Deck 22: Consumer Surplus, Producer Surplus, and Market Efficiency

Question 1

Producer surplus is the:

A)amount by which the quantity supplied of a good exceeds the quantity demanded of a good.
B)measure of producers' willingness to sell a good plus the price of the good.
C)measure of how much producers value a good.
D)amount consumers actually pay for a good minus the amount the sellers are willing to sell the good.

Answer 1

amount consumers actually pay for a good minus the amount the sellers are willing to sell the good.

Question 2

Consumer surplus is the:

A)amount by which the quantity supplied of a good exceeds the quantity demanded of a good.
B)measure of consumes' willingness to buy a good plus the price of the good.
C)measure of how much consumers value a good.
D)amount consumers are willing to pay for a good minus the amount the consumers actually pays for it.

Answer 2

amount consumers are willing to pay for a good minus the amount the consumers actually pays for it.

Question 3

Suppose Jones sells a good for $100 at a yard sale. If the producer surplus from the sale is $75, Jones's cost of the good must have been:

A)$100.
B)$175.
C)$25.
D)equal to the deadweight loss.

Answer 3

$25.

Question 4

Which of the following is not true concerning consumer surplus?

A)It is graphically the area under the demand curve and above the market price.
B)It does not exist in equilibrium.
C)A leftward shift of the supply curve will decrease consumer surplus.
D)A rightward shift of the supply curve will increase consumer surplus.

Question 5

Consumer surplus is the:

A)number of consumers who are excluded from a market because of scarcity.
B)amount of a good that consumers will buy at a price below the equilibrium price.
C)amount consumers are willing to pay for a good minus the amount the consumers actually pay for it.
D)amount consumers are willing to pay for a good minus the cost of producing the good.

Question 6

A drought destroys much of the grape crop. As a result, consumer surplus in the market for wine:

A)decreases.
B)increases.
C)remains unchanged.
D)depends on the deadweight loss.

Question 7

Using supply and demand curve analysis, the triangular area above the equilibrium price and under the demand curve is:

A)consumer surplus.
B)producer surplus.
C)marginal cost.
D)deadweight loss.

Question 8

Assuming peaches are a normal good and consumer incomes rise, producer surplus in the peach market:

A)increases.
B)decreases.
C)remains unchanged.
D)equals the deadweight loss increase.

Question 9

Suppose Alice sells a good for $60 on eBay. If the producer surplus from the sale is $25, Alice's cost of the good must have been:

A)$35.
B)$25.
C)$60.
D)$85.

Question 10

Suppose Sam buys a good for $100 at a yard sale. If consumer surplus from the sale is $75, Sam would have been willing to pay:

A)$100.
B)$175.
C)$25.
D)equal to the deadweight loss.

Question 11

If Bill is willing to pay $10 for one good X, $8 for a second, and $6 for a third, and the market price is $5, then Max's consumer surplus is:

A)$24.
B)$18.
C)$9.
D)$6.

Question 12

Producer surplus is the:

A)number of producers who are excluded from a market because of scarcity.
B)amount of a good that a producers will sell at a price below the equilibrium price.
C)amount consumers actually pay for a good minus the amount the sellers are willing to sell the good.
D)amount consumers are willing to pay for a good minus the cost of producing the good.

Question 13

Consumer surplus:

A)is minimized in market equilibrium.
B)measures the value between the actual selling price of a product and the price at which sellers are willing to sell the product.
C)measures the value between the price consumers are willing to pay for a product and the price they actually pay.
D)measures the price at which sellers extract excess profits from consumers.

Question 14

Consumer surplus measures the value between the price consumers are willing to pay and the:

A)producer surplus price.
B)deadweight gain price.
C)actual price paid.
D)preference price.

Question 15

A drought destroys much of the peach crop. As a result, consumer surplus in the peach market:

A)increases.
B)decreases.
C)remains unchanged.
D)equals the deadweight loss increase.

Question 16

At $30 each, Jack will buy 1 Blu-ray and at $25, he will purchase 2. If the price is $20, Jack's consumer surplus is:

A)$10.
B)$15.
C)$20.
D)$25.

Question 17

Suppose Sue's buys a good for $60 on eBay. If the consumer surplus from the sale is $25, Sue would have been willing to pay:

A)$35.
B)$25.
C)$60.
D)$85.

