Deck 7: Consumers, producers, and the Efficiency of Markets

Question 1

Table 7-1

Refer to Table 7-1.If the table represents the willingness to pay of 4 buyers and the price of the product is $25,who would be willing to purchase the product

A)Mike
B)Mike and Evan
C)Mike, Evan, and Jonathan
D)Mike, Evan, Jonathan, and Haley

Answer 1

Mike, Evan, and Jonathan

Question 2

With respect to welfare economics,why is the equilibrium price of a product considered to be the best price

A)It maximizes total revenue to firms and total utility to buyers.
B)It maximizes the total welfare of buyers and sellers.
C)It minimizes costs and maximizes profits of sellers.
D)It minimizes the level of welfare payments to those living close to the poverty line.

Answer 2

It maximizes the total welfare of buyers and sellers.

Question 3

To what does normative analysis refer

A)what is
B)what should be
C)what maximizes efficiency
D)what is politically correct

Answer 3

what should be

Question 4

What is welfare economics

A)the study of the well-being of less fortunate people
B)the study of welfare programs in Canada
C)the study of the effect of income redistribution on work effort
D)the study of how the allocation of resources affects economic well-being

Question 5

What is the likely effect of the equilibrium of supply and demand in a market

A)It maximizes the prices at which producers are willing to sell.
B)It minimizes the prices that consumers are willing to pay.
C)It maximizes market benefits from government intervention.
D)It maximizes total surplus in a competitive market.

Question 6

What does the equilibrium of supply and demand in a market do

A)It maximizes the prices at which producers are willing to sell.
B)It minimizes the prices that consumers are willing to pay.
C)It produces both an efficient and equitable market outcome.
D)It maximizes the total benefits received by buyers and sellers.

Question 7

What does consumer surplus measure

A)the amount of a product a consumer can buy at a price below equilibrium price
B)the difference between the amount a consumer has to pay and the amount the consumer would be willing to pay
C)the number of consumers who are excluded from a market because of scarcity
D)how much a buyer values a good

Question 8

Suri is willing to pay $85 for a pair of shoes for her graduation banquet.She finds a pair at her favourite outlet shoe store for $62.What is Suri's consumer surplus

A)$23
B)$46
C)$62
D)$85

Question 9

What name is given to the study of how the allocation of resources affects economic well-being

A)consumer economics
B)managerial economics
C)welfare economics
D)supply-side economics

Question 10

Suppose Lauren,Leslie,and Lyndsay all purchase bulletin boards for their rooms for $20 each.Lauren's willingness to pay was $35,Leslie's willingness to pay was $25,and Lyndsay's willingness to pay was $30.What is the total consumer surplus for these three

A)$10
B)$20
C)$30
D)$40

Question 11

If Paula is willing to pay $80 for Prince's last album,and the market-equilibrium price is $70,what is consumer surplus for Paula

A)$0
B)$10
C)$70
D)$80

Question 12

Why is the best price the particular price that results in quantity supplied being equal to quantity demanded

A)It maximizes sellers' costs.
B)It maximizes profit for buyers.
C)It maximizes the total welfare of buyers and sellers.
D)It minimizes the expenditure of buyers.

Question 13

To what does positive analysis refer

A)what is
B)what should be
C)what could be
D)what is politically correct

Question 14

What does a consumer's willingness to pay measure

A)the cost of a good to the buyer
B)how much a buyer values a good
C)how much a buyer has to pay to receive a good
D)how much a seller receives from the sale of a good

Question 15

What is consumer surplus

A)a buyer's willingness to pay minus the price
B)a buyer's willingness to pay plus the price
C)the price of the product minus the buyer's willingness to pay
D)the price of the product plus the buyer's willingness to pay

Question 16

Shannon buys a new audio system for her car for $335.She receives consumer surplus of $25 on her purchase.What is her willingness to pay

A)$25
B)$300
C)$335
D)$360

Question 17

What does willingness to pay measure

A)the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it
B)the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept
C)the maximum amount a buyer is willing to pay minus the minimum amount a seller is willing to accept
D)the maximum amount that a buyer will pay for a good

Question 18

Suppose Lauren,Leslie,and Lyndsay all purchase bulletin boards for their rooms for $15 each.Lauren's willingness to pay was $35,Leslie's willingness to pay was $25,and Lyndsay's willingness to pay was $30.Rank their consumer surplus from high to low.

