been achieved.
66) If a landlord will rent an apartment only to married couples over 30 years old, the landlord is
allocating resources using a ________ allocation method.
A) majority rule
B) market price
C) contest
D) personal characteristics
E) command
67) Allocative efficiency occurs when
A) the most highly valued goods and services are produced.
B) all citizens have equal access to goods and services.
C) the environment is protected at all cost.
D) goods and services are free.
E) production takes place at any point on the PPF.
68) Marginal benefit equals the
A) benefit that a person receives from consuming another unit of a good.
B) additional efficiency from producing another unit of a good.
C) increase in profit from producing another unit of a good.
D) cost of producing another unit of a good.
E) total benefit from consuming all the units of the good or service.
69) In general, the marginal cost curve
A) has a positive slope.
B) has a negative slope.
C) is horizontal.
D) is vertical.
E) is U-shaped.
70) Allocative efficiency is achieved when the marginal benefit of a good
A) exceeds the marginal cost by as much as possible.
B) exceeds the marginal cost but not by as much as possible.
C) is less than the marginal cost.
D) equals the marginal cost.
E) equals zero.
6.2 Value, Price, and Consumer Surplus
1) Which describes the economic meanings of value and price?
A) Value is exchange worth minus marginal benefit and price is the dollars that must be paid.
B) Value is the marginal benefit obtained and price is the dollars that must be paid.
C) Value refers to the gain the producer gets from the good or service and price refers to the gain
the consumer gets from the good or service.
D) Value refers to the dollars that must be paid and price refers to the cost of producing the good.
E) They are the same and both mean the dollars that must be paid.
2) The value of a slice of pizza to a consumer is equal to
A) its marginal benefit.
B) the maximum price the consumer is willing to pay.
C) the consumer surplus.
D) Both answers A and B are correct.
E) Both answers B and C are correct.
3) To an economist, “value” is the same as
A) marginal cost.
B) consumer surplus.
C) the minimum price that people are willing to pay for another unit of the good.
D) marginal benefit.
E) total surplus.
4) Which of the following statements is correct?
i. The demand curve shows the maximum price people are willing to pay for a given quantity
of the good.
ii. The maximum price a consumer is willing to pay for an additional unit is the marginal
benefit of that unit.
iii. Value is what a consumer receives and price is what a consumer pays.
A) i only.
B) ii only.
C) iii only.
D) i and iii.
E) i, ii, and iii.
5) Value and price can be compared by noting that
A) they are the same thing.
B) value is always greater than price.
C) value is what we must pay while price is what we are willing to pay.
D) price is what we must pay and value is what we are willing to pay.
E) value is what the seller receives when we buy a good and price is what we must pay when we
buy a good.
6) The maximum amount of other goods and services that people are willing to give up in order
to get one more unit of a good is defined as the good’s
A) marginal benefit.
B) total benefit.
C) marginal cost.
D) total cost.
E) price.
7) The marginal benefit of each additional unit of a good consumed
A) increases as more is consumed.
B) is always equal to its marginal cost.
C) decreases as more is consumed.
D) will maximize consumer surplus.
E) is equal to the deadweight loss if the unit of the good is not produced.
8) The phrase “decreasing marginal benefit” means that
A) the more you consume of the product, the less total benefit you derive.
B) the marginal cost will be increasing as you consume more of a good.
C) each additional unit of a good you consume gives you less additional benefit than the previous
unit.
D) Both answers A and B are correct.
E) Both answers A and C are correct.
9) What must be true for a consumer to buy a good or service?
A) The price must be equal to or less than the marginal benefit.
B) The total benefit received must equal the total spent to buy the good or service.
C) The consumer must be able to obtain some consumer surplus.
D) The consumer must not be able to produce the product.
E) The price must be equal to or greater than the marginal benefit.
10) Mark loves ice cream. At any point in time, he will buy an additional ice cream cone if
A) the marginal benefit from it exceeds the price.
B) the marginal benefit from it is zero.
C) his willingness to pay is less than the price.
D) there is no deadweight loss produced by his purchase of a cone.
