Deck 7: 3: Sec 73 Mc Market Efficiency

Question 1

Total surplus is represented by the area below the

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.

Answer 1

B

Question 2

Total surplus is

A)the total cost to sellers of providing the good minus the total value of the good to buyers.
B)the total value of the good to buyers minus the cost to sellers of providing the good.
C)the difference between consumer surplus and sellers' cost.
D)always smaller than producer surplus.

Answer 2

D

Question 3

Producer surplus equals the

A)value to buyers minus the amount paid by buyers.
B)value to buyers minus the cost to sellers.
C)amount received by sellers minus the cost to sellers.
D)amount received by sellers minus the amount paid by buyers.

Answer 3

C

Question 4

Total surplus in a market is equal to

A)value to buyers - amount paid by buyers.
B)amount received by sellers - costs of sellers.
C)value to buyers - costs of sellers.
D)amount received by sellers - amount paid by buyers.

Question 5

Which of the following statements is not correct about a market in equilibrium?

A)The price determines which buyers and which sellers participate in the market.
B)Those buyers who value the good more than the price choose to buy the good.
C)Those sellers whose costs are less than the price choose to produce and sell the good.
D)Consumer surplus will be equal to producer surplus.

Question 6

Which of the following is correct?

A)Consumer surplus refers to a situation in which there are more buyers than sellers in a market.
B)Producer surplus refers to a situation in which there are more sellers than buyers in a market.
C)Total surplus is measured as the area below the demand curve and above the supply curve,up to the equilibrium quantity.
D)All of the above are correct.

Question 7

Efficiency in a market is achieved when

A)a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs.
B)the sum of producer surplus and consumer surplus is maximized.
C)all firms are producing the good at the same low cost per unit.
D)no buyer is willing to pay more than the equilibrium price for any unit of the good.

Question 8

Total surplus is

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 9

We can say that the allocation of resources is efficient if

A)producer surplus is maximized.
B)consumer surplus is maximized.
C)total surplus is maximized.
D)sellers' costs are minimized.

Question 10

Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?

A)profits and costs to firms
B)consumer and producer surplus
C)the equilibrium price and quantity
D)incomes of and prices paid by buyers

Question 11

Total surplus is represented by the area

A)under the demand curve and above the price.
B)above the supply curve and up to the price.
C)under the supply curve and up to the price.
D)between the demand and supply curves up to the point of equilibrium.

Question 12

At the equilibrium price of a good,the good will be sold by those sellers

A)whose cost is more than price.
B)whose cost is less than price.
C)that can produce the good.
D)enter the market first.

Question 13

At the equilibrium price of a good,the good will be purchased by those buyers who

A)value the good more than price.
B)value the good less than price.
C)have the money to buy the good.
D)consider the good a necessity.

Question 14

Economists typically measure efficiency using

A)the price paid by buyers.
B)the quantity supplied by sellers.
C)total surplus.
D)profits to firms.

Question 15

Total surplus is equal to

A)value to buyers - profit to sellers.
B)value to buyers - cost to sellers.
C)consumer surplus x producer surplus.
D)(consumer surplus + producer surplus)x equilibrium quantity.

Question 16

Total surplus in a market is equal to

A)consumer surplus + producer surplus.
B)value to buyers - amount paid by buyers.
C)amount received by sellers - costs of sellers.
D)producer surplus - consumer surplus.

Question 17

Consumer surplus equals the

A)value to buyers minus the amount paid by buyers.
B)value to buyers minus the cost to sellers.
C)amount received by sellers minus the cost to sellers.
D)amount received by sellers minus the amount paid by buyers.

Question 18

Total surplus

A)can be used to measure a market's efficiency.
B)is the sum of consumer and producer surplus.
C)is the value to buyers minus the cost to sellers.
D)All of the above are correct.

Question 19

Efficiency is attained when

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 20

The distinction between efficiency and equality can be described as follows:

A)Efficiency refers to maximizing the number of trades among buyers and sellers;equality refers to maximizing the gains from trade among buyers and sellers.
B)Efficiency refers to minimizing the price paid by buyers;equality refers to maximizing the gains from trade among buyers and sellers.
C)Efficiency refers to maximizing the size of the pie;equality refers to producing a pie of a given size at the least possible cost.
D)Efficiency refers to maximizing the size of the pie;equality refers to distributing the pie fairly among members of society.

Question 21

Figure 7-19
Refer to Figure 7-19.At the equilibrium price,consumer surplus is

A)$100.
B)$200.
C)$50.
D)$450.

Question 22

Figure 7-18
Refer to Figure 7-18.If total surplus is $240 and consumer surplus is

A)$100,then the price of the good is $130.
B)$130,then the price of the good is $120.
C)$160,then the price of the good is $100.
D)$120,then the price of the good is $90.

