Question 1

Equilibrium in a competitive market maximizes total surplus.

Accepted Answer

A) True 
 B)False  True

Question 2

Producer surplus is the area above the supply curve and below the price.

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following best explains the source of consumer surplus for a good?

Accepted Answer

A)  Many consumers would be willing to pay more than the market price for the good. 
B)  Many consumers pay prices that are greater than the equilibrium price of the good. 
C)  Many consumers think the market price of the good is greater than its cost. 
D)  Many consumers think the price elasticity of demand for the good is unit elastic. 
A)  Many consumers would be willing to pay more than the market price for the good. 
B)  Many consumers pay prices that are greater than the equilibrium price of the good. 
C)  Many consumers think the market price of the good is greater than its cost. 
D)  Many consumers think the price elasticity of demand for the good is unit elastic. A

Question 4

Other things being equal, what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve.

Accepted Answer

@#IMG-DLM& When the price of a good rises, produce

Question 5

A consumer's willingness to pay directly measures

Accepted Answer

A)  the extent to which advertising and other external forces have influenced the consumer's preferences. 
B)  the cost of a good to the buyer. 
C)  how much a buyer values a good. 
D)  consumer surplus. 
A)  the extent to which advertising and other external forces have influenced the consumer's preferences. 
B)  the cost of a good to the buyer. 
C)  how much a buyer values a good. 
D)  consumer surplus.

Question 6

The seller's cost of production is

Accepted Answer

A)  the proportion of total cost allocated to profit 
B)  the minimum amount the seller is willing to accept for a good. 
C)  the seller's producer surplus. 
D)  the maximum amount the seller is willing to accept for a good. 
E)  the seller's consumer surplus. 
A)  the proportion of total cost allocated to profit 
B)  the minimum amount the seller is willing to accept for a good. 
C)  the seller's producer surplus. 
D)  the maximum amount the seller is willing to accept for a good. 
E)  the seller's consumer surplus.

Question 7

Consumer surplus is the

Accepted Answer

A)  amount of a good consumers get without paying anything. 
B)  amount a consumer pays minus the amount the consumer is willing to pay. 
C)  amount a consumer is willing to pay minus the amount the consumer actually pays. 
D)  value of a good to a consumer. 
A)  amount of a good consumers get without paying anything. 
B)  amount a consumer pays minus the amount the consumer is willing to pay. 
C)  amount a consumer is willing to pay minus the amount the consumer actually pays. 
D)  value of a good to a consumer.

Question 8

If a benevolent social planner chooses to produce more than the equilibrium quantity of a good, then

Accepted Answer

A)  the value placed on the last unit of production by buyers exceeds the cost of production. 
B)  the cost of production on the last unit produced exceeds the value placed on it by buyers. 
C)  consumer surplus is maximized. 
D)  total surplus is maximized. 
E)  producer surplus is maximized. 
A)  the value placed on the last unit of production by buyers exceeds the cost of production. 
B)  the cost of production on the last unit produced exceeds the value placed on it by buyers. 
C)  consumer surplus is maximized. 
D)  total surplus is maximized. 
E)  producer surplus is maximized.

Question 9

Donald produces nails at a cost of €200 per ton. If he sells the nails for €350 per ton, his producer surplus per ton is

Accepted Answer

A)  €150. 
B)  €200. 
C)  €350. 
D)  €550. 
A)  €150. 
B)  €200. 
C)  €350. 
D)  €550.

Question 10

Suppose there are three identical vases available to be purchased. Buyer 1 is willing to pay €30 for one, buyer 2 is willing to pay €25 for one, and buyer 3 is willing to pay €20 for one. If the price is €25, how many vases will be sold and what is the value of consumer surplus in this market?

Accepted Answer

A)  Three vases will be sold and consumer surplus is €80. 
B)  One vase will be sold and consumer surplus is €5. 
C)  One vase will be sold and consumer surplus is €30. 
D)  Three vases will be sold and consumer surplus is €0. 
E)  Two vases will be sold and consumer surplus is €5. 
A)  Three vases will be sold and consumer surplus is €80. 
B)  One vase will be sold and consumer surplus is €5. 
C)  One vase will be sold and consumer surplus is €30. 
D)  Three vases will be sold and consumer surplus is €0. 
E)  Two vases will be sold and consumer surplus is €5.

