Question 1

A simultaneous decrease in both the demand for MP3 players and the supply of MP3 players would imply that

Accepted Answer

A) both the value of MP3 players to consumers and the cost of producing MP3 players has increased. 
B) both the value of MP3 players to consumers and the cost of producing MP3 players has decreased. 
C) the value of MP3 players to consumers has decreased, and the cost of producing MP3 players has increased. 
D) the value of MP3 players to consumers has increased, and the cost of producing MP3 players has decreased. 
A) both the value of MP3 players to consumers and the cost of producing MP3 players has increased. 
B) both the value of MP3 players to consumers and the cost of producing MP3 players has decreased. 
C) the value of MP3 players to consumers has decreased, and the cost of producing MP3 players has increased. 
D) the value of MP3 players to consumers has increased, and the cost of producing MP3 players has decreased.

Question 2

A supply curve can be used to measure producer surplus because it reflects

Accepted Answer

A) the actions of sellers. 
B) quantity supplied. 
C) sellers' costs. 
D) the amount that will be purchased by consumers in the market. 
A) the actions of sellers. 
B) quantity supplied. 
C) sellers' costs. 
D) the amount that will be purchased by consumers in the market.

Question 3

Figure 7-27  
-Refer to Figure 7-27. Sellers whose costs are greater than the equilibrium price are represented by segment

Accepted Answer

A) AC. 
B) CK. 
C) BC. 
D) CH. 
A) AC. 
B) CK. 
C) BC. 
D) CH.

Question 4

Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day.  
-Refer to Table 7-5. Who experiences the largest gain in consumer surplus when the price of an orange decreases from $1.05 to $0.75?

Accepted Answer

A) Allison 
B) Bob 
C) Charisse 
D) Allison and Bob experience the same gain in consumer surplus, and Charisse's gain is zero. 
A) Allison 
B) Bob 
C) Charisse 
D) Allison and Bob experience the same gain in consumer surplus, and Charisse's gain is zero.

Question 5

Figure 7-22  
-Refer to Figure 7-22. At the equilibrium price, producer surplus is

Accepted Answer

A) $5,000. 
B) $2,500. 
C) $3,500. 
D) $1,750. 
A) $5,000. 
B) $2,500. 
C) $3,500. 
D) $1,750.

Question 6

Figure 7-14  
-Refer to Figure 7-14. If the market price increases to $130 due to an increase in demand, then producer surplus is

Accepted Answer

A) $1,800. 
B) $900. 
C) $975. 
D) $1,950. 
A) $1,800. 
B) $900. 
C) $975. 
D) $1,950.

Question 7

Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is   
 . If 80 units of the good are produced and sold, then producer surplus amounts to $1,200.

Accepted Answer

A) True 
 B)False

Question 8

Many economists believe that restrictions against ticket scalping result in each of the following except

Accepted Answer

A) a smaller audience for cultural and sporting events. 
B) shorter lines at cultural and sporting events. 
C) less tax revenue for the state. 
D) an increase in ticket prices. 
A) a smaller audience for cultural and sporting events. 
B) shorter lines at cultural and sporting events. 
C) less tax revenue for the state. 
D) an increase in ticket prices.

Question 9

You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field. Assume the ticket has no resale value. Willie Nelson is performing on the same night, and his concert is your next-best alternative activity. Tickets to see Willie Nelson cost $40. On any given day, you would be willing to pay up to $50 to see and hear Willie Nelson perform. Assume there are no other costs of seeing either event. Based on this information, at a minimum, how much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game?

Accepted Answer

A) $0 
B) $10 
C) $40 
D) $50 
A) $0 
B) $10 
C) $40 
D) $50

Question 10

Which of the following will cause a decrease in producer surplus?

Accepted Answer

A) the imposition of a nonbinding price ceiling in the market 
B) buyers expect the price of a good to be higher next month 
C) the price of a substitute increases 
D) income increases and buyers consider the good to be inferior 
A) the imposition of a nonbinding price ceiling in the market 
B) buyers expect the price of a good to be higher next month 
C) the price of a substitute increases 
D) income increases and buyers consider the good to be inferior

Question 11

The "invisible hand" refers to

Accepted Answer

A) the marketplace guiding the self-interests of market participants into promoting general economic well-being. 
B) the fact that social planners sometimes have to intervene, even in perfectly competitive markets, to make those markets more efficient. 
C) the equality that results from market forces allocating the goods produced in the market. 
D) the automatic maximization of consumer surplus in free markets. 
A) the marketplace guiding the self-interests of market participants into promoting general economic well-being. 
B) the fact that social planners sometimes have to intervene, even in perfectly competitive markets, to make those markets more efficient. 
C) the equality that results from market forces allocating the goods produced in the market. 
D) the automatic maximization of consumer surplus in free markets.

Question 12

Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day.  
-Refer to Table 7-5. If the market price of an orange increases from $0.80 to $1.05, then consumer surplus

Accepted Answer

A) increases by $0.75. 
B) decreases by $0.95. 
C) decreases by $0.75. 
D) decreases by $1.00. 
A) increases by $0.75. 
B) decreases by $0.95. 
C) decreases by $0.75. 
D) decreases by $1.00.

