Review 1.--Assuming a market originally in equilibrium, an increase in the numbe

Question

Review 1.--Assuming a market originally in equilibrium, an increase in the number of buyers would lead to: a. price increase, quantity increase b. price increase, quantity decrease c. price decrease, quantity increase d. price decrease, quantity decrease 2The law of diminishing marginal utility states that: a the addtional utity frorm consuming additional units of a good eventually declines b. marginal utility can be compared objectively for different persons c. Both of the above d. Neither of the above Perfect competition results in: a. the most efficient quantity of output b. a quantity of output where price exceeds marginal cost c. a quantity of output where marginal social benefit exceeds marginal social 3. cost d. All of the above In comparison to perfect competition, a monopoly market structure results in a. more output b. higher price c. Both of the above d. Neither of the above 5.--wage rates in different labor markets differ because: a. there are differences in nonmoney aspects of jobs b. all workers generate the same MRP c. Both of the above d. Neither of the above 6. Economic rent: allocates resources to their most valuable use a. b. provides incentive for resource owners to develop the productivity of their resources c. Both of the above d. Neither of the above Instructor's Manual Quiz Review

Explanation / Answer

1. Assuming a market originally in equlibrium, an increase in the number of buyers would lead to :

d. price increase, quantity increase

Explanation
Since it is a equlibrium market, the supply and demand are equal. Here if the buyers increase that means the demand increases and supply being unchanged that will lead to increase in price and increase in quanity.

2. The law of diminishing marginal utility states that:

a. the additional utility from consuming additional units of a good eventually declines...

Explanation
The law of diminishing marginal utility states that while consumption of other products are kept constant, when a persnon increases the consumption of a particular product then there is a decline in the marginal utility of that additional unit of product.

3. PErfect competition results in

a. the most efficient quantity of output

Explanation
Perfect competition is a state where buyers and sellers are present in high numbers who all are well informed about the market and there is no monopoly and the prices are not at all in the control of individual buyers and sellers.
As everything happens by its own mechanism there is no intereference and therfore perfect competiton gives allocative and prodcutive efficiency.

4. In comparison to perfect competition, a monopoly market structure results in:

b. higher price

Explanation
In perfect competition price is equal to marginal cost, as all the buyers and sellers are well informed and they do not have any control over price. While in monopoly the price is higher as there is only one seller in the market for a particular product and the buyers have to buy them so the price is determined by the seller only, so it increases.

5. Wage rates in different labor markets differ because:

a. there are differences in nonmoney aspects of jobs

Explanation
Wages are paid to workers as per their job. There are difference in the capacity, ability to peform a job, efforts taken to do a job and the working knowledge of a worker thus these nonmoney aspects are different leading to wages differences.

6. Economic rent:

b. provides incentive for resource owners to develop the productivity of their resources.

Explanation
It is the excess amount paid over the amount of the property, goods or services. This can be termed as incentive over the original value of the product, therefore it can be used to develop the productivity of the resources as it is extra amount.

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