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If a market is in equilibrium, is it necessarily true that all buyers and all sellers are satisfied with the market price? Briefly explain

** my thoughts, while I am not entirely sure: I would assume that this would be the case because it includes the middle point between the marginal cost and marginal benefit. Otherwise, put - the max the consumer is willing to pay and the minimum the seller is willing to take. The market being in equilibrium would suggest a compromise between these two. Just checking my answer

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manhokwe tawanda
manhokwe tawandaLv10
29 Sep 2019

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Related questions

1.

In a perfectly competitive market, in the long run, the marginal cost of a firm becomes equal to its minimum average total cost.

A) True
B) False

2.

Generally, The price a firm charges for its product is equal to its total revenue divided by the number of units sold.

A) True
B) False

3.

In a perfectly competitive firm to maximize profit a firm must make sure that the price it charges does not exceed its marginal cost.

A) True
B) False

4.

Firms in a competitive market can never make economic profits while they may make biasness (accounting) profits.

A) True
B) False

5.

When a perfectly competitive firm is making a positive economic profit its average revenue must be greater than its average total cost.

A) True
B) False

6.

To maximize its profit a firm always produces at the quantity level where it can charge the highest price and earn the greatest revenue; this strategy is consistent with setting is MC equal to price.

A) True
B) False

7.

When a firm in a competitive market is making a positive economic profit its business profit may be positive or negative.

A) True
B) False

8.

In a perfectly competitive market new entries could result in increases in input prices thus making production costs go up.

A) True
B) False

9.

In a perfectly competitive market, in the long run, each firm produces the maximum amount it can produce and charges the lowest price possible. That is why we consider competitive markets efficient.

A) True
B) False

10.

A monopolist always under-produces and charges a price higher than its MC.

A) True
B) False

11.

As the only supplier in the market a monopolist can charge any price it wishes and buyers have no choice but to pay.

A) True
B) False

12.

The marginal revenue is the additional revenue generated by the last unit of labor hired.

A) True
B) False

13.

The price a monopolist charges may or may not be above its average cost but it is always above its MR.

A) True
B) False

14.

When demand curve is a downward-sloping straight line (linear) marginal revenue will be greater than MC at all output leveles.

A) True
B) False

15.

By setting its MR equal to its MC a monopolist determines the output that would maximize its profit.

A) True
B) False

16.

In the long run each competitive firm would produce at the quantity level where its MC is equal to its MR as well as its ATC.

A) True
B) False

17.

A monopoly always makes an economic profit.

A) True
B) False

18.

When a monopoly's ATC is equal to the price it charges it is making normal economic profits.

A) True
B) False

19.

When a monopoly is making a zero economic profit still its MR>ATC.

A) True
B) False

20.

An increase in demand would enable a monopolist to raise its price while reducing its output.

A) True
B) False

21.

The market supply curve in an increasing-cost industry is:

A) a. upward sloping
B) b. downward sloping
C) c. vertical
D) d. horizontal
E) e. none of the above

22.

The total producer surplus is measured by:

A) a. the area between supply and demand curves.
B) b. the difference between the price the consumer is willing and able to pay and the price suppliers wish to charge to maximize their profits.
C) c. the area between the price consumers actually pay and the demand curve.
D) d. the area between the equilibrium market price and the supply curve.
E) e. the consumer willingness to pay as reflected by the equilibrium market price.

23.

. Economists measure economic (social) welfare by the

A) a. net consumer surplus
B) b. sum of consumer and producer surplus
C) c. sum of the net profits made by the industry's competitive firms
D) d. price consumers are willing to pay for one additional unit of a good
E) e. difference between the total consumer surplus and total producer surplus

1. Suppose that there is a tax of $1 per unit, and the elasticity of supply is 3 and the elasticity of demand is 2 (in absolute value). How much of the $1 tax is paid by sellers?

$0.60

$0.40

$0.75

$0.67

2. In Market X, the external benefit of consumption is $5. In Market Y, the external cost of consumption is $10. Efficiency in both markets could be achieved by:

a tax of $5 in Market X and a subsidy of $10 in Market Y.

subsidizing both markets.

taxing Market Y and subsidizing Market X.

taxing both markets.

3.Economic theory suggests that a natural monopoly should be:

eliminated whenever it arises.

regulated to take advantage of economies of scale.

left alone to operate with excess capacity.

taken over by the government.

