Assignment:
Multiple Choice
1. A market equilibrium:
• is socially optimal.
• leaves unexploited opportunities for individuals.
• might not maximize total economic surplus.
• is never socially optimal.
2. Suppose we observe a decrease in the equilibrium price of tuna and an increase in the equilibrium quantity of tuna. This is best explained by:
• a decrease in the cost of fuel used by tuna fishing boats.
• a decrease in the tuna population in the oceans.
• a decrease in the expected future price of tuna.
• an increase in the price of salmon, a substitute for tuna.
3. If the supply curve and the demand curve both shift to the left, then the new equilibrium:
• quantity will be higher, but the direction of the price change is uncertain.
• price will be lower, but the direction of the change in quantity is uncertain.
• price will be higher, but the direction of the change in quantity is uncertain.
• quantity will be lower, but the direction of the price change is uncertain.