Section 3

Question 1

Allocation of resources is efficient if it

Answer 1

Maximizes total surplus

Question 2

Efficiency means three things

Answer 2

1. Raising or lowering a quantity of a good would not increase total surplus
2. The goods are being produced by the producers with lowest cost
3. The goods are being consumed by the buyers who value the most highly

Question 3

How do we measure society’s well-being

Answer 3

By calculating the total surplus where supply is the cost to sellers and demand is the willingness to buy

Question 4

If we have a small slope or close to zero what does this say about the demand curve

Answer 4

The demand curve would be relatively flat

The number bought is greatly affected by the price

Question 5

If we have a large slope what can we say about it

Answer 5

The demand curve is relatively steep

The number by is only slightly affected by the change in price

Question 6

What is efficiency

Answer 6

Total surplus =. (Value to buyers) - (cost to sellers)