4.When the size of the production is the most efficient:

total cost is at the minimum.

average cost is at the minimum.

marginal cost is at the minimum.

fixed cost is at the minimum.

5.A firm should exit the industry if which of the following conditions apply?

TR > TC

P < AC

Lifetime expected profit is positive.

Prices are low now but expected to rise.

6.Figure: Costs

Reference: Ref 11-6

(Figure: Costs) Use the figure. At a price of $20, the firm earns profit of:

$75.

$300.

$225.

$0, because P = MC at P = $20.

7.When external benefits are present, the market price is ________, however when external costs are present, the market price is ________.

too low; too high

equal to the efficient price; too low

too high; too low

equal to the efficient price; too high

8.Which of the following statements is TRUE?

I. The EPA's tradeable allowances program for sulfur dioxide establishes property rights to pollute and helps reduce transaction costs by distributing allowances, maintaining databases, and monitoring emissions.

II. One criticism of tradeable allowances is that they prohibit non-businesses and environmental groups from purchasing the allowances.

III. The tradeable allowances for sulfur dioxide have performed poorly because electricity output has increased, causing a rise in sulfur dioxide levels.

I only

II and III only

I, II, and III

III only

9.Price floors make it illegal to compete for more customers by lowering prices, so firms compete by offering customers:

various options.

more quantity.

more discount.

higher quality.

10.Figure: Government Price Controls

Reference: Ref 8-3

(Figure: Government Price Controls) Refer to the figure. If the government sets the price ceiling at $31, there will be:

a shortage of 15 units.

a surplus of 15 units.

a supply of 20 units.

no effect on the market.

11.In which of these instances does price function as a signal in the market?

Suppliers invest more in exploration when the price of oil increases.

Consumers complain of price gouging as the price of oil skyrockets.

Government imposes price controls on the skyrocketing price of oil.

All of the answers are correct.

12.Ethanol and sugar are both made from sugar cane, and ethanol can be used as substitute fuel for oil. Increasing oil prices cause the demand for ethanol to increase. This will cause the ______ sugar to ______ and its price to ______.

demand for; decrease; decrease

supply of; increase; increase

supply of; decrease; increase

demand for; increase; increase

13.Why do cotton growers spend billions of dollars to dam rivers and transport water hundreds of miles to grow cotton in California deserts?

Cotton growers in California don't pay payroll taxes.

The water used to grow California cotton is highly subsidized by the government.

Cotton growers in California are mostly operated as nonprofit enterprises.

The water used to grow California cotton is high in mineral contents, making for a bigger cotton yield.

14.Suppose that the equilibrium price in the market is $10. If the current market price is $7.50:

the equilibrium price will fall to $7.50.

competition among buyers will increase the current price.

the current price will fall below $7.50 as sellers compete for market share.

There is not enough information provided to answer the question.

15.Which of the following would increase the demand for beef?

lower pork prices

higher consumer income

higher prices of feed grains used to feed beef cattle

an increase in the price of beef

16.A change in quantity supplied is reflected by a movement along the same supply curve while a change in supply refers to a shift in the entire supply curve.

True

False

17.Table: Production in the United States and Germany

Labor units required to produce:

One Clock

One Sofa

United States

2

5

Germany

3

9

Reference: Ref 2-8

(Table: Production in the United States and Germany) According to the table, the opportunity cost of producing one sofa in the United States is _________, and the opportunity cost of producing one sofa in Germany is _______.

two clocks; three clocks

10 clocks; 27 clocks

0.4 clocks; 0.33 clocks

2.5 clocks; three clocks

18.Mark values his drum set at $800 and Ella values her guitar at $1,000. Suppose that Mark trades his drum set for Ella's guitar.

This trade makes Ella worse off by $200.

This trade makes Mark better off by $200.

Mark must value Ella's guitar for at least $1,000, and Ella must value Mark's drum set for at least $800.

This trade creates value by moving the guitar and drum set to people who value them more.

1. Suppose that there is a tax of $1 per unit, and the elasticity of supply is 3 and the elasticity of demand is 2 (in absolute value). How much of the $1 tax is paid by sellers?