E) None of the above answers is correct.
11) A point on the demand curve shows the
A) price and the corresponding quantity demanded.
B) marginal benefit from that unit.
C) marginal cost to the seller of producing the unit.
D) Both answers A and B are correct.
E) Both answers A and C are correct.
12) A point on the demand curve shows the
A) minimum price that people are willing to pay for another unit of a good.
B) dollars’ worth of other goods that people must sacrifice to consume another unit of the good.
C) maximum price that people are willing to pay for another unit of a good.
D) consumer surplus a person gains from consuming a unit of a good.
E) marginal benefit minus the consumer surplus from consuming another unit of a good.
13) The demand curve is also the
A) total cost curve.
B) total benefit curve.
C) marginal cost curve.
D) marginal benefit curve.
E) marginal deadweight cost curve.
14) A demand curve can be interpreted as
A) a marginal benefit curve.
B) a total benefit curve.
C) an average benefit curve.
D) a marginal cost curve.
E) None of the above answers is correct.
15) Which of the following is true regarding a demand curve?
i. The demand curve is also the marginal benefit curve.
ii. The demand curve shows the dollars’ worth of other goods that people are willing to forgo to
consume another unit of the good.
iii. The demand curve shows the maximum price that people are willing to pay for another unit
of a good.
A) i and ii
B) i and iii
C) ii and iii
D) i, ii, and iii
E) i only
16) The total benefit from buying a particular unit of a good
A) is the amount paid for the unit plus the consumer surplus of the unit.
B) increases as market price increases.
C) is the difference between the amount paid for the unit and the market price of the unit.
D) is the difference between the marginal benefit of the unit and the marginal cost of producing
that unit.
E) None of the above answers is correct.
17) A consumer’s total benefit from consuming a good is equal to the
A) total expenditure on the good.
B) consumer surplus on the quantity purchased.
C) consumer surplus plus the total expenditure.
D) consumer surplus minus the total expenditure.
E) total expenditure on the good divided by the number of units purchased.
18) Samantha was willing to pay $10 for a hamburger because she was hungry but she only paid
$2.50. What is the marginal benefit Samantha gained from the hamburger?
A) $2.50
B) $7.50
C) $10.00
D) $12.50
E) None of the above answers is correct.
19) Consumer surplus exists when a
A) person buys something with a marginal benefit less than what they paid.
B) person buys something with a marginal benefit exactly what they paid.
C) person buys something with a marginal benefit more than what they paid.
D) producer sells something for more than it is worth.
E) person buys something with a marginal cost less than what they paid.
20) Shelby said to her friend, “I just bought a new pair of climbing shoes and I love them so
much that I totally would have paid more for them.” Shelby was describing the concept of
A) consumer surplus.
B) producer surplus.
C) equilibrium.
D) marginal cost.
E) total surplus.
21) Jake just bought a new hockey stick. When he was leaving the shop, he thought that he such
a great deal and would have paid $50 more dollars for the stick. Jake received
A) producer surplus.
B) equilibrium.
C) marginal cost.
D) total surplus.
E) consumer surplus.
22) Consumer surplus exists when
A) it costs less to produce goods than buyers must pay for them.
B) consumers value the good more highly than what they must pay to buy it.
C) taxes on goods are less than the appropriate amount.
D) the marginal benefit of the good is always equal to or less than the price of the good.
E) the price of the good is greater than the marginal cost of producing a unit of the good.
23) The consumer acquires a consumer surplus on a good if the marginal benefit is
A) equal to the price.
B) greater than the price.
C) less than the price.
D) zero.
E) less than the marginal cost.
24) Consumer surplus is equal to
A) marginal benefit minus price summed over the quantity consumed.
B) price minus marginal benefit summed over the quantity consumed.
C) marginal benefit summed over the quantity consumed.
D) price multiplied by the quantity consumed.
E) marginal benefit plus price summed over the quantity consumed.
25) Which of the following statements is correct?
A) Consumer surplus equals the price paid for a good.
B) The consumer surplus from a good is always larger than the total benefit from the good.