A)Lauren, Lyndsay, and Leslie
B)Leslie, Lyndsay, and Lauren
C)Lyndsay, Leslie, and Lauren
D)Lauren, Leslie, and Lyndsay

Question 19

Suppose that Emmilyn,Cassie,and Tessa are bidding in an auction for a mint-condition video of the original Star Wars movie.Each has in mind a maximum amount that she will bid.What is this maximum called

A)resistance price
B)willingness to pay
C)consumer surplus
D)producer surplus

Question 20

Suppose Connor is willing to pay $400 for a new suit for his graduation,but is able to buy the suit for $350.What is his consumer surplus

A)$50
B)$150
C)$350
D)$400

Question 21

What is consumer surplus

A)the quantity of a good consumers get free
B)the amount a consumer has to pay less the amount the consumer was willing to pay
C)the amount a consumer is willing to pay less the amount the consumer actually pays
D)the total value of a good to a consumer

Question 22

Table 7-2

Refer to Table 7-2.If the market price is $6.90,who will purchase the good

A)David, Laura, and Ty
B)Ty, Mallory, and Audrey
C)Laura and Ty
D)David and Laura

Question 23

Denise values a stainless steel dishwasher for her new house at $700.The actual price of the dishwasher is $850.What will Denise do

A)buy the dishwasher and receive a consumer surplus of $150
B)buy the dishwasher and receive a consumer surplus of $500
C)not buy the dishwasher because her willingness to pay is greater than the price
D)not buy the dishwasher because her willingness to pay is less than the price

Question 24

Suppose the price a consumer pays for a product is equal to a consumer's willingness to pay.What is the consumer surplus of that purchase

A)equal to zero
B)equal to one
C)equal to the consumer's willingness to pay
D)equal to the price paid

Question 25

Table 7-2

Refer to Table 7-2.At different market prices,which statement is NOT correct

A)At a price of $9.00, no buyer is willing to purchase the good.
B)At a price of $7.50, the consumer surplus for Laura is $0.50.
C)When the price is $3.00, each person would receive consumer surplus.
D)At a price of $4.00, total consumer surplus in the market will be $8.50.

Question 26

What does consumer surplus equal

A)value to buyers minus amount paid by buyers
B)value to sellers minus cost of sellers
C)value to buyers minus costs of sellers
D)value to sellers minus value to buyers

Question 27

Table 7-2

Refer to Table 7-2.If the market price is $5.00,what is the consumer surplus in the market

A)$3.00
B)$5.50
C)$15.50
D)$21.00

Question 28

Which of the following does a demand curve NOT reflect

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

Question 29

Jeff decides that he would pay as much as $1,250 for a new laptop computer.He buys the computer and receives a consumer surplus of $200.How much did Jeff pay for his computer

A)$200
B)$575
C)$1050
D)$1450

Question 30

Chad is willing to pay $5.00 to get his second cup of morning latte.He finds a vendor selling latte for $3.75.What is Chad's consumer surplus

A)$1.25
B)$1.50
C)$3.75
D)$5.00

Question 31

Amy buys a new horse for $1500.She receives consumer surplus of $100 on her purchase.What is her willingness to pay

A)$100
B)$1400
C)$1500
D)$1600

Question 32

Suppose there is an early freeze in California that ruins the lemon crop.What happens to consumer surplus in the market for lemons

A)It increases.
B)It decreases.
C)It is not affected by this change in market forces.
D)It increases very briefly then decreases.

Question 33

Daria values a stainless steel dishwasher for her new house at $800,but buys it for $550.What is Daria's willingness to pay

A)$250
B)$550
C)$800
D)$1350

Question 34

Janine would be willing to pay $100 to see Cirque du Soleil,but buys a ticket for only $70.At what amount does Janine value the performance

A)$120
B)$130
C)$100
D)$170

Question 35

What is the outcome if you pay a price exactly equal to your willingness to pay

A)Your consumer surplus is negative.
B)Your willingness to pay is less than your consumer surplus.
C)Your consumer surplus is zero.
D)Your consumer surplus is one.

Question 36

What does the area below a demand curve and above the price measure

A)producer surplus
B)total surplus
C)consumer surplus
D)willingness to pay

Question 37

What does a demand curve measure

A)a buyer's willingness to pay
B)the actual price a buyer must pay to get the product
C)the difference between a buyer's willingness to pay and the actual price of the product
D)the least a buyer will pay for the product

Question 38

Calvin buys a new tractor for $125,000.He receives consumer surplus of $13,000 on his purchase.What is Calvin's willingness to pay

A)$13,000
B)$125,000
C)$125 ,000
D)$138,000

Question 39

Nathan buys a new sound system for his dorm room for $500.He receives consumer surplus of $400 from the purchase.At what amount does Nathan value his sound system

A)$100
B)$400
C)$500
D)$900

Question 40

Cameron visits a sporting goods store to buy a new set of golf clubs.He is willing to pay $1200 for the clubs,but buys them on sale for $900.What is Cameron's consumer surplus from the purchase

A)$175
B)$300
C)$575
D)$900

Question 41

If the price of oak lumber increases,what happens to consumer surplus in the market for oak cabinets

A)It increases.
B)It decreases.
C)It does not change, but producer surplus will change.
D)It will increase then decrease.

