An efficiency loss (or deadweight loss):
A. is measured as the combined loss of consumer surplus and producer surplus.
B. results from producing a unit of output for which the maximum willingness to pay exceeds
the minimum acceptable price.
C. can result from underproduction, but not from overproduction.
D. can result from overproduction, but not from underproduction.
Answer: A
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If a society only cares about efficiency and not equity, then
A) all points on the contract curve yield the same level of social welfare. B) it will not rely on competitive markets to allocate goods. C) it will maximize the utility of its worst-off member. D) an equitable outcome is impossible.
Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfares are $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Chicago-Atlanta round-trip airfares are $450. If the Chicago-Atlanta round-trip air fare were $350, should you use the coupon to go to Miami?
A. Yes, your economic surplus would be $400. B. Yes, your economic surplus would be $50. C. No, your economic surplus would be ?$100. D. No, your economic surplus would be ?$50.