Practice Questions
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Which of the following best describes price discrimination in terms of allocative efficiency?
Price discrimination means charging different prices to different people. Other options are incorrect because Some might think a single price is fair ...
How does the concept of price elasticity relate to allocative efficiency in the context of marginal benefit?
When price elasticity is high, consumers can change their buying habits easily. Other options are incorrect because This suggests that higher price el...
How does an increase in price elasticity of demand affect allocative efficiency in a competitive market?
When demand is more elastic, consumers change their buying habits more with price changes. Other options are incorrect because Some might think that h...
In a perfectly competitive market, how does the price elasticity of demand affect the allocative efficiency when marginal benefit equals marginal cost?
When demand is more elastic, consumers are more responsive to price changes. Other options are incorrect because Some might think that less responsive...
In a perfectly competitive market, how is allocative efficiency achieved, and what is the impact on consumer surplus and deadweight loss when the price is set above the equilibrium price?
Allocative efficiency happens when the price is at equilibrium. Other options are incorrect because Some might think higher prices help consumers, but...
What is allocative efficiency in the context of economics?
Allocative efficiency happens when resources are used to make people as happy as possible. Other options are incorrect because Some might think that s...
What is the condition for allocative efficiency in a perfectly competitive market?
Allocative efficiency happens when the price of a product matches the cost to make one more unit. Other options are incorrect because Some might think...
What is the primary effect of achieving allocative efficiency in a market concerning consumer surplus?
When a market is allocatively efficient, resources are used in the best way. Other options are incorrect because Some might think that reducing produc...
Which of the following conditions indicate that a municipality has achieved allocative efficiency in pricing a public bridge? Select all that apply.
Other options are incorrect because The price should equal the cost of adding one more user; Setting a high price means fewer people can afford it....
Which of the following sequences best represents the steps a municipality should take to achieve allocative efficiency in its pricing strategy for a bridge?
To achieve allocative efficiency, the price should match the marginal cost. Other options are incorrect because This option suggests setting a price f...
Which of the following scenarios best illustrates a situation of allocative efficiency in a market?
When a public park charges an entrance fee equal to its maintenance cost, it covers expenses without wasting resources. Other options are incorrect be...
Allocative Efficiency : Optimal Pricing :: Market Monopoly : ?
In a market monopoly, one company controls the whole market. Other options are incorrect because Some might think that a monopoly would have competiti...
If a municipality sets the price of bridge access at the same level as its marginal cost, what is the likely outcome?
Setting the price at marginal cost means the price reflects the actual cost of providing access. Other options are incorrect because Some might think ...
In a scenario where a municipality sets the price of a good to achieve allocative efficiency, the price must equal the __________ to ensure optimal resource allocation.
When the price equals marginal cost, it means resources are used where they are most needed. Other options are incorrect because Total cost includes a...
A municipality has decided to set a toll for accessing a bridge it owns. To achieve allocative efficiency, what price should the municipality set for the toll, considering the bridge's marginal cost of maintenance is $3 per crossing and the demand curve indicates that consumers are willing to pay up to $5 for the crossing?
Setting the toll at $3 matches the cost to maintain the bridge. Other options are incorrect because Some might think a higher price means more profit;...
If a municipality sets the price of a bridge to achieve allocative efficiency, which of the following outcomes is most likely to occur?
When the price of the bridge equals the marginal cost, it means the cost to build one more bridge is the same as the price charged. Other options are ...
If a municipality sets the price of a bridge at the point where it equals the marginal cost of providing that bridge, what is the likely outcome in terms of resource allocation?
When the price matches the marginal cost, it means resources are used efficiently. Other options are incorrect because Some might think a low price me...
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