Question 1

Figure 7-3  
-Refer to Figure 7-3. When the price is P2, consumer surplus is

Accepted Answer

A)  A. 
B)  B. 
C)  A+B. 
D)  A+B+C. 
A)  A. 
B)  B. 
C)  A+B. 
D)  A+B+C.

Question 2

Figure 7-4  
-Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to new buyers entering the market?

Accepted Answer

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

Question 3

Scenario 7-1
Suppose market demand is given by the equation  
-Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, how much consumer surplus do consumers entering the market after the price drop receive?

Accepted Answer

The consumers enteri

Question 4

Producer surplus is the

Accepted Answer

A)  area under the supply curve to the left of the amount sold. 
B)  amount a seller is paid minus the cost of production. 
C)  area between the supply and demand curves, above the equilibrium price. 
D)  cost to sellers of participating in a market. 
A)  area under the supply curve to the left of the amount sold. 
B)  amount a seller is paid minus the cost of production. 
C)  area between the supply and demand curves, above the equilibrium price. 
D)  cost to sellers of participating in a market.

Question 5

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 6

Kristi and Rebecca sell lemonade on the corner for $0.50 per cup. It costs them $0.10 to make each cup. On a certain day, their producer surplus is $20. How many cups did Kristi and Rebecca sell?

Accepted Answer

A)  40. 
B)  200. 
C)  8. 
D)  50. 
A)  40. 
B)  200. 
C)  8. 
D)  50.

Question 7

The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate

Accepted Answer

A)  increases, and producer surplus increases. 
B)  increases, and producer surplus decreases. 
C)  decreases, and producer surplus increases. 
D)  decreases, and producer surplus decreases. 
A)  increases, and producer surplus increases. 
B)  increases, and producer surplus decreases. 
C)  decreases, and producer surplus increases. 
D)  decreases, and producer surplus decreases.

Question 8

Suppose that the market price for pizzas increases. The increase in producer surplus comes from the benefit of the higher prices to

Accepted Answer

A)  only existing sellers who now receive higher prices on the pizzas they were already selling. 
B)  only new sellers who enter the market because of the higher prices. 
C)  both existing sellers who now receive higher prices on the pizzas they were already selling and new sellers who enter the market because of the higher prices. 
D)  Producer surplus does not increase; it decreases. 
A)  only existing sellers who now receive higher prices on the pizzas they were already selling. 
B)  only new sellers who enter the market because of the higher prices. 
C)  both existing sellers who now receive higher prices on the pizzas they were already selling and new sellers who enter the market because of the higher prices. 
D)  Producer surplus does not increase; it decreases.

Question 9

Hot dogs and hot dog buns are complements. An increase in the price of flour used to make hot dogs buns will

Accepted Answer

A)  increase consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs. 
B)  increase consumer surplus in the market for hot dogs and increase producer surplus in the market for hot dog buns. 
C)  decrease consumer surplus in the market for hot dog buns and increase producer surplus in the market for hot dogs. 
D)  decrease consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs. 
A)  increase consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs. 
B)  increase consumer surplus in the market for hot dogs and increase producer surplus in the market for hot dog buns. 
C)  decrease consumer surplus in the market for hot dog buns and increase producer surplus in the market for hot dogs. 
D)  decrease consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs.

Question 10

Figure 7-1  
-Refer to Figure 7-1. If the price of the good is $200, then

Accepted Answer

A)  consumer surplus is $150. 
B)  consumer surplus is $650. 
C)  producer surplus is $650. 
D)  producer surplus is $750. 
A)  consumer surplus is $150. 
B)  consumer surplus is $650. 
C)  producer surplus is $650. 
D)  producer surplus is $750.

Question 11

Total surplus in a market is consumer surplus minus producer surplus.

Accepted Answer

A) True 
 B)False

Question 12

Figure 7-33  
-Refer to Figure 7-33. How much is total surplus in this market at the equilibrium price?

Accepted Answer

Total surp

Question 13

Corn chips and potato chips are substitutes. Good weather that sharply increases the corn harvest would

Accepted Answer

A)  increase consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips. 
B)  increase consumer surplus in the market for corn chips and increase producer surplus in the market for potato chips. 
C)  decrease consumer surplus in the market for corn chips and increase producer surplus in the market for potato chips. 
D)  decrease consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips. 
A)  increase consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips. 
B)  increase consumer surplus in the market for corn chips and increase producer surplus in the market for potato chips. 
C)  decrease consumer surplus in the market for corn chips and increase producer surplus in the market for potato chips. 
D)  decrease consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips.

