Reading 14: Efficiency and Equity LOS a习题精选 benefit, div, efficient, resources, quantity

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LOS a: Explain the various means of markets to allocate resources, describe marginal benefit and marginal cost, and demonstrate why the efficient quantity occurs when marginal benefit equals marginal cost.

If the marginal benefit of the last unit of a good or service consumed was $25, the marginal benefit of the next unit consumed is most likely to be:

A) $25.

B) $26.

C) $24.

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In most cases, the marginal benefit of a good or service decreases as the quantity consumed increases. So, $24 is the most likely answer. This principle is called decreasing marginal benefit.

 

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A columnist is discussing how the efficient quantity of output for a good or service is determined. These two statements appear in his column:

Statement 1: The equilibrium quantity of production for a good or service can be considered efficient as long as the marginal social benefit of that quantity is greater than its marginal social cost.

Statement 2: Subsidies and quotas typically result in production of a good or service in quantities at which the marginal social cost exceeds the marginal social benefit.

With respect to these statements:

A) both are correct.

B) only one is correct.

C) both are incorrect.

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Statement 1 is incorrect. The efficient quantity of output is the quantity at which the marginal social benefit (demand) is equal to the marginal social cost (supply). Statement 2 is also incorrect. Subsidies typically lead to overproduction, where the marginal social cost at the quantity produced is greater than the marginal social benefit. Quotas, however, typically limit production to a level below equilibrium, such that the marginal social benefit at the quantity produced is greater than the marginal social cost.

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Marginal benefit is most accurately described as the:

A) benefit from producing one more unit of a good or service.

B) benefit that must be forgone in order to consume an additional unit of a good or service.

C) benefit an individual gets from consuming an additional unit of a good or service.

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Marginal benefit is the benefit a consumer receives from consuming an additional unit of a good or service. It is quantified as the maximum price that a consumer is willing to pay for one additional unit of a good or service.

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Marginal cost is most accurately defined as the:

A) cost that a consumer must incur to consume an additional unit of a good or service.

B) cost of producing one more unit of a good or service.

C) value of the good or service that a consumer must forego in order to consume an additional unit of a good or service.

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Marginal cost is the cost of producing one more unit of output.