Question 1

Table 7-20  
-Refer to Table 7-20. How much is total producer surplus at the equilibrium price in this market?

Accepted Answer

Total producer surpl

Question 2

Welfare economics is the study of how

Accepted Answer

A)  the allocation of resources affects economic well-being. 
B)  a price ceiling compares to a price floor. 
C)  the government helps poor people. 
D)  a consumer's optimal choice affects her demand curve. 
A)  the allocation of resources affects economic well-being. 
B)  a price ceiling compares to a price floor. 
C)  the government helps poor people. 
D)  a consumer's optimal choice affects her demand curve.

Question 3

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 4

Table 7-17  
-Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, producer surplus will be

Accepted Answer

A)  $16. 
B)  $18. 
C)  $24. 
D)  $26. 
A)  $16. 
B)  $18. 
C)  $24. 
D)  $26.

Question 5

The maximum price that a buyer will pay for a good is called

Accepted Answer

A)  consumer surplus. 
B)  willingness to pay. 
C)  equilibrium. 
D)  efficiency. 
A)  consumer surplus. 
B)  willingness to pay. 
C)  equilibrium. 
D)  efficiency.

Question 6

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

Accepted Answer

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

Question 7

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 due to new producers entering the market would be

Accepted Answer

A)  $400. 
B)  $800. 
C)  $1,200. 
D)  $900. 
A)  $400. 
B)  $800. 
C)  $1,200. 
D)  $900.

Question 8

Figure 7-10  
-Refer to Figure 7-10. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?

Accepted Answer

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

Question 9

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 10

In order to conclude that markets are efficient, we assume that they are perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 11

Tom tunes pianos in his spare time for extra income. Buyers of his service are willing to pay $155 per tuning. One particular week, Tom is willing to tune the first piano for $120, the second piano for $125, the third piano for $140, and the fourth piano for $160. Assume Tom is rational in deciding how many pianos to tune. His producer surplus is

Accepted Answer

A)  $95. 
B)  $80. 
C)  $75. 
D)  $60. 
A)  $95. 
B)  $80. 
C)  $75. 
D)  $60.

Question 12

Figure 7-19  
-Refer to Figure 7-19. If the government imposes a price floor of $55 in this market, then total surplus will be

Accepted Answer

A)  $100.00 higher than it would be without the price floor. 
B)  $50.00 lower than it would be without the price floor. 
C)  $125.00 lower than it would be without the price floor. 
D)  $62.50 lower than it would be without the price floor. 
A)  $100.00 higher than it would be without the price floor. 
B)  $50.00 lower than it would be without the price floor. 
C)  $125.00 lower than it would be without the price floor. 
D)  $62.50 lower than it would be without the price floor.

Question 13

Producer surplus directly measures

Accepted Answer

A)  the well-being of sellers. 
B)  production costs. 
C)  excess demand. 
D)  unsold inventories. 
A)  the well-being of sellers. 
B)  production costs. 
C)  excess demand. 
D)  unsold inventories.

Question 14

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 15

Figure 7-24  
-Refer to Figure 7-24. The equilibrium allocation of resources is

Accepted Answer

A)  efficient because total surplus is maximized at the equilibrium. 
B)  efficient because consumer surplus is maximized at the equilibrium. 
C)  inefficient because consumer surplus is larger than producer surplus at the equilibrium. 
D)  inefficient because producer surplus is not maximized. 
A)  efficient because total surplus is maximized at the equilibrium. 
B)  efficient because consumer surplus is maximized at the equilibrium. 
C)  inefficient because consumer surplus is larger than producer surplus at the equilibrium. 
D)  inefficient because producer surplus is not maximized.

Question 16

Producer surplus measures the benefit to sellers from receiving a price above their costs.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is correct?

Accepted Answer

A)  Consumer surplus refers to a situation in which there are more buyers than sellers in a market. 
B)  Producer surplus refers to a situation in which there are more sellers than buyers in a market. 
C)  Total surplus is measured as the area below the demand curve and above the supply curve, up to the equilibrium quantity. 
D)  All of the above are correct. 
A)  Consumer surplus refers to a situation in which there are more buyers than sellers in a market. 
B)  Producer surplus refers to a situation in which there are more sellers than buyers in a market. 
C)  Total surplus is measured as the area below the demand curve and above the supply curve, up to the equilibrium quantity. 
D)  All of the above are correct.

Question 18

Producing a soccer ball costs Jake $5. He sells it to Darby for $35. Darby values the soccer ball at $50. For this transaction, the total surplus in the market is $40.

Accepted Answer

A) True 
 B)False

Question 19

Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

Accepted Answer

A) True 
 B)False

Question 20

Table 7-3
The only four consumers in a market have the following willingness to pay for a good:  
-Refer to Table 7-3. If there is only one unit of the good and if the buyers bid against each other for the right to purchase it, then the good will sell for

Accepted Answer

A)  $15 or slightly less. 
B)  $25 or slightly more. 
C)  $35 or slightly more. 
D)  $45 or slightly less. 
A)  $15 or slightly less. 
B)  $25 or slightly more. 
C)  $35 or slightly more. 
D)  $45 or slightly less.

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

Table 7-20 -Refer to Table 7-20. How much is total producer surplus at the equilibrium price in this market?

Welfare economics is the study of how

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,

Table 7-17 -Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, producer surplus will be

The maximum price that a buyer will pay for a good is called

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

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 due to new producers entering the market would be

Figure 7-10 -Refer to Figure 7-10. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?

In order to conclude that markets are efficient, we assume that they are perfectly competitive.

Figure 7-19 -Refer to Figure 7-19. If the government imposes a price floor of $55 in this market, then total surplus will be

Producer surplus directly measures

Figure 7-24 -Refer to Figure 7-24. The equilibrium allocation of resources is

Producer surplus measures the benefit to sellers from receiving a price above their costs.

Which of the following is correct?

Producing a soccer ball costs Jake $5. He sells it to Darby for $35. Darby values the soccer ball at $50. For this transaction, the total surplus in the market is $40.

Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

Table 7-3 The only four consumers in a market have the following willingness to pay for a good: -Refer to Table 7-3. If there is only one unit of the good and if the buyers bid against each other for the right to purchase it, then the good will sell for

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

Application: 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 of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

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 Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters