Question 1

Which of the following is not true when the price of a good or service falls?

Accepted Answer

A)  Buyers who were already buying the good or service are better off. 
B)  Some new buyers, who are now willing to buy, enter the market. 
C)  The total consumer surplus in the market increases. 
D)  The total value of purchases before and after the price change is the same. 
A)  Buyers who were already buying the good or service are better off. 
B)  Some new buyers, who are now willing to buy, enter the market. 
C)  The total consumer surplus in the market increases. 
D)  The total value of purchases before and after the price change is the same.

Question 2

Inefficiency exists in an economy when a good is

Accepted Answer

A)  not being consumed by buyers who value it most highly. 
B)  not distributed fairly among buyers. 
C)  not produced because buyers do not value it very highly. 
D)  being produced with less than all available resources. 
A)  not being consumed by buyers who value it most highly. 
B)  not distributed fairly among buyers. 
C)  not produced because buyers do not value it very highly. 
D)  being produced with less than all available resources.

Question 3

Producer surplus is

Accepted Answer

A)  represented on a graph by the area below the demand curve and above the supply curve. 
B)  the amount a seller is paid minus the cost of production. 
C)  also referred to as excess supply. 
D)  All of the above are correct. 
A)  represented on a graph by the area below the demand curve and above the supply curve. 
B)  the amount a seller is paid minus the cost of production. 
C)  also referred to as excess supply. 
D)  All of the above are correct.

Question 4

A demand curve reflects each of the following except the

Accepted Answer

A)  willingness to pay of all buyers in the market. 
B)  value each buyer in the market places on the good. 
C)  highest price buyers are willing to pay for each quantity. 
D)  ability of buyers to obtain the quantity they desire. 
A)  willingness to pay of all buyers in the market. 
B)  value each buyer in the market places on the good. 
C)  highest price buyers are willing to pay for each quantity. 
D)  ability of buyers to obtain the quantity they desire.

Question 5

Janine would be willing to pay $50 to see Les Misérables, but she buys a ticket for only $30. Janine values the performance at

Accepted Answer

A)  $20. 
B)  $30. 
C)  $50. 
D)  $80. 
A)  $20. 
B)  $30. 
C)  $50. 
D)  $80.

Question 6

Table 7-6
For each of three potential buyers of apples, the table displays the willingness to pay for the first three apples of the day. Assume Xavier, Yadier, and Zavi are the only three buyers of apples, and only three apples can be supplied per day.  
-Refer to Table 7-6. If the market price of an apple is $1.40, then consumer surplus amounts to

Accepted Answer

A)  $0.60. 
B)  $1.20. 
C) $1.40. 
D)  $3.40 
A)  $0.60. 
B)  $1.20. 
C) $1.40. 
D)  $3.40

Question 7

Consumer surplus in a market can be represented by the

Accepted Answer

A)  area below the demand curve and above the price. 
B)  distance from the demand curve to the horizontal axis. 
C)  distance from the demand curve to the vertical axis. 
D)  area below the demand curve and above the horizontal axis. 
A)  area below the demand curve and above the price. 
B)  distance from the demand curve to the horizontal axis. 
C)  distance from the demand curve to the vertical axis. 
D)  area below the demand curve and above the horizontal axis.

Question 8

Figure 7-17  
-Refer to Figure 7-17. Suppose the market starts out in equilibrium with demand curve D and supply curve S. Next, suppose demand shifts left so as to decrease the quantity demanded by 20 units at every price. What is the change in producer surplus as a result of this demand shift?

Accepted Answer

A)  $80 
B)  $160 
C)  $240 
D)  $320 
A)  $80 
B)  $160 
C)  $240 
D)  $320

Question 9

Answer each of the following questions about demand and consumer surplus.
a. What is consumer surplus, and how is it measured?
b. What is the relationship between the demand curve and the willingness to pay?
c. Other things equal, what happens to consumer surplus if the price of a good falls? Why?
Illustrate using a demand curve.
d. In what way does the demand curve represent the benefit consumers receive from participating in a market? In addition to the demand curve, what else must be considered to determine consumer surplus?

Accepted Answer

a. Consumer surplus measures the benefit

Question 10

Free markets allocate (a) the supply of goods to the buyers who value them most highly and (b) the demand for goods to the sellers who can produce them at least cost.

