1. Social welfare is dened as a] equilibrium price times equilibrium quantity. b] total benefits minus total costs. c] marginal benets minus marginal costs. {1] consumer surplus minus producer surplus. e] producer surplus minus consumer surplus. 2. Which one of the following statements is false? a] Social welfare is a concept that economists seek to quantify in monetary terms. b] Consumer surplus is defined as one's maximum willingness to pay minus price. c] Consumer surplus is a concept that economists seek to My in monetary terms. {1] Welfare analysis can be used to evaluate various policy scenarios. e] Social welfare is the same thing as social well-being. 3. Suppose Tyra's maximum willingness to pay for a pair of shoes is $100. The price of the shoes is $55. What is her consumer surplus in this example? a] 5105 b) $60 c] $45 {1) 515 e] $5 4. Suppose Amon's maximum willingness to pay for a pair of jeans is $50. The price of the jeans is $55. What: is his consumer surplus in this example? a] $80 b) $45 c] $35 {1) $5 e] None 5. Consumer surplus is the area a] below the demand curve but above the supply curve. b) above the demand curve but below the supply curve. c] below the demand curve but above price. {1] above the demand curve but below price. e) below price but above the supply curve. 6. The term economists use to describe a small change is a] an elastic change. b] an inelastic change. c] a welfare change. {1] a marginal change. e] a surplus change. ?. Another name for a demand curve is a] a marginal bene fit curve. b] a total benet curve. c] a marginal cost curve. {1] a marginal surplus curve. e] a total cost curve. 8. Producer surplus is equivalent to ... a) marginal costs. b) total costs. c) marginal benefits. d) social welfare. e) profits. 9. Producer surplus for any unit sold is equal to ... a) The vertical distance between the demand curve and the supply curve. b) The vertical distance between the supply curve and price. c) The vertical distance between the demand curve and price. d) The horizontal distance between the demand curve and the supply curve. e) The horizontal distance between the supply curve and price. 10. A socially efficient outcome in a market ... a) occurs where the marginal benefits are greatest. b) occurs where the marginal net benefits are greatest. c) occurs where the distance between the demand curve and the supply curve is the greatest. d) occurs where consumer surplus equals producer surplus. e) occurs where the marginal benefits equal the marginal costs. 11. Which one of the following statements is true? a) A price floor will always increase consumer surplus. b) A price ceiling will always increase consumer surplus. c) A price floor will always decrease consumer surplus. d) A price ceiling will always decrease consumer surplus. e) A price floor will always increase social welfare. 12. Which one of the following statements is true? a) A price floor will always increase producer surplus. b) A price ceiling will always increase producer surplus. c) A price floor will always decrease producer surplus. d) A price ceiling will always decrease producer surplus. e) A price ceiling will always increase social welfare. 13. In The Wealth of Nations, Adam Smith argued that the interests of society are frequently promoted by... a) government regulation. b) price ceilings and floors. c) high tax rates. d) individual self-interest. e) import and export quotas.14. Suppose that Samantha purchases one pound of chicken, which is worth $10 to her, costs $8 to produce, and imposes $5 in environmental damages on people who live near the chicken farm. This purchase... a] raises social welfare by $5. b] raises social welfare by $3. c] raises social welfare by $2. d] reduces social welfare by $2. e] reduces social welfare by $3. 15. A market demand curve does not illustrate... a. at what price consumers would purchase a given quantity of the good. b. the quantity ofthe good that will be demanded at a particular price. c. the price and quantity of the good that maximize the net benets to society. d. the marginal benets of a good, measured in monetary units. e. individuals' willingness to pay for a good. 16. Which of the following statements is false in the welfare analysis model presented in Chapter 5? a. The intersection of the supply and demand curves provides the price and quantity that can theoretically maximize the net benets in a market. b. The demand curve represents the marginal benets ofa good or service. c. The net benets in a market are equal to the sum of the consumer surplus and the producer surplus. d. The net benets in a market are equal to the total benets minus the total costs. e. Social welfare analysis focuses on the fairness of the distribution of benets in a market. 17. Although everyone is free to participate in markets, some people's preferences are weighed more heavily than others. Markets operate according to the principle a. one person, one vote. b. one dollar one vote. c. from each according to their ability, to each according to their need. d. the greatest happiness for the greatest number. e. do onto others as you would have them do onto you. 18. A market failure occurs when... a. a market leads to an unfair outcome. b. a market generates consumer surplus but no producer surplus. c. an unregulated market produces a socially ineicient outcome. {1. a price floor results in deadweight loss. M price ceiling shifts surplus from producers to consumers. 19. There is debate among economists about whether minimum wage hikes are good for workers. Based on welfare analysis, raising the minimum wage is most likely to increase workers' surplus if.... a. employers' surplus is greater than workers' surplus. b. The demand for labor is very elastic. c. the demand for labor is very inelastic. d. the supply of labor is very elastic. e. the supply oflabor is very inelastic 2|]. Suppose that John is willing to pay a maximum of 5 dollars per cup of regular coffee at a coffee shop on campus. What is John's consumer surplus from buying one cup of cotfee if the actual price of coffee is 3 dollars per cup? a. $5 b. $3 c. $2 {1. $1 e. $0 21.Suppose Luis, Madeleine, and Emma are the only consumers in the entire coffee market, and that their maximum willingness to pay for a cup of coffee is $2, $3, and $2 respectively. Assume that the price of coffee is $2 per cup and that they each buy one cup of coffee. What is the market consumer surplus? a. $? b. $5 c. $3 {1. $1 e. $0 22. The net social benets ofa market are equal to a. the difference between consumer and producer surplus. b. quantity demanded times the price. c. the sum of consumer and producer surplus. {1. total revenue minus total cost. e. consumer surplus times producer surplus. 23. Can we conclude from welfare analysis that unregulated markets are always efficient and that the only justification for government intervention is to further other social goals such as justice or ecological sustainability? a. Yes, because unregulated efcient markets are the rule rather than the exception. b. No, because there are situations in which unregulated markets are not efficient. c. Yes, because government intervention is always bad for the economy. d. No, because ecological sustainability should be left to the markets also. e. No, because the justice system should be privatized and work under the principles of supply and demand. 24. Regarding welfare analysis, which of the following assertions is not correct? a. Maximizing efficiency is concerned only with increasing overall social benefits. b. Maximizing efficiency is not concerned with the allocation of social benefits across different income groups. c. By looking at total benefits, we avoid making subjective judgments about who receives those benefits. {1. An emphasis on efficiency implicitly views the current distribution of economic re sources as acceptable. e. All unregulated markets are efficient. 25. Consumer sovereignty means that a) consumers have perfect information about alternatives. b] consumers' needs and wants determine the shape of all economic activities. c] consumers are significantly influenced by their reference groups. {1] consumers\" purchasing decisions are a trial-and-error process. e] consumers are motivated to maximize their utility