Question 18

Consumer surplus:

A)does not exist in equilibrium.
B)is illustrated by the area under the demand curve and above the market price.
C)is illustrated by the area under the demand curve and below the market price.
D)is illustrated by the area above the supply curve and under the demand curve.

Question 19

Suppose a consumer is willing to pay $20 for one good X, $10 for a second, and $5 for a third, and the market price is $4. The consumer surplus is:

A)$16.
B)$6.
C)$1.
D)$23.

Question 20

If Sam is willing to pay $50 for one good X, $30 for a second, $20 for a third, $8 for a fourth, and the market price is $10, then Sam's consumer surplus is:

A)$10.
B)$40.
C)$70.
D)$100.

Question 21

Total surplus equals:

A)consumer surplus + producer surplus - deadweight loss.
B)consumer surplus - producer surplus - deadweight loss.
C)consumer surplus - producer surplus + deadweight loss.
D)consumer surplus + producer surplus.

Question 22

At the equilibrium price, deadweight loss is:

A)minimized.
B)zero.
C)maximized.
D)equal to the equilibrium price multiplied by the quantity exchanged.

Question 23

If the quantity supplied exceeds the quantity demanded in a market, then the result is which of the following?

A)Deadweight loss
B)Inefficiency
C)Overproduction
D)Each of these are true.

Question 24

If the quantity demanded exceeds the quantity supplied in a market, then the result is which of the following?

A)Deadweight loss
B)Inefficiency
C)Underproduction
D)Each of these are true.

Question 25

Suppose Gizmo Inc. is willing to sell one gizmo for $10, a second gizmo for $12, a third for $14, and a fourth for $20, and the market price is $20. What is Gizmo Inc.'s producer surplus?

A)$56
B)$24
C)$20
D)$10

Question 26

Suppose Tucker Inc. is willing to sell one gizmo for $10, a second gizmo for $15, a third for $20, and the market price is $25. What is Tucker Inc.'s producer surplus?

A)$10
B)$15
C)$30
D)$50

Question 27

Producer surplus:

A)measures the value between the actual selling price of a product and the price at which sellers are willing to sell the product.
B)is illustrated by the area above the supply curve and below the market price.
C)is maximized in market equilibrium.
D)all of these.

Question 28

In an efficient market, deadweight loss is ____.

A)maximum.
B)minimum.
C)constant.
D)zero.

Question 29

Suppose seller X is willing to sell one good X for $5, a second good X for $10, a third for $16, a fourth for $25, and the market price is $20. What is seller X's producer surplus?

A)$15
B)$20
C)$22
D)$29

Question 30

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-1, if the quantity supplied is 6 million pounds of ground beef per year, the result is:

A)deadweight loss.
B)inefficiency.
C)overproduction.
D)all of the above are true.
E)none of the above are true.

Question 31

Which of the following statements is correct ?

A)Total surplus is the sum of consumer and producer surplus.
B)Deadweight loss is the net loss of both consumer and producer surplus resulting from underproduction or overproduction of a product.
C)Deadweight loss is a measure of market inefficiency.
D)All of these.

Question 32

Deadweight loss is the net loss of:

A)consumer surplus.
B)producer surplus.
C)disequilibrium surplus.
D)both a and b.

Question 33

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-1, if the market is in equilibrium, then ____ represents producer surplus.

A)ADFB
B)CEFD
C)EGH
D)BEF

Question 34

Deadweight loss results from:

A)equilibrium.
B)underproduction.
C)overproduction.
D)none of the above are correct.
E)Either b or c.

Question 35

Producer surplus measures the value between the actual selling price and the:

A)price sellers are willing to sell the product.
B)deadweight loss price.
C)lowest price sellers are willing to sell the product.
D)profit-maximization price.

Question 36

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-1, if the quantity supplied is 2 million pounds of ground beef per year, the result is:

A)deadweight loss.
B)inefficiency.
C)underproduction.
D)all of the above are true.
E)none of the above are true.

Question 37

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-1, if the market price falls from $3.00 to $2.00, then:

A)total surplus increases.
B)deadweight loss increases.
C)overproduction increases.
D)underproduction decreases.

Question 38

Deadweight loss is not the result of:

A)an efficient market.
B)an inefficient market.
C)zero consumer surplus.
D)zero producer surplus.

Question 39

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-1, if the market is in equilibrium, then ____ represents consumer surplus.