C) An increase in price decreases consumer surplus.
D) An increase in price has no effect on consumer surplus.
E) The consumer surplus from a good or service must always equal producer surplus.
26) In a figure, the consumer surplus is equal to the area ________ the ________ curve and
________ the price.
A) above; demand; above
B) below; supply; below
C) below; demand; below
D) below; demand; above
E) above; supply; below
27) Consumer surplus is the area
A) below the demand curve and above the market price.
B) below the supply curve and above the market price.
C) above the demand curve and below the market price.
D) above the supply curve and below the market price.
E) below the demand curve and above the supply curve.
28) When the market price rises, the consumers’ consumer surplus ________. When the market
price falls, the consumers’ consumer surplus ________.
A) decreases; increases
B) decreases; decreases
C) increases; increases
D) increases; decreases
E) does not change; increases
29) In the summer of 2008, the price of gasoline increased greatly. If the demand curve for
gasoline did not shift, which of the following occurred?
A) Drivers received no consumer surplus after the price increase.
B) Consumer surplus increased if drivers drove less.
C) Consumer surplus decreased.
D) If consumers drove the same amount, they received less total benefit.
E) Both the marginal benefit from each gallon of gasoline and the consumer surplus from each
gallon of gasoline decreased.
30) Lauren and Katy each bought a new bike lock for $20. Both Lauren and Katy would have
paid $25 for the lock. Katy’s consumer surplus equaled
A) $10.
B) $40.
C) $5.
D) $20.
E) $50.
31) Lauren and Katy each bought a new bike lock for $20. Both Lauren and Katy would have
paid $25 for the lock. The total consumer surplus for Lauren and Katy taken together equaled
A) $15.
B) $10.
C) $40.
D) $20.
E) $50.
32) Mary is willing to pay $50 for a Christmas tree, John is willing to pay $45 and Jeff is willing
to pay $40. The price of a tree is $40. The total consumer surplus for Mary, John and Jeff taken
together is
A) $15.
B) $135.
C) $40.
D) $95.
E) $120.
33) Suppose Dan is willing to pay a maximum of $3,000 for a piano, but finds one he can buy for
$2,500. Dan’s consumer surplus from this piano is
A) $5,500.
B) $3,000.
C) $2,500.
D) $500.
E) zero because he buys the piano.
34) Which of the following is an example of consumer surplus?
A) Jose buys a hamburger for $2 and tells you he would not have paid a penny more.
B) John believes the price he paid for his computer was too high.
C) Mary buys a paper tablet for $2 and finds the same good at another store for $1.50.
D) Sue would have paid $15 for a new compact disc but paid only $10.
E) Anne finds a mountain bike for which she is willing to pay a maximum of $550 and the price
of the bike is $600.
35) If you are willing to pay no more than $4 for a slice of pizza and the price of a slice of pizza
is $4, then
A) if you buy it, you would be cheated because you would realize no benefit from the purchase.
B) you buy it but you get no marginal benefit from the purchase.
C) you will not buy it.
D) you buy it but you get no consumer surplus from the purchase.
E) you might buy it depending on how the slice’s marginal benefit compares to its price.
36) If a seller charges a buyer the exact price the buyer is willing to pay, then the buyer would
A) not buy the good.
B) receive the maximum consumer surplus.
C) receive no benefit from the good.
D) receive no consumer surplus from that unit of the good.
E) suffer a deadweight loss from buying the good.
37) In the figure above, for the 3,000th unit, the maximum price a consumer is willing to pay is
A) $5.
B) $10.
C) $15.
D) $0.
E) $25.
38) In the figure above, at the market price of $15, the consumer surplus equals
A) $10,000.
B) $30,000.
C) $40,000.
D) 2,000 units
E) $20,000.
39) The figure above shows Lauren’s demand curve for Barbie dolls and the market price for
Barbie dolls. Using the area of the consumer surplus triangle, Lauren’s total consumer surplus
from purchasing 3 dolls is
A) $5.50.
B) $10.00.
C) $22.50.
D) $45.00.
E) 3 dolls.