1) When existing firms leave a perfectly competitive industry, ________ A both the equilibrium price

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1) When existing firms leave a perfectly competitive industry, ________

A both the equilibrium price and quantity decrease

B both the equilibrium price and quantity increase

C the equilibrium price decreases while the equilibrium quantity increases

D the equilibrium price increases while the equilibrium quantity decreases

2) If the producer surplus in a market for a good is? $36 and the consumer surplus in the market for the same good is? $9, the social surplus in the market is? ________

A $45

B ?$324

C? $27

D ?$4

3)An outcome is Pareto efficient? if:

A no individual can be made better off without making someone else worse off

B benefits of the outcome are equally distributed among all the participants

C costs of the outcome are equally shared by all the participants

D an individual can be made better off without making someone else worse off

4)Which of the following best describes a command? economy?

AAn economy that is characterized by barter trade of goods and services

BAn economy in which resources are allocated through the price mechanism

CAn economy in which there are a few privately owned firms

DAn economy where strong controls are imposed by the ruling authority

5)The entry of new firms into a perfectly competitive market will? cause:

Athe equilibrium price to increase but the equilibrium quantity to decrease

Bboth the equilibrium price and quantity to decrease

Cthe equilibrium price to decrease but the equilibrium quantity to increase

Dboth the equilibrium price and quantity to increase

6) Are all efficient outcomes also? equitable? Explain

A ?No, only those efficient outcomes that produce a? rich-to-poor income ratio less than 50 are equitable

B There is really no definitive answer to this question since issues surrounding efficiency and equity are the domain of normative? economics, where subjective value judgments are made

C ?No, the only efficient outcome that is equitable is the one that results in an equal distribution of goods across society

D ?Yes, if an outcome is? efficient, then by? definition, it maximizes social surplus and consequently must be equitable

7)Which of the following statements differentiates between a shortage and a? surplus?

A A shortage occurs when price is held below the equilibrium? price, but a surplus occurs when price is held at the equilibrium price

B A shortage occurs when quantity demanded exceeds quantity? supplied, whereas a surplus occurs when quantity supplied exceeds quantity demanded

C A shortage occurs when price is held at the equilibrium? price, but a surplus occurs when price is held above the equilibrium price

D A shortage occurs when quantity supplied exceeds quantity? demanded, whereas a surplus occurs when quantity demanded exceeds quantity supplied

8)If your professor decided to give all students the highest grade in the? class, your? classmates’ incentives to study would(___________

A not change

B increase

C decrease

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