Question 42

Suppose a consumer is willing and able to pay $18.00 for a particular good but only has to pay $14.00.What is the consumer surplus

A)$4.00
B)$14.00
C)$18.00
D)$32.00

Question 43

Suppose that Dylan has a change in his tastes such that he values avocados more than before.If the market price is the same as before,then what would happen to Dylan

A)Dylan's consumer surplus would increase since his willingness to pay decreases.
B)Dylan's consumer surplus would increase since his willingness to pay increases.
C)Dylan's consumer surplus would decrease since his willingness to pay decreases.
D)Dylan's consumer surplus would decrease since his willingness to pay increases.

Question 44

On a graph,which area is consumer surplus

A)the area below the demand curve to the left of the equilibrium price
B)the area below the demand curve to the right of the equilibrium price
C)the area below the price and above the supply curve
D)the area below the demand curve and above the price

Question 45

Figure 7-2

Refer to Figure 7-2.When the price falls from P₁ to P₂,which area represents the increase in consumer surplus to new buyers entering the market

A)ABD
B)ACF
C)BCED
D)DEF

Question 46

Figure 7-2

Refer to Figure 7-2.Which area represents the increase in consumer surplus when the price falls from P₁ to P₂

A)ABD
B)ACF
C)BCED
D)BCFD

Question 47

What happens to consumer surplus if the price of a good changes

A)It increases if the price increases.
B)It decreases if the price increases.
C)It decreases if the price decreases.
D)It changes to zero if the price changes to zero.

Question 48

Figure 7-1

Refer to Figure 7-1.Which does NOT occur when the price rises from P₁ to P₂

A)The buyers who still buy the good are worse off because they now pay more.
B)Some buyers leave the market because they are not willing to buy the good at the higher price.
C)The total value of what is now purchased by buyers is actually higher.
D)Consumer surplus in the market falls.

Question 49

When technology improves in the ice cream industry,what happens to consumer surplus

A)It increases.
B)It decreases.
C)It does not change, since technology affects suppliers and not consumers.
D)It increases then decreases.

Question 50

Figure 7-1

Refer to Figure 7-1.At the price of P₂,what is consumer surplus

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

Question 51

Figure 7-2

Refer to Figure 7-2.Which area represents consumer surplus at a price of P₂

A)ABD
B)ACF
C)BCED
D)DEF

Question 52

Other things equal,if the price of a good falls,what happens to the consumer surplus

A)It decreases.
B)It falls to zero if price falls to zero.
C)It increases.
D)It falls to a minimum if price falls to zero.

Question 53

Figure 7-1

Refer to Figure 7-1.When the price rises from P₁ to P₂,what happens to consumer surplus

A)It increases by an amount equal to A.
B)It decreases by an amount equal to B + C.
C)It increases by an amount equal to B + C.
D)It decreases by an amount equal to C.

Question 54

What will occur when the price of a good or service falls

A)Buyers who were already buying the good or service are worse off.
B)Some new buyers, who are now willing to buy, enter the market.
C)The total value of what is purchased decreases.
D)The total value of what is purchased increases.

Question 55

If the cost of producing sectional sofas decreases,what happens to consumer surplus

A)It increases then decreases.
B)It decreases.
C)It remains constant.
D)It increases.

Question 56

Figure 7-2

Refer to Figure 7-2.Which area represents consumer surplus at a price of P₁

A)ABD
B)ACF
C)BCED
D)DEF

Question 57

Figure 7-1

Refer to Figure 7-1.What does area C represent

A)the decrease in consumer surplus to new consumers who enter the market when the price falls from P₂ to P₁
B)the increase in consumer surplus to new consumers who enter the market when the price falls from P₂ to P₁
C)an increase in producer surplus when quantity sold increases from Q₂ to Q₁
D)a decrease in consumer surplus to each consumer in the market when the price falls from P₂ to P₁

Question 58

What is the outcome if a consumer is willing and able to pay $18.00 for a particular good but the price of the good is $20.00

A)The consumer has a consumer surplus of $3.00.
B)The consumer has a consumer surplus of $18.00
C)The consumer will try to increase his/her willingness and ability to pay by earning more.
D)The consumer will not purchase the good and will not have any consumer surplus.

