Question 1

Figure 7-29  
-Refer to Figure 7-29. Which of the following statements is correct?

Accepted Answer

A)  The market is in equilibrium at Q1. 
B)  At Q2, the cost to sellers exceeds the value to buyers. 
C)  At Q4, the value to buyers is less than the cost to sellers. 
D)  At Q3, the market is producing too much output. 
A)  The market is in equilibrium at Q1. 
B)  At Q2, the cost to sellers exceeds the value to buyers. 
C)  At Q4, the value to buyers is less than the cost to sellers. 
D)  At Q3, the market is producing too much output.

Question 2

Efficiency is attained when

Accepted Answer

A)  total surplus is maximized. 
B)  producer surplus is maximized. 
C)  all resources are being used. 
D)  consumer surplus is maximized and producer surplus is minimized. 
A)  total surplus is maximized. 
B)  producer surplus is maximized. 
C)  all resources are being used. 
D)  consumer surplus is maximized and producer surplus is minimized.

Question 3

All else equal, what happens to consumer surplus if the price of a good decreases?

Accepted Answer

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

Question 4

Table 7-16
The following table represents the costs of five possible sellers.
Seller Cost ($)  
-Refer to Table 7-16. If each producer has one unit available for sale, and if the market equilibrium price is $80 per unit, how much is the total producer surplus in this market?

Accepted Answer

A)  $90 
B)  $110 
C)  $130 
D)  $140 
A)  $90 
B)  $110 
C)  $130 
D)  $140

Question 5

When the demand for a good increases and the supply of the good remains unchanged, consumer surplus

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 6

Figure 7-15  
-Refer to Figure 7-15. Suppose producer surplus is larger than C but smaller than A+B+C. The price of the good must be

Accepted Answer

A)  lower than P1. 
B)  P1. 
C)  between P1 and P2. 
D)  higher than P2. 
A)  lower than P1. 
B)  P1. 
C)  between P1 and P2. 
D)  higher than P2.

Question 7

Consumer surplus

Accepted Answer

A)  is closely related to the supply curve for a product. 
B)  is represented by a rectangle on a supply-demand graph when the demand curve is a straight, downward- sloping line. 
C)  is measured using the demand curve for a product. 
D)  does not reflect economic well-being in most markets. 
A)  is closely related to the supply curve for a product. 
B)  is represented by a rectangle on a supply-demand graph when the demand curve is a straight, downward- sloping line. 
C)  is measured using the demand curve for a product. 
D)  does not reflect economic well-being in most markets.

Question 8

Figure 7-20  
-Refer to Figure 7-20. For quantities less than M, the value to the marginal buyer is

Accepted Answer

A)  greater than the cost to the marginal seller, so increasing the quantity increases total surplus. 
B)  less than the cost to the marginal seller, so increasing the quantity increases total surplus. 
C)  greater than the cost to the marginal seller, so decreasing the quantity increases total surplus. 
D)  less than the cost to the marginal seller, so decreasing the quantity increases total surplus. 
A)  greater than the cost to the marginal seller, so increasing the quantity increases total surplus. 
B)  less than the cost to the marginal seller, so increasing the quantity increases total surplus. 
C)  greater than the cost to the marginal seller, so decreasing the quantity increases total surplus. 
D)  less than the cost to the marginal seller, so decreasing the quantity increases total surplus.

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. 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 10

When demand increases so that market price increases, producer surplus increases because (1) producer surplus received by existing sellers increases, and (2) new sellers enter the market.

Accepted Answer

A) True 
 B)False

Question 11

Suppose you sell a kayak for $600, but you were willing to sell it for $450. The buyer was willing to pay $650. The total surplus is $200.

Accepted Answer

A) True 
 B)False

Question 12

Figure 7-34  
-Refer to Figure 7-34. Suppose the government imposes a price floor at $10 per unit in this market. With the price floor, how much is total producer surplus assuming those producers with the lowest cost are the ones who supply the market?

Accepted Answer

Total producer surpl

Question 13

Joel has a 1966 Mustang, which he sells to Susie, an avid car collector. Susie is pleased since she paid $8,000 for the car but would have been willing to pay $11,000 for the car. Susie's consumer surplus is $2,000.

