Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (2nd Edition)
2nd Edition
ISBN: 9780134641904
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 7, Problem 7P
To determine
The outcome in the vintage button market is Pareto or not.
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Students have asked these similar questions
The first Welfare Theorem states that, invariably, a competitive market results in an efficient allocation of resources and thus maximizes social surplus.
True or False?
In a market, the consumer surplus is 800,000 units and the producer surplus is 100,000. Which of the following statement is true?
Group of answer choices
The market is efficient since marginal benefit is equal to marginal cost.
The market is inefficient since consumer surplus is greater than producer surplus and marginal benefit is equal to marginal cost.
The market is efficient since consumer gain more than the producer.
The market is inefficient since consumer surplus is greater than producer surplus.
Social efficiency requires that, if Q 1 units are bought and sold in a market, then the ____ of Q 1 equals the social marginal cost of Q 1.
A.
Pareto-efficiency
B.
social welfare
C.
social marginal benefit
D.
social net-gain
Chapter 7 Solutions
Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (2nd Edition)
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- consider a market with typically shaped supply and demand curves. Suppose that at the market equilibrium, demand is relatively more price inelastic as compared to supply. Which of the following is true: 1. net social surplus all goes to suppliers 2. consumers' surplus is larger than producers' surplus 3. producers' surplus is larger than consumers' surplus 4. consumers' and producers' surplus are equalarrow_forwardBoth a home buyer (A) and seller (B) of a house agree on a price of 2.5 million dollars. A values the house at 3 million dollars and B values the house at 2 million dollars. Before the date of delivery of the keys, C offers to buy this house from B for 3 million dollars because C values the house at 4 million. (a) Assuming transaction costs are zero (0), fully explain what actions A, B, and C will take and how social surplus will be distributed among them if A has the remedy of expectation damages against B. (b) Assuming transaction costs are zero (0), fully explain what actions A, B, and C will take and how social surplus will be distributed among them if A has the remedy of specific performance against B. (c) Assuming transaction costs are zero (0), fully explain what actions A, B, and C will take and how social surplus will be distributed among them if A has no remedy against B. (d) How high can transaction costs be before it matters which remedy A has?arrow_forwardOnce the buyer and seller agree on a price and exchange the product, a total surplus is "realized" as the "gains from trade." True or false?arrow_forward
- An allocation of goods is said to be Pareto-optimal (or Pareto-efficient) if no ____ are possible. A. Pareto-improvements B. Market systems C. Pareto-reductions D. Alfredo-deductionsarrow_forwardIn the provided graph, the equilibrium point in the market is where the S and D curves intersect. At equilibrium, consumer surplus would be represented by the area Multiple Choice a + b. a + b + c. a. b + c.arrow_forwardLet there be 3 people in the economy. Let the utility function of person 1 be u=min(x,y), utility of person 2 be = max(x,y) and the utility function of the 3rd consumer be U=x+y. Let the endowment points be A(5,5), B(5,5) c(5,5). An example of a pareto efficient allocation is: A) A(5,5), B(5,5) c(5,5) B) A(5,5), B(5,0) c(10,5) C) A(5,5), B(0,5), c(5,10) D) None of the above The correct answer is D. Explain clearly. Also, please state the pareto effient outcome not mentioned in the options (if it exists).arrow_forward
- When a market is in equilibrium, which of the following is not correct Select one: a. the price determines which buyers and sellers participate in the market. b. those buyers who value the good more than the price choose to buy the good. c. those sellers whose costs are less than the price choose to produce and sell the good. d. the marginal cost of producing the last unit of the good is equal to consumers' marginal benefit from consuming the last unit e. the opportunity cost of producing the last unit of the good is equal to the absolute advantage of producing it.arrow_forwardThe market mechanism that yields an efficient outcome tries on all of the following actions EXCEPT a) consumers act in their own self interest to maximize their consumption b) firms act in their own self interest to maximize profit c) firms coordinate with each other on price d) firms compete with each other for consumer purchasesarrow_forwardwhich statement is correct If a good is not being produced by sellers with the lowest cost, then the market reflects inefficiency in the allocation of resources. Welfare economics deals with how the allocation of resources affects economic well-being. The willingness to pay is a measure of how much the buyer values the good. The marginal seller is the seller who would leave the market first if the price were any higher.arrow_forward
- Consider the market for apartments. The market price of each apartment is $375,000, and each buyer demands no more than one apartment. Suppose that Rajiv is the only consumer in the apartment market. His willingness to pay for an apartment is $600,000. Based on Rajiv's willingness to pay, the following graph shows his demand curve for apartments. Shade the area representing Rajiv's consumer surplus using the green rectangle (triangle symbols). Part 2 Now, suppose another buyer, Simone, enters the market for apartments, and her willingness to pay is $450,000. Based on Simone's and Rajiv's respective willingness to pay, plot the market demand curve on the following graph using the blue points (circle symbol). Next, shade Rajiv's consumer surplus using the green rectangle (triangle symbols), and shade Simone's consumer surplus using the purple rectangle (diamond symbols). Note: Plot your points as a step function in the order in which you would like them connected. Line…arrow_forwardThe figure illustrates the rental housing market, where there is an outward shift in the demand curve. In response, the city authority imposes a rent ceiling of €500. Which of the following statements is correct? Select one: a. In the long run, building more houses would remove the need for the rent ceiling. b. The market clears at €500 with 12,000 houses. c. Removing the rent ceiling leads to an inefficient outcome. d. Banning sub-letting makes the outcome Pareto efficient.arrow_forwardConsumer surplus indicates that:A. more will be demanded at lower than at higher prices.B. it is impossible to increase consumer wellbeing by changing the way in which income is spent.C. consumers often get more value from a good than is represented by the price.D. the allocation of resources is decided by the interaction of buyers and sellers.E. market equilibrium can always be attained.arrow_forward
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