Question 59

Figure 7-1

Refer to Figure 7-1.At the price of P₁,what is consumer surplus

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

Question 60

Figure 7-2

Refer to Figure 7-2.When the price falls from P₁ to P₂,which area represents the increase in consumer surplus to existing buyers

A)ABD
B)ACF
C)BCED
D)DEF

Question 61

What is cost a measure of

A)the seller's willingness to sell
B)the seller's producer surplus
C)the producer shortage
D)the seller's willingness to buy

Question 62

At Nick's Bakery,the cost to make Nick's homemade chocolate cake is $4 per cake.He sells four and receives a total of $24 worth of producer surplus.What is Nick selling his cakes for

A)$2 each
B)$7 each
C)$8 each
D)$10 each

Question 63

How can we define consumer surplus in a market

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

Question 64

What is the sum of out-of-pocket expenses plus the value of the seller's own resources used in production

A)the seller's total revenue
B)the seller's consumer surplus
C)producer surplus
D)the cost of production

Question 65

Roger produces computer boards.His production cost is $10 per board.He sells the boards for $25 each.What is his producer surplus

A)$10 per board
B)$15 per board
C)$25 per board
D)$35 per board

Question 66

Donald produces nails at a cost of $200 per tonne.If he sells the nails for $500 per tonne,what is his producer surplus

A)$200 per tonne
B)$300 per tonne
C)$500 per tonne
D)$700 per tonne

Question 67

Table 7-3

Refer to Table 7-3.If the price is $1000,what is Jackson's producer surplus

A)$250
B)$400
C)$750
D)$1000

Question 68

Table 7-3

Refer to Table 7-3.If the market price is $1000,what is the total cost in the market

A)$1500
B)$2550
C)$2700
D)$3700

Question 69

What does cost refer to

A)a seller's producer surplus
B)a seller's opportunity cost
C)a seller's consumer surplus
D)a seller's willingness to buy

Question 70

Zara produces carrot muffins.Her production cost is $2 per dozen.She sells the muffins for $6 per dozen.What is her producer surplus

A)$3 per dozen
B)$4 per dozen
C)$6 per dozen
D)$8 per dozen

Question 71

What does producer surplus measure

A)the well-being of sellers
B)production costs
C)the well-being of buyers and sellers
D)unsold inventories

Question 72

Table 7-3

Refer to Table 7-3.If the market price is $1000,what is the producer surplus in the market

A)$450
B)$950
C)$1450
D)$3700

Question 73

Table 7-3

Refer to Table 7-3.If the price is $1100,who would be willing to supply the product

A)Dale and Jill
B)Dale, Jill, and Denise
C)Denise, Catherine, and Jackson
D)Catherine and Jackson

Question 74

What does producer surplus measure

A)the well-being of society as a whole
B)the well-being of sellers
C)the well-being of buyers and sellers
D)the well-being of buyers

Question 75

Lauren and Amy sell lemonade on a street corner.Each glass costs them $0.05 to make.At the end of the day,they have sold 50 glasses and received a total producer surplus of $22.50.What are Lauren and Amy selling each glass for

A)$0.15
B)$0.20
C)$0.30
D)$0.45

Question 76

Knowing the cost of production,which decision will a seller mostly likely make

A)A seller would be eager to sell her product at a price higher than her cost and refuse to sell her product at a price equal to her cost.
B)A seller would refuse to sell her product at a price lower than her cost and willing to sell her product at a price equal to her cost.
C)A seller would be eager to sell her produce at a price higher than her cost and refuse to sell her product at a price lower than her cost.
D)A seller must be willing to sell her product at any price since sellers cannot set the price for their product.

Question 77

Ryah sells investment advice for $150 per hour.Her cost is $40 per hour.What is Ryah's producer surplus

A)$40 per hour
B)$80 per hour
C)$110 per hour
D)$130 per hour

Question 78

When is an allocation of resources said to be inefficient

A)when a good is not being produced by the sellers with the lowest cost
B)when producer surplus is not at a minimum
C)when consumer surplus is not at a maximum
D)when equilibrium is not an equitable distribution of resources

Question 79

If Jadelyn sells a bracelet for $30,and her producer surplus from the sale is $21,what must her cost have been

A)$9
B)$21
C)$30
D)$51

Question 80

When would a seller be willing to sell a product

A)only if the price received is less than the cost of production
B)only if the price received is at least as great as the cost of production
C)only if the price received is equal to the cost of production
D)only if the price received is at least double the cost of production