$0.60

$0.40

$0.75

$0.67

2. In Market X, the external benefit of consumption is $5. In Market Y, the external cost of consumption is $10. Efficiency in both markets could be achieved by:

a tax of $5 in Market X and a subsidy of $10 in Market Y.

subsidizing both markets.

taxing Market Y and subsidizing Market X.

taxing both markets.

3.Economic theory suggests that a natural monopoly should be:

eliminated whenever it arises.

regulated to take advantage of economies of scale.

left alone to operate with excess capacity.

taken over by the government.

4.When the size of the production is the most efficient:

total cost is at the minimum.

average cost is at the minimum.

marginal cost is at the minimum.

fixed cost is at the minimum.

5.A firm should exit the industry if which of the following conditions apply?

TR > TC

P < AC

Lifetime expected profit is positive.

Prices are low now but expected to rise.

6.Figure: Costs

Reference: Ref 11-6

(Figure: Costs) Use the figure. At a price of $20, the firm earns profit of:

$75.

$300.

$225.

$0, because P = MC at P = $20.

7.When external benefits are present, the market price is ________, however when external costs are present, the market price is ________.

too low; too high

equal to the efficient price; too low

too high; too low

equal to the efficient price; too high

8.Which of the following statements is TRUE?

I. The EPA's tradeable allowances program for sulfur dioxide establishes property rights to pollute and helps reduce transaction costs by distributing allowances, maintaining databases, and monitoring emissions.

II. One criticism of tradeable allowances is that they prohibit non-businesses and environmental groups from purchasing the allowances.

III. The tradeable allowances for sulfur dioxide have performed poorly because electricity output has increased, causing a rise in sulfur dioxide levels.

I only

II and III only

I, II, and III

III only

9.Price floors make it illegal to compete for more customers by lowering prices, so firms compete by offering customers:

various options.

more quantity.

more discount.

higher quality.

10.Figure: Government Price Controls

Reference: Ref 8-3

(Figure: Government Price Controls) Refer to the figure. If the government sets the price ceiling at $31, there will be:

a shortage of 15 units.

a surplus of 15 units.

a supply of 20 units.

no effect on the market.

11.In which of these instances does price function as a signal in the market?

Suppliers invest more in exploration when the price of oil increases.

Consumers complain of price gouging as the price of oil skyrockets.

Government imposes price controls on the skyrocketing price of oil.

All of the answers are correct.

12.Ethanol and sugar are both made from sugar cane, and ethanol can be used as substitute fuel for oil. Increasing oil prices cause the demand for ethanol to increase. This will cause the ______ sugar to ______ and its price to ______.

demand for; decrease; decrease

supply of; increase; increase

supply of; decrease; increase

demand for; increase; increase

13.Why do cotton growers spend billions of dollars to dam rivers and transport water hundreds of miles to grow cotton in California deserts?

Cotton growers in California don't pay payroll taxes.

The water used to grow California cotton is highly subsidized by the government.

Cotton growers in California are mostly operated as nonprofit enterprises.

The water used to grow California cotton is high in mineral contents, making for a bigger cotton yield.

14.Suppose that the equilibrium price in the market is $10. If the current market price is $7.50:

the equilibrium price will fall to $7.50.

competition among buyers will increase the current price.

the current price will fall below $7.50 as sellers compete for market share.

There is not enough information provided to answer the question.

15.Which of the following would increase the demand for beef?

lower pork prices

higher consumer income

higher prices of feed grains used to feed beef cattle

an increase in the price of beef

16.A change in quantity supplied is reflected by a movement along the same supply curve while a change in supply refers to a shift in the entire supply curve.

True

False

17.Table: Production in the United States and Germany

Labor units required to produce:

One Clock

One Sofa

United States

2

5

Germany

3

9

Reference: Ref 2-8

(Table: Production in the United States and Germany) According to the table, the opportunity cost of producing one sofa in the United States is _________, and the opportunity cost of producing one sofa in Germany is _______.

two clocks; three clocks

10 clocks; 27 clocks

0.4 clocks; 0.33 clocks

2.5 clocks; three clocks

18.Mark values his drum set at $800 and Ella values her guitar at $1,000. Suppose that Mark trades his drum set for Ella's guitar.

This trade makes Ella worse off by $200.

This trade makes Mark better off by $200.

Mark must value Ella's guitar for at least $1,000, and Ella must value Mark's drum set for at least $800.

This trade creates value by moving the guitar and drum set to people who value them more.

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