1] When markets are efficient and there are no externalities, the market equilibrium achieves allocative efficiency because_____.

a.The sum of consumer surplus and producer surplus is maximized

b.Consumer surplus exceeds producer surplus by the largest possible amount

c.More social surplus is allocated to low-income groups and less to high-income groups

d.All of the answers above are correct.

2]When we use published values for slopes or elasticities and pairs of price-quantity observations to derive or extrapolate a demand equation, which of the following is the LEAST problematic issue/assumption?

a.That the demand equation has a negative slope. b.That the published slopes and elasticities are from different countries and different time periods. c.That the demand equation takes on a linear, point-slope functional form. d.That a given pair of price-quantity observation may have captured income changes and correspond to a shifted demand.