..6...objective.

Question 1 Which best describes consumer surplus? a) The price consumers are willing to pay for a unit b) The cost of providing a unit c) The profits made by a firm d) The difference the price a consumer pays for an item and the price he/she is willing to pay Question 2 In the free market the price mechanism: a) Acts as a signal to producers b) Can provide an incentive to reallocate resources c) Acts as a rationing device d) Is set by the governmentf Question 3 Community surplus equals: a) Producer surplus minus consumer surplus b) Profits plus utility c) Total utility minus plus profit d) Consumer surplus plus producer surplus Question 4 Monopoly power: a) Is likely to increase consumer surplus b) Is likely to increase community surplus c) Is likely to lead to higher producer surplus d) Is likely to lead to lower prices and lower output Question 5 A negative production externality means a) The social marginal cost is greater than the private marginal cost b) The social marginal benefit is greater than the private marginal cost c) The social marginal cost is greater than the private marginal benefit d) The social marginal cost is less than the private marginal cost Question 6 A positive externality occurs when: a) The social marginal cost is greater than the private marginal cost b) The social marginal benefit is greater than the private marginal benefit c) The social marginal cost is greater than the private marginal benefit d) The social marginal cost is less than the private marginal cost Question 7 A merit good a) Is a public good b) Involves a negative externality c) Is overprovided in the free market d) Is under provided in the free market Question 8 A demerit good a) Is a public good b) Involves a positive externality c) Is overprovided in the free market d) Is under provided in the free market Question 9 A public good will probably: a) Be underprovided in the free market b) Be overprovided in the free market c) Not be provided in the free market d) Has no opportunity cost Question 10 Asymmetric information occurs when a) Information is free b) Buyers and sellers have access to different information c) Community surplus is maximized d) Community surplus is minimized