Question 1

The 2005 Boston Globe article discussing ticket scalping points out that the price people will pay for tickets will rise when

Accepted Answer

A) supply and demand are both limited. 
B) supply is limited and demand is not limited. 
C) supply is not limited and demand is  limited. 
D) supply and demand are both not limited. 
A) supply and demand are both limited. 
B) supply is limited and demand is not limited. 
C) supply is not limited and demand is  limited. 
D) supply and demand are both not limited.

Question 2

Figure 7-10  
-Refer to Figure 7-10. Which area represents the increase in producer surplus when the price rises from P1 to P2?

Accepted Answer

A) BCG 
B) ACH 
C) ABGD 
D) AHGB 
A) BCG 
B) ACH 
C) ABGD 
D) AHGB

Question 3

An example of normative analysis is studying

Accepted Answer

A) how market forces produce equilibrium. 
B) surpluses and shortages. 
C) whether equilibrium outcomes are socially desirable. 
D) income distributions. 
A) how market forces produce equilibrium. 
B) surpluses and shortages. 
C) whether equilibrium outcomes are socially desirable. 
D) income distributions.

Question 4

Figure 7-16  
-Refer to Figure 7-16. If the price of the good is $300, then producer surplus amounts to

Accepted Answer

A) $100. 
B) $200. 
C) $300. 
D) $400. 
A) $100. 
B) $200. 
C) $300. 
D) $400.

Question 5

Table 7-11
The only four producers in a market have the following costs:
Seller
Cost
Evan
$50
Selena
$100
Angie
$150
Kris
$200
-Refer to Table 7-11. If the sellers bid against each other for the right to sell the good to a consumer, then the producer surplus will be

Accepted Answer

A) $0 or slightly more. 
B) $50 or slightly less. 
C) $150 or slightly less. 
D) $200 or slightly more. 
A) $0 or slightly more. 
B) $50 or slightly less. 
C) $150 or slightly less. 
D) $200 or slightly more.

Question 6

Justin builds fences for a living. Justin's out-of-pocket expenses (for wood, paint, etc.) plus the value that he places on his own time amount to his

Accepted Answer

A) producer surplus. 
B) producer deficit. 
C) cost of building fences. 
D) profit. 
A) producer surplus. 
B) producer deficit. 
C) cost of building fences. 
D) profit.

Question 7

Which of the following statements is not correct?

Accepted Answer

A) A seller would be eager to sell her product at a price higher than her cost. 
B) A seller would refuse to sell her product at a price lower than her cost. 
C) A seller would be indifferent about selling her product at a price equal to her cost. 
D) Since sellers cannot set the price for their product, they must be willing to sell their product at any price. 
A) A seller would be eager to sell her product at a price higher than her cost. 
B) A seller would refuse to sell her product at a price lower than her cost. 
C) A seller would be indifferent about selling her product at a price equal to her cost. 
D) Since sellers cannot set the price for their product, they must be willing to sell their product at any price.

Question 8

Which of the following is correct?

Accepted Answer

A) Efficiency deals with the size of the economic pie, and equality deals with how fairly the pie is sliced. 
B) Equality can be judged on positive grounds whereas efficiency requires normative judgments. 
C) Efficiency is more difficult to evaluate than equality. 
D) Equality and efficiency are both maximized in a society when total surplus is maximized. 
A) Efficiency deals with the size of the economic pie, and equality deals with how fairly the pie is sliced. 
B) Equality can be judged on positive grounds whereas efficiency requires normative judgments. 
C) Efficiency is more difficult to evaluate than equality. 
D) Equality and efficiency are both maximized in a society when total surplus is maximized.

Question 9

The area below the price and above the supply curve measures the producer surplus in a market.

Accepted Answer

A) True 
 B)False

Question 10

What happens to consumer surplus in the iPod market if iPods are normal goods and buyers of iPods experience an increase in income?

Accepted Answer

A) Consumer surplus decreases. 
B) Consumer surplus remains unchanged. 
C) Consumer surplus increases. 
D) Consumer surplus may increase, decrease, or remain unchanged. 
A) Consumer surplus decreases. 
B) Consumer surplus remains unchanged. 
C) Consumer surplus increases. 
D) Consumer surplus may increase, decrease, or remain unchanged.

Question 11

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is

Accepted Answer

A) $175. 
B) $575. 
C) $750. 
D) $1,325. 
A) $175. 
B) $575. 
C) $750. 
D) $1,325.

Question 12

Figure 7-24  
-Refer to Figure 7-24. If the government imposes a price floor at $18, then consumer surplus is

Accepted Answer

A) ABF. 
B) AGH. 
C) HGCD. 
D) HGBF. 
A) ABF. 
B) AGH. 
C) HGCD. 
D) HGBF.

