#1
What happens to economic surplus when a market reaches equilibrium?
It remains constant
ExplanationAt equilibrium, economic surplus is maximized and remains stable.
#2
What is producer surplus?
The difference between total cost and total revenue
ExplanationProducer surplus measures the benefit producers receive from selling a good or service.
#3
What happens to consumer surplus if the price of a good decreases?
Consumer surplus increases
ExplanationLower prices increase consumer surplus as consumers gain more benefit from purchasing the good.
#4
Which of the following best describes economic surplus?
The difference between consumer surplus and producer surplus
ExplanationEconomic surplus is the combined benefit to consumers and producers.
#5
What is the formula for calculating consumer surplus?
Consumer Surplus = Total Revenue - Total Cost
ExplanationConsumer surplus measures the benefit consumers receive from purchasing a good or service.
#6
Which of the following is NOT a factor affecting consumer surplus?
Price controls
ExplanationPrice controls, such as government-imposed price ceilings or floors, directly affect prices, not consumer surplus.
#7
How does an increase in supply affect economic surplus in a competitive market?
It increases economic surplus
ExplanationIncreased supply leads to lower prices and higher quantities, benefiting both consumers and producers.
#8
What is the relationship between consumer surplus and price in a market?
Consumer surplus decreases as price increases
ExplanationAs price increases, consumer surplus decreases since consumers are willing to pay less for a given quantity.
#9
Which of the following statements about economic surplus is correct?
Economic surplus is the sum of consumer surplus and producer surplus
ExplanationEconomic surplus encompasses both consumer and producer benefits in a market.
#10
In a perfectly competitive market, what condition leads to the maximization of economic surplus?
When the quantity supplied equals the quantity demanded
ExplanationMaximization of economic surplus occurs when supply equals demand, leading to efficiency.
#11
What is the relationship between economic surplus and deadweight loss?
They are inversely related
ExplanationDeadweight loss occurs when economic efficiency is not achieved, leading to a decrease in economic surplus.
#12
Which of the following accurately describes economic efficiency?
Achieving the highest possible level of economic surplus
ExplanationEconomic efficiency is achieved when resources are allocated to maximize the total benefit to society.
#13
In the context of economic surplus, what does 'allocative efficiency' refer to?
When resources are allocated to their highest-valued use
ExplanationAllocative efficiency ensures that resources are allocated in a way that maximizes overall welfare.