1. Consider a free, competitive market without taxes or externalities. Which of the following statements is wrong?

a.

Market should produce where MSB=MSC.

b.Market should produce where supply equals demand.

c.

Producing more than equilibrium is inefficient because it wastes resources.

d.Producing less than equilibrium is efficient because less output leads to saving resources.

e.

deadweight loss should be zero.

2. Consider a free, competitive market. If MSB>MSC, which of the following is true? (I strongly advise you graph and properly label your response before choosing).

a.

None of the answers offered are accurate.

b.

This is a good thing, because more benefits is always efficient.

c.This is NOT efficient. We are producing too much.

d.This is NOT efficient. We are wasting resources by not producing enough.

e.It is uncertain whether this is efficient.

3. The following graph shows a free, perfectly competitive market. If a= 63, P*=30, b = 19 and Q*=107, how much is producer surplus for all the sellers in this market?

a.None of the answers offered are accurate.

b.$2354.00

c.$588.50

d.$1780.50

e.$3531.00

P in $s/unit P* D Q* Q in units/period\fPin $/unit a P* b D Q* Q in units/period