1 - Ray buys a new tractor for $118,000. He receives consumer surplus of $13,000

Question

1. 
   1 - Ray buys a new tractor for $118,000. He receives consumer surplus of $13,000 on his purchase. Ray's willingness to pay isA - $13,000B - $105,000C - $118,000D - $131,000
   
2. 2 - When a free-rider problem exists,
   A - the market will devote too few resources to the production of the good.B - the cost of the good will always be more than the benefit of the good.C - the good will not be produced.D - entrepreneurs will eventually find a way to make free-riders pay their share.

3 - At any quantity, the price given by the supply curve shows the cost of the lowest-cost seller. True False
4 - Suppose that Firms A and B each produce high-resolution computer monitors, but Firm A can do so at a lower cost. Cassie and David each want to purchase a high-resolution computer monitor, but David is willing to pay more than Cassie. If Firm A produces a monitor that Cassie buys but David does not, then the market outcome illustrates which of the following principles? (i) Free markets allocate the supply of goods to the buyers who value them most highly, as measured by their willingness to pay. (ii) Free markets allocate the demand for goods to the sellers who can produce them at the least cost.

A - (i) only B - (ii) only C - both (i) and (ii) D - neither (i) nor (ii)

1. 
   

1 - Ray buys a new tractor for $118,000. He receives consumer surplus of $13,000 on his purchase. Ray's willingness to pay isA - $13,000B - $105,000C - $118,000D - $131,000
3 - At any quantity, the price given by the supply curve shows the cost of the lowest-cost seller. True False
4 - Suppose that Firms A and B each produce high-resolution computer monitors, but Firm A can do so at a lower cost. Cassie and David each want to purchase a high-resolution computer monitor, but David is willing to pay more than Cassie. If Firm A produces a monitor that Cassie buys but David does not, then the market outcome illustrates which of the following principles? (i) Free markets allocate the supply of goods to the buyers who value them most highly, as measured by their willingness to pay. (ii) Free markets allocate the demand for goods to the sellers who can produce them at the least cost.

A - (i) only B - (ii) only C - both (i) and (ii) D - neither (i) nor (ii)

Explanation / Answer

1

$131,000

2

C - the good will not be produced.

3

False

4

B - (ii) only

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