Accepted Answer

A) True 
 B)False

Question 14

Table 7-13
The numbers reveal the opportunity costs of providing 10 piano lessons of equal quality.  
-Refer to Table 7-13. You wish to purchase 10 piano lessons, so you take bids from each of the sellers. You will not accept a bid below a seller's cost because you are concerned that the seller will not provide all 10 lessons. What bid will you accept?

Accepted Answer

A)  $351 
B)  $251 
C)  $249 
D)  $199 
A)  $351 
B)  $251 
C)  $249 
D)  $199

Question 15

Table 7-15  
-Refer to Table 7-15. You want to hire a professional photographer to take pictures of your family. The table shows the costs of the four potential sellers in the local photography market. Which of the following graphs represents the market supply curve?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 16

Scenario 7-1
Suppose market demand is given by the equation  
-Refer to Scenario 7-1. If the market equilibrium price rises from $10 to $15, what is the change in total consumer surplus in the market?

Accepted Answer

Consumer s

Question 17

Figure 7-24  
-Refer to Figure 7-24. At equilibrium, consumer surplus is

Accepted Answer

A)  $18. 
B)  $36. 
C)  $54. 
D)  $72. 
A)  $18. 
B)  $36. 
C)  $54. 
D)  $72.

Question 18

Total surplus is represented by the area below the

Accepted Answer

A)  demand curve and above the price. 
B)  price and up to the point of equilibrium. 
C)  demand curve and above the supply curve, up to the equilibrium quantity. 
D)  demand curve and above the horizontal axis, up to the equilibrium quantity. 
A)  demand curve and above the price. 
B)  price and up to the point of equilibrium. 
C)  demand curve and above the supply curve, up to the equilibrium quantity. 
D)  demand curve and above the horizontal axis, up to the equilibrium quantity.

Question 19

Figure 7-16  
-Refer to Figure 7-16. Producer surplus amounts to $300 if the price of the good is

Accepted Answer

A)  $300. 
B)  $350. 
C)  $400. 
D)  $450. 
A)  $300. 
B)  $350. 
C)  $400. 
D)  $450.

Question 20

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.

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

Figure 7-29 -Refer to Figure 7-29. Which of the following statements is correct?

Efficiency is attained when

All else equal, what happens to consumer surplus if the price of a good decreases?

Table 7-16 The following table represents the costs of five possible sellers. Seller Cost ($) -Refer to Table 7-16. If each producer has one unit available for sale, and if the market equilibrium price is $80 per unit, how much is the total producer surplus in this market?

When the demand for a good increases and the supply of the good remains unchanged, consumer surplus

Figure 7-15 -Refer to Figure 7-15. Suppose producer surplus is larger than C but smaller than A+B+C. The price of the good must be

Consumer surplus

Figure 7-20 -Refer to Figure 7-20. For quantities less than M, the value to the marginal buyer is

When demand increases so that market price increases, producer surplus increases because (1) producer surplus received by existing sellers increases, and (2) new sellers enter the market.

Suppose you sell a kayak for $600, but you were willing to sell it for $450. The buyer was willing to pay $650. The total surplus is $200.

Figure 7-34 -Refer to Figure 7-34. Suppose the government imposes a price floor at $10 per unit in this market. With the price floor, how much is total producer surplus assuming those producers with the lowest cost are the ones who supply the market?

Joel has a 1966 Mustang, which he sells to Susie, an avid car collector. Susie is pleased since she paid $8,000 for the car but would have been willing to pay $11,000 for the car. Susie's consumer surplus is $2,000.

Table 7-15 -Refer to Table 7-15. You want to hire a professional photographer to take pictures of your family. The table shows the costs of the four potential sellers in the local photography market. Which of the following graphs represents the market supply curve?

Scenario 7-1 Suppose market demand is given by the equation -Refer to Scenario 7-1. If the market equilibrium price rises from $10 to $15, what is the change in total consumer surplus in the market?

Figure 7-24 -Refer to Figure 7-24. At equilibrium, consumer surplus is

Total surplus is represented by the area below the

Figure 7-16 -Refer to Figure 7-16. Producer surplus amounts to $300 if the price of the good is

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

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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