A)ABEC
B)AED
C)EGH
D)BEF

Question 40

Deadweight loss is the result of:

A)disequilibrium.
B)underproduction.
C)overproduction.
D)all of these are correct.

Question 41

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-2, if the market price falls from P₂ to P₃, then:

A)total surplus increases.
B)deadweight loss decreases.
C)overproduction increases.
D)underproduction decreases.

Question 42

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-1, if the market price falls from $3.00 to $2.00, then:

A)consumer surplus increases.
B)producer surplus increases.
C)deadweight loss is eliminated.
D)all of these are true.

Question 43

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-2, if the quantity supplied of good X per year is Q₁, the result is a deadweight loss represented by area:

A)BEG.
B)CBEFD.
C)EGH.
D)BEF.

Question 44

The points along the demand curve represent the maximum willingness of consumers to purchase a product.

Question 45

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-2, if the market is in equilibrium, then ____ represents producer surplus.

A)FEH
B)EGH
C)DFEA

Question 46

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-2, if the market price falls from P₂ to P₃, then:

A)consumer surplus increases.
B)producer surplus increases.
C)deadweight loss increases.
D)all of the above are true.
E)none of the above are true.

Question 47

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-1, if the market price falls from $2.00 to $1.00, then:

A)total surplus increases.
B)deadweight loss increases.
C)overproduction decreases.
D)underproduction decreases.

Question 48

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-1, if the quantity supplied is 2 million pounds of ground beef per year, the result is a deadweight loss represented by area:

A)ABEC.
B)CEFD.
C)EGH.
D)BEF.

Question 49

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-2, if the market price falls from P₁ to P₂, then:

A)total surplus increases.
B)deadweight loss increases.
C)overproduction increases.
D)underproduction decreases.

Question 50

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-2, if the market price falls from P₁ to P₂, then area ____ disappears.

A)ABEFD
B)BEG
C)EGH
D)BEF

Question 51

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-2, if the market price falls from P₂ to P₃, then area ____ appears.

A)ABEFD
B)ABEC
C)EGF
D)BEF

Question 52

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-2, if the market price falls from P₁ to P₂, then:

A)consumer surplus increases.
B)producer surplus increases.
C)deadweight loss is eliminated.
D)all of these are true.

Question 53

Total consumer surplus is measured by the total area under the market demand curve and below the equilibrium price.

Question 54

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-2, if the market is in equilibrium, then ____ represents consumer surplus.

A)DFEBC
B)AEBC
C)DEA
D)BEG

Question 55

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-1, if the market price falls from $2.00 to $1.00, then:

A)consumer surplus increases.
B)producer surplus increases.
C)deadweight loss is eliminated.
D)all of the above are true.
E)none of the above are true.

Question 56

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-1, if the market price falls from $3.00 to $2.00, then area ____ disappears.

A)ABEFD
B)ABEC
C)CEFD
D)BEF

Question 57

Exhibit 3A-1 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-1, if the market price falls from $2.00 to $1.00, then area ____ appears.

A)ABEFD
B)ABEC
C)EGF
D)BEF

Question 58

Consumer surplus measures the value between the price consumers are willing to pay for a product and the preference price.

Question 59

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-2, if the quantity supplied of good X per year is Q₁, the result is:

A)deadweight loss.
B)inefficiency.
C)underproduction.
D)all of the above are true.
E)none of the above are true.

Question 60

Exhibit 3A-2 Comparison of Market Efficiency and Deadweight Loss As shown in Exhibit 3A-2, if the quantity supplied of good X per year is Q_3, the result is:

A)deadweight loss.
B)inefficiency.
C)overproduction.
D)all of the above are true.
E)none of the above are true.

Question 61

At the equilibrium price, deadweight loss is minimized.

Question 62

Producer surplus measures the value between the actual selling price and the profit-maximization price.

Question 63

The points along the supply curve represent the maximum willingness of firms to accept payment for a product offered for sale at various prices.

Question 64

The deadweight loss equals the consumer surplus minus the producer surplus resulting from a non-equilibrium price.

Question 65

Total producer surplus is measured by the total area under the equilibrium price and below the supply curve.

Question 66

Deadweight loss results from a misallocation of resources.

Question 67

Deadweight loss results from too few or too many resources used in a given market.

Question 68

Total producer surplus is the area below the equilibrium price and above the supply curve.