Question 13

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 is $0.40, then

Accepted Answer

A) 6 oranges are demanded per day, and consumer surplus amounts to $4.95. 
B) 6 oranges are demanded per day, and consumer surplus amounts to $5.10. 
C) 7 oranges are demanded per day, and consumer surplus amounts to $5.30. 
D) 7 oranges are demanded per day, and consumer surplus amounts to $5.15. 
A) 6 oranges are demanded per day, and consumer surplus amounts to $4.95. 
B) 6 oranges are demanded per day, and consumer surplus amounts to $5.10. 
C) 7 oranges are demanded per day, and consumer surplus amounts to $5.30. 
D) 7 oranges are demanded per day, and consumer surplus amounts to $5.15.

Question 14

Figure 7-22  
-Refer to Figure 7-22. Assume demand increases, which causes the equilibrium price to increase from $50 to $70. The increase in producer surplus would be

Accepted Answer

A) $2,500. 
B) $900. 
C) $800. 
D) $1,600. 
A) $2,500. 
B) $900. 
C) $800. 
D) $1,600.

Question 15

If a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will

Accepted Answer

A) increase producer surplus. 
B) reduce producer surplus. 
C) not affect producer surplus. 
D) Any of the above are possible. 
A) increase producer surplus. 
B) reduce producer surplus. 
C) not affect producer surplus. 
D) Any of the above are possible.

Question 16

Producer surplus is the area

Accepted Answer

A) under the supply curve. 
B) between the supply and demand curves. 
C) below the price and above the supply curve. 
D) under the demand curve and above the price. 
A) under the supply curve. 
B) between the supply and demand curves. 
C) below the price and above the supply curve. 
D) under the demand curve and above the price.

Question 17

Figure 7-2  
-Refer to Figure 7-2. If the price of the good is $100, then consumer surplus amounts to

Accepted Answer

A) $50. 
B) $75. 
C) $100. 
D) $125. 
A) $50. 
B) $75. 
C) $100. 
D) $125.

Question 18

Figure 7-3  
-Refer to Figure 7-3. When the price rises from P1 to P2, consumer surplus

Accepted Answer

A) increases by an amount equal to A. 
B) decreases by an amount equal to B+C. 
C) increases by an amount equal to B+C. 
D) decreases by an amount equal to C. 
A) increases by an amount equal to A. 
B) decreases by an amount equal to B+C. 
C) increases by an amount equal to B+C. 
D) decreases by an amount equal to C.

Question 19

Figure 7-7  
-Refer to Figure 7-7. What happens to the consumer surplus if the price rises from $100 to $150?

Accepted Answer

A) The new consumer surplus is half of the original consumer surplus. 
B) The new consumer surplus is 25 percent of the original consumer surplus. 
C) The new consumer surplus is double the original consumer surplus. 
D) The new consumer surplus is triple the original consumer surplus. 
A) The new consumer surplus is half of the original consumer surplus. 
B) The new consumer surplus is 25 percent of the original consumer surplus. 
C) The new consumer surplus is double the original consumer surplus. 
D) The new consumer surplus is triple the original consumer surplus.

Question 20

Answer each of the following questions about supply and producer surplus.
a.What is producer surplus, and how is it measured?
b.What is the relationship between the cost to sellers and the supply curve?
c.Other things equal, what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve.

Accepted Answer

a.Producer surplus measures the benefit

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

The 2005 Boston Globe article discussing ticket scalping points out that the price people will pay for tickets will rise when

Figure 7-10 -Refer to Figure 7-10. Which area represents the increase in producer surplus when the price rises from P1 to P2?

An example of normative analysis is studying

Figure 7-16 -Refer to Figure 7-16. If the price of the good is $300, then producer surplus amounts to

Table 7-11 The only four producers in a market have the following costs: Seller Cost Evan $50 Selena $100 Angie $150 Kris $200 -Refer to Table 7-11. If the sellers bid against each other for the right to sell the good to a consumer, then the producer surplus will be

Justin builds fences for a living. Justin's out-of-pocket expenses (for wood, paint, etc.) plus the value that he places on his own time amount to his

Which of the following statements is not correct?

Which of the following is correct?

The area below the price and above the supply curve measures the producer surplus in a market.

What happens to consumer surplus in the iPod market if iPods are normal goods and buyers of iPods experience an increase in income?

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is

Figure 7-24 -Refer to Figure 7-24. If the government imposes a price floor at $18, then consumer surplus is

Figure 7-22 -Refer to Figure 7-22. Assume demand increases, which causes the equilibrium price to increase from $50 to $70. The increase in producer surplus would be

If a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will

Producer surplus is the area

Figure 7-2 -Refer to Figure 7-2. If the price of the good is $100, then consumer surplus amounts to

Figure 7-3 -Refer to Figure 7-3. When the price rises from P1 to P2, consumer surplus

Figure 7-7 -Refer to Figure 7-7. What happens to the consumer surplus if the price rises from $100 to $150?

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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