Question 14

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. You take bids from the sellers. Who offers the winning bid, and what does he offer to charge for the photography session?

Accepted Answer

A)  Steve; more than $400 but less than $450 
B)  Steve; $399 
C)  LeBron; more than $700 
D)  LeBron; more than $600 but less than $700 
A)  Steve; more than $400 but less than $450 
B)  Steve; $399 
C)  LeBron; more than $700 
D)  LeBron; more than $600 but less than $700

Question 15

Celine buys a new MP3 player for $90. She receives consumer surplus of $15 on her purchase if her willingness to pay is

Accepted Answer

A)  $15. 
B)  $90 
C)  $105. 
D)  $75. 
A)  $15. 
B)  $90 
C)  $105. 
D)  $75.

Question 16

A simultaneous increase 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 17

Welfare economics explains which of the following in the market for televisions?

Accepted Answer

A)  The government sets the price of televisions; firms respond to the price by producing a specific level of output. 
B)  The government sets the quantity of televisions; firms respond to the quantity by charging a specific price. 
C)  The market equilibrium price for televisions maximizes the total welfare of television buyers and sellers. 
D)  The market equilibrium price for televisions maximizes consumer welfare and minimizes producer profit. 
A)  The government sets the price of televisions; firms respond to the price by producing a specific level of output. 
B)  The government sets the quantity of televisions; firms respond to the quantity by charging a specific price. 
C)  The market equilibrium price for televisions maximizes the total welfare of television buyers and sellers. 
D)  The market equilibrium price for televisions maximizes consumer welfare and minimizes producer profit.

Question 18

Table 7-11
The following table represents the costs of five possible sellers.  
-Refer to Table 7-11. If the market price is $1,000, the producer surplus in the market is

Accepted Answer

A)  $1000. 
B)  $300. 
C)  $1,700. 
D)  $700. 
A)  $1000. 
B)  $300. 
C)  $1,700. 
D)  $700.

Question 19

Scenario 7-1
Suppose market demand is given by the equation  
-Refer to Scenario 7-1. If the market equilibrium price is $10, how much is total consumer surplus in this market?

Accepted Answer

Consumer s

Question 20

Figure 7-21  
-Refer to Figure 7-21. When the price is P1, area B+C represents

Accepted Answer

A)  total surplus. 
B)  producer surplus. 
C)  consumer surplus. 
D)  None of the above is correct. 
A)  total surplus. 
B)  producer surplus. 
C)  consumer surplus. 
D)  None of the above is correct.

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

Figure 7-3 -Refer to Figure 7-3. When the price is P2, consumer surplus is

Figure 7-4 -Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to new buyers entering the market?

Scenario 7-1 Suppose market demand is given by the equation -Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, how much consumer surplus do consumers entering the market after the price drop receive?

Producer surplus is the

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

Kristi and Rebecca sell lemonade on the corner for $0.50 per cup. It costs them $0.10 to make each cup. On a certain day, their producer surplus is $20. How many cups did Kristi and Rebecca sell?

The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate

Suppose that the market price for pizzas increases. The increase in producer surplus comes from the benefit of the higher prices to

Hot dogs and hot dog buns are complements. An increase in the price of flour used to make hot dogs buns will

Figure 7-1 -Refer to Figure 7-1. If the price of the good is $200, then

Total surplus in a market is consumer surplus minus producer surplus.

Figure 7-33 -Refer to Figure 7-33. How much is total surplus in this market at the equilibrium price?

Corn chips and potato chips are substitutes. Good weather that sharply increases the corn harvest would

Celine buys a new MP3 player for $90. She receives consumer surplus of $15 on her purchase if her willingness to pay is

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

Welfare economics explains which of the following in the market for televisions?

Table 7-11 The following table represents the costs of five possible sellers. -Refer to Table 7-11. If the market price is $1,000, the producer surplus in the market is

Scenario 7-1 Suppose market demand is given by the equation -Refer to Scenario 7-1. If the market equilibrium price is $10, how much is total consumer surplus in this market?

Figure 7-21 -Refer to Figure 7-21. When the price is P1, area B+C 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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