Question 13

Table 7-7  
-Refer to Table 7-7. You have two essentially identical extra tickets to the Midwest Regional Sweet 16 game in the men's NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You hold an auction to sell the two tickets. Who makes the winning bids, and what do they offer to pay for the tickets?

Accepted Answer

A) Michael and Earvin; more than $350 but less than or equal to $400 
B) Michael and Earvin; more than $400 but less than or equal to $500 
C) Earvin and Larry; more than $300 but less than or equal to $350 
D) Larry and Charles; less than $300 
A) Michael and Earvin; more than $350 but less than or equal to $400 
B) Michael and Earvin; more than $400 but less than or equal to $500 
C) Earvin and Larry; more than $300 but less than or equal to $350 
D) Larry and Charles; less than $300

Question 14

Suppose that the equilibrium price in the market for tomatoes is $3 per pound. If a law reduced the maximum legal price for tomatoes to $2 per pound,

Accepted Answer

A) any possible increase in consumer surplus would be larger than the loss of producer surplus. 
B) any possible increase in consumer surplus would be smaller than the loss of producer surplus. 
C) the resulting increase in producer surplus would be larger than any possible loss of consumer surplus. 
D) the resulting increase in producer surplus would be smaller than any possible loss of consumer surplus. 
A) any possible increase in consumer surplus would be larger than the loss of producer surplus. 
B) any possible increase in consumer surplus would be smaller than the loss of producer surplus. 
C) the resulting increase in producer surplus would be larger than any possible loss of consumer surplus. 
D) the resulting increase in producer surplus would be smaller than any possible loss of consumer surplus.

Question 15

Consumer surplus is

Accepted Answer

A) a concept that helps us make normative statements about the desirability of market outcomes. 
B) represented on a graph by the area below the demand curve and above the price. 
C) a good measure of economic welfare if buyers' preferences are the primary concern. 
D) All of the above are correct. 
A) a concept that helps us make normative statements about the desirability of market outcomes. 
B) represented on a graph by the area below the demand curve and above the price. 
C) a good measure of economic welfare if buyers' preferences are the primary concern. 
D) All of the above are correct.

Question 16

Table 7-10
The following table represents the costs of five possible sellers.
Seller
Cost
Abby
$1,600
Bobby
$1,300
Dianne
$1,100
Evaline
$900
Carlos
$800
-Refer to Table 7-10. Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 2 if the price is

Accepted Answer

A) $1,700. 
B) $1,100. 
C) $1,650. 
D) $1,050. 
A) $1,700. 
B) $1,100. 
C) $1,650. 
D) $1,050.

Question 17

Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market

Accepted Answer

A) decreases. 
B) is unchanged. 
C) increases. 
D) may increase, decrease, or remain unchanged. 
A) decreases. 
B) is unchanged. 
C) increases. 
D) may increase, decrease, or remain unchanged.

Question 18

Consumer surplus is a good measure of economic welfare if policymakers want to

Accepted Answer

A) maximize total benefit. 
B) minimize deadweight loss. 
C) respect the preferences of sellers. 
D) respect the preferences of buyers. 
A) maximize total benefit. 
B) minimize deadweight loss. 
C) respect the preferences of sellers. 
D) respect the preferences of buyers.

Question 19

Consumer surplus equals the

Accepted Answer

A) value to buyers minus the amount paid by buyers. 
B) value to buyers minus the cost to sellers. 
C) amount received by sellers minus the cost to sellers. 
D) amount received by sellers minus the amount paid by buyers. 
A) value to buyers minus the amount paid by buyers. 
B) value to buyers minus the cost to sellers. 
C) amount received by sellers minus the cost to sellers. 
D) amount received by sellers minus the amount paid by buyers.

Question 20

Ticket scalping can increase total surplus in the market for tickets to sporting events.

Accepted Answer

A) True 
 B)False

Exam 7: Consumers, Producers, and the Efficiency of Markets

A simultaneous decrease in both the demand for MP3 players and the supply of MP3 players would imply that

A supply curve can be used to measure producer surplus because it reflects

Figure 7-27 -Refer to Figure 7-27. Sellers whose costs are greater than the equilibrium price are represented by segment

Figure 7-22 -Refer to Figure 7-22. At the equilibrium price, producer surplus is

Figure 7-14 -Refer to Figure 7-14. If the market price increases to $130 due to an increase in demand, then producer surplus is

Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is . If 80 units of the good are produced and sold, then producer surplus amounts to $1,200.

Many economists believe that restrictions against ticket scalping result in each of the following except

Which of the following will cause a decrease in producer surplus?

The "invisible hand" refers to

Suppose that the equilibrium price in the market for tomatoes is $3 per pound. If a law reduced the maximum legal price for tomatoes to $2 per pound,

Consumer surplus is

Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market

Consumer surplus is a good measure of economic welfare if policymakers want to

Consumer surplus equals the

Ticket scalping can increase total surplus in the market for tickets to sporting events.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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