Accepted Answer

A) True 
 B)False

Question 11

Figure 7-4  
-Refer to Figure 7-4. Which area represents consumer surplus at a price of P1?

Accepted Answer

A)  BDF 
B)  AFG 
C)  ABDG 
D)  ABC 
A)  BDF 
B)  AFG 
C)  ABDG 
D)  ABC

Question 12

Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book?

Accepted Answer

A)  $6. 
B)  $2. 
C)  $8. 
D)  $4. 
A)  $6. 
B)  $2. 
C)  $8. 
D)  $4.

Question 13

Given the following two equations:
1) Total Surplus = Consumer Surplus + Producer Surplus
2) Total Surplus = Value to Buyers - Cost to Sellers
Show how equation (1) can be used to derive equation (2).

Accepted Answer

Start with the equation: Total Surplus =

Question 14

Figure 7-32  
-Refer to Figure 7-32. If the government imposed a price floor at $35 in this market, how much is consumer surplus?

Accepted Answer

Consumer s

Question 15

Figure 7-25  
-Refer to Figure 7-25. At the equilibrium price, total surplus is

Accepted Answer

A)  $288. 
B)  $576. 
C)  $1,152. 
D)  $2,304. 
A)  $288. 
B)  $576. 
C)  $1,152. 
D)  $2,304.

Question 16

Total surplus is

Accepted Answer

A)  equal to consumer surplus minus producer surplus. 
B)  equal to the total value to buyers minus the total cost to sellers. 
C)  equal to consumers' willingness to pay plus producers' cost. 
D)  greater than the sum of consumer surplus plus producer surplus. 
A)  equal to consumer surplus minus producer surplus. 
B)  equal to the total value to buyers minus the total cost to sellers. 
C)  equal to consumers' willingness to pay plus producers' cost. 
D)  greater than the sum of consumer surplus plus producer surplus.

Question 17

Figure 7-11  
-Refer to Figure 7-11. If the supply curve is S and the demand curve shifts from D to D', what is the increase in producer surplus due to new producers

Accepted Answer

A)  $625 
B)  $2,500 
C)  $3,125 
D)  $5,625 
A)  $625 
B)  $2,500 
C)  $3,125 
D)  $5,625

Question 18

Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts?

Accepted Answer

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

Question 19

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 20

Figure 7-15  
-Refer to Figure 7-15. Area A represents

Accepted Answer

A)  producer surplus to new producers entering the market as the result of an increase in price from P1 to P2. 
B)  the increase in consumer surplus that results from an upward-sloping supply curve. 
C)  the increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2. 
D)  the increase in producer surplus to those producers already in the market when the price increases from P1 to P2. 
A)  producer surplus to new producers entering the market as the result of an increase in price from P1 to P2. 
B)  the increase in consumer surplus that results from an upward-sloping supply curve. 
C)  the increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2. 
D)  the increase in producer surplus to those producers already in the market when the price increases from P1 to P2.

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

Which of the following is not true when the price of a good or service falls?

Inefficiency exists in an economy when a good is

Producer surplus is

A demand curve reflects each of the following except the

Janine would be willing to pay $50 to see Les Misérables, but she buys a ticket for only $30. Janine values the performance at

Consumer surplus in a market can be represented by the

Figure 7-17 -Refer to Figure 7-17. Suppose the market starts out in equilibrium with demand curve D and supply curve S. Next, suppose demand shifts left so as to decrease the quantity demanded by 20 units at every price. What is the change in producer surplus as a result of this demand shift?

Free markets allocate (a) the supply of goods to the buyers who value them most highly and (b) the demand for goods to the sellers who can produce them at least cost.

Figure 7-4 -Refer to Figure 7-4. Which area represents consumer surplus at a price of P1?

Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book?

Given the following two equations: 1) Total Surplus = Consumer Surplus + Producer Surplus 2) Total Surplus = Value to Buyers - Cost to Sellers Show how equation (1) can be used to derive equation (2).

Figure 7-32 -Refer to Figure 7-32. If the government imposed a price floor at $35 in this market, how much is consumer surplus?

Figure 7-25 -Refer to Figure 7-25. At the equilibrium price, total surplus is

Total surplus is

Figure 7-11 -Refer to Figure 7-11. If the supply curve is S and the demand curve shifts from D to D', what is the increase in producer surplus due to new producers

Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts?

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 7-15 -Refer to Figure 7-15. Area A represents

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

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