Question 11

This table refers to five possible buyers' willingness to pay for a take-away meal. ?

$\begin{array}{|l|l|}
\hline \text { Buyer } & \begin{array}{l}
\text { Willingness To } \
\text { Pay }
\end{array} \
\hline \text { David } & € 8.50 \
\hline \text { Laura } & € 7.00 \
\hline \text { Megan } & € 5.50 \
\hline \text { Mallory } & € 4.00 \
\hline \text { Audrey } & € 3.50 \
\hline
\end{array}$
?
Refer to the table above. Which of the following is not true?
?

Accepted Answer

A)  At a price of €9.00, no buyer is willing to purchase take-away meal. 
B)  At a price of €5.50, Megan is indifferent between buying a case of take-away meal and not buying one. 
C)  At a price of €4.00, total consumer surplus in the market will be €9.00. 
D)  All of the above are correct. 
A)  At a price of €9.00, no buyer is willing to purchase take-away meal. 
B)  At a price of €5.50, Megan is indifferent between buying a case of take-away meal and not buying one. 
C)  At a price of €4.00, total consumer surplus in the market will be €9.00. 
D)  All of the above are correct.

Question 12

This table refers to five possible buyers' willingness to pay for a take-away meal. ?
$\begin{array}{|l|l|}
\hline \text { Buyer } & \begin{array}{l}
\text { Willingness To } \
\text { Pay }
\end{array} \
\hline \text { David } & € 8.50 \
\hline \text { Laura } & € 7.00 \
\hline \text { Megan } & € 5.50 \
\hline \text { Mallory } & € 4.00 \
\hline \text { Audrey } & € 3.50 \
\hline
\end{array}$
?
Refer to the table above. If the market price is €3.80,
?

Accepted Answer

A)  David's consumer surplus is €4.70 and total consumer surplus for the five individuals is €9.50. 
B)  Megan's consumer surplus is €1.70 and total consumer surplus for the five individuals is €9.60. 
C)  David, Laura, and Megan will be the only buyers of a take-away meal. 
D)  the demand curve for the take-away meal, taking the five individuals into account, is horizontal. 
A)  David's consumer surplus is €4.70 and total consumer surplus for the five individuals is €9.50. 
B)  Megan's consumer surplus is €1.70 and total consumer surplus for the five individuals is €9.60. 
C)  David, Laura, and Megan will be the only buyers of a take-away meal. 
D)  the demand curve for the take-away meal, taking the five individuals into account, is horizontal.

Question 13

An increase in the price of a good along a stationary supply curve

Accepted Answer

A)  increases producer surplus. 
B)  does all of the things described in these answers. 
C)  decreases producer surplus. 
D)  improves market equity. 
A)  increases producer surplus. 
B)  does all of the things described in these answers. 
C)  decreases producer surplus. 
D)  improves market equity.

Question 14

If Gina sells a shirt for €40, and her producer surplus from the sale is €32, her cost must have been

Accepted Answer

A)  €72. 
B)  €32. 
C)  €8. 
D)  We would have to know the consumer surplus in order to make this determination. 
A)  €72. 
B)  €32. 
C)  €8. 
D)  We would have to know the consumer surplus in order to make this determination.

Question 15

If your willingness to pay for a hamburger is €3.00 and the price is €2.00, your consumer surplus is €5.00.

Accepted Answer

A) True 
 B)False

Question 16

If demand increases when supply is perfectly price elastic, then

Accepted Answer

A)  consumer surplus will remain the same. 
B)  consumer surplus will increase. 
C)  it is not possible to predict the change in consumer surplus. 
D)  consumer surplus will decrease with the increase in price. 
A)  consumer surplus will remain the same. 
B)  consumer surplus will increase. 
C)  it is not possible to predict the change in consumer surplus. 
D)  consumer surplus will decrease with the increase in price.

Question 17

In general, if a benevolent social planner wanted to maximize the total benefits received by buyers and sellers in a market, the planner should

Accepted Answer

A)  choose a price below the market equilibrium price. 
B)  allow the market to seek equilibrium on its own. 
C)  choose any price the planner wants because the losses to the sellers (buyers) from any change in price are exactly offset by the gains to the buyers (sellers). 
D)  choose a price above the market equilibrium price. 
A)  choose a price below the market equilibrium price. 
B)  allow the market to seek equilibrium on its own. 
C)  choose any price the planner wants because the losses to the sellers (buyers) from any change in price are exactly offset by the gains to the buyers (sellers). 
D)  choose a price above the market equilibrium price.

Question 18

Refer to the image below. When the price is P2, producer surplus is ​   ​

Accepted Answer

A)  A 
B)  A+C. 
C)  A+B+C. 
D)  D+G. 
A)  A 
B)  A+C. 
C)  A+B+C. 
D)  D+G.

Question 19

Free markets are efficient because they allocate output to buyers who have a willingness to pay that is below the price.

Accepted Answer

A) True 
 B)False

Question 20

Other things equal, what happens to consumer surplus if the price of a good falls? Why? Illustrate using a demand curve.

Accepted Answer

@#IMG-DLM& When the price of a good falls, consume

Exam 7: Consumers, Producers and the Efficiency of Markets

Equilibrium in a competitive market maximizes total surplus.

Producer surplus is the area above the supply curve and below the price.

Which of the following best explains the source of consumer surplus for a good?

Other things being equal, what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve.

A consumer's willingness to pay directly measures

The seller's cost of production is

Consumer surplus is the

If a benevolent social planner chooses to produce more than the equilibrium quantity of a good, then

Donald produces nails at a cost of €200 per ton. If he sells the nails for €350 per ton, his producer surplus per ton is

This table refers to five possible buyers' willingness to pay for a take-away meal. ? Buyer Willingness To Pay David 8.50 Laura 7.00 Megan 5.50 Mallory 4.00 Audrey 3.50 ? Refer to the table above. Which of the following is not true? ?

This table refers to five possible buyers' willingness to pay for a take-away meal. ? Buyer Willingness To Pay David 8.50 Laura 7.00 Megan 5.50 Mallory 4.00 Audrey 3.50 ? Refer to the table above. If the market price is €3.80, ?

An increase in the price of a good along a stationary supply curve

If Gina sells a shirt for €40, and her producer surplus from the sale is €32, her cost must have been

If your willingness to pay for a hamburger is €3.00 and the price is €2.00, your consumer surplus is €5.00.

If demand increases when supply is perfectly price elastic, then

In general, if a benevolent social planner wanted to maximize the total benefits received by buyers and sellers in a market, the planner should

Refer to the image below. When the price is P2, producer surplus is ​ ​

Free markets are efficient because they allocate output to buyers who have a willingness to pay that is below the price.

Other things equal, what happens to consumer surplus if the price of a good falls? Why? Illustrate using a demand curve.

What Is Economics

Thinking Like an Economist

The Market Forces of Supply and Demand

Elasticity and Its Applications

Background to Demand: Consumer Choices

Background to Supply: Firms in Competitive Markets

Supply, Demand and Government Policies

The Tax System

Public Goods, Common Resources and Merit Goods

Market Failure and Externalities

Information and Behavioural Economics

Firms Production Decisions

Market Structures I: Monopoly

Market Structures Ii: Monopolistic Competition

Market Structures Iii: Oligopoly

The Economics of Factor Markets

Income Inequality and Poverty

Interdependence and the Gains From Trade

Measuring a Nations Well-Being

Measuring the Cost of Living

Production and Growth

Unemployment

Saving, Investment and the Financial System

The Basic Tools of Finance

Issues in Financial Markets

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Business Cycles

Keynesian Economics and the Is-Lm Analysis

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Supply-Side Policies

Common Currency Areas and European Monetary Union

The Financial Crisis and Sovereign Debt

Filters

Refer to the image below. When the price is P2, producer surplus is