Question 23

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

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 24

Moving production from a high-cost producer to a low-cost producer will

A)lower total surplus.
B)raise total surplus.
C)lower producer surplus.
D)raise producer surplus but lower consumer surplus.

Question 25

Figure 7-21
Refer to Figure 7-21.Which area represents producer surplus when the price is P1?

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

Question 26

Figure 7-19
Refer to Figure 7-19.If the government imposes a price floor of $55 in this market,then total surplus will be

A)$137.50.
B)$125.00.
C)$187.50.
D)$275.00.

Question 27

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

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 28

Figure 7-18
Refer to Figure 7-18.Total surplus amounts to $500 if consumer surplus amounts to

A)$290 and if the price of the good is $150.
B)$300 and if the price of the good is $130.
C)$275 and if the price of the good is $160.
D)$400 and if the price of the good is $100.

Question 29

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

A)total surplus.
B)producer surplus.
C)consumer surplus.
D)profits.

Question 30

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

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

Question 31

Figure 7-19
Refer to Figure 7-19.If the government imposes a price floor of $55 in this market,then total surplus will be

A)$100.00 higher than it would be without the price floor.
B)$50.00 lower than it would be without the price floor.
C)$125.00 lower than it would be without the price floor.
D)$62.50 lower than it would be without the price floor.

Question 32

Which of the following is correct?

A)Efficiency deals with the size of the economic pie,and equality deals with how fairly the pie is sliced.
B)Equality can be judged on positive grounds whereas efficiency requires normative judgments.
C)Efficiency is more difficult to evaluate than equality.
D)Equality and efficiency are both maximized in a society when total surplus is maximized.

Question 33

Figure 7-19
Refer to Figure 7-19.If the government imposes a price ceiling of $55 in this market,then total surplus will be

A)$187.50.
B)$125.00.
C)$250.00.
D)$266.67.

Question 34

Figure 7-21
Refer to Figure 7-21.Which area represents consumer surplus when the price is P1?

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

Question 35

Figure 7-19
Refer to Figure 7-19.At the equilibrium price,total surplus is

A)$125.
B)$450.
C)$250.
D)$500.

Question 36

Figure 7-21
Refer to Figure 7-21.When the price is P1,area A represents

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

Question 37

Figure 7-18
Refer to Figure 7-18.Suppose the willingness to pay of the marginal buyer of the 3^rd unit is $125.Then total surplus is maximized if

A)1 unit of the good is produced and sold.
B)2 units of the good are produced and sold.
C)3 units of the good are produced and sold.
D)4 units of the good are produced and sold.

Question 38

If an allocation of resources is efficient,then

A)consumer surplus is maximized.
B)producer surplus is maximized.
C)all potential gains from trade among buyers are sellers are being realized.
D)the allocation achieves equality as well.

Question 39

Figure 7-20
Refer to Figure 7-20.Total surplus can be measured as the area

A)JNK.
B)JNML.
C)JRL.
D)JNL.

Question 40

Figure 7-19
Refer to Figure 7-19.At the equilibrium price,producer surplus is

A)$300.
B)$150.
C)$450.
D)$125.

Question 41

Figure 7-22
Refer to Figure 7-22.If the price decreases from $80 to $70 due to a shift in the supply curve,consumer surplus increases by

A)$250.
B)$750.
C)$1000.
D)$500.

Question 42

Figure 7-22
Refer to Figure 7-22.Assume demand increases,which causes the equilibrium price to increase from $50 to $70.The increase in producer surplus would be

A)$2,500.
B)$900.
C)$800.
D)$1,600.

Question 43

Figure 7-22
Refer to Figure 7-22.If 110 units of the good are bought and sold,then

A)the marginal cost to sellers is equal to the marginal value to buyers.
B)the marginal value to buyers is greater than the marginal cost to sellers.
C)the marginal cost to buyers is greater than marginal value to sellers.
D)producer surplus is greater than consumer surplus.

Question 44

Figure 7-24
Refer to Figure 7-24.At equilibrium,consumer surplus is measured by the area

A)AHG.
B)AFB.
C)ABD.
D)BDF.

Question 45

Figure 7-21
Refer to Figure 7-21.Which area represents total surplus in the market when the price is P1?

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

Question 46

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

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

Question 47

Figure 7-22
Refer to Figure 7-22.Assume demand increases,which causes the equilibrium price to increase from $50 to $70.The increase in producer surplus due to new producers entering the market would be

A)$400.
B)$800.
C)$1,200.
D)$900.

Question 48

Figure 7-23
Refer to Figure 7-23.If the price were P1,producer surplus would be represented by the area

A)F.
B)F+G.
C)D+H+F.
D)D+H+F+G+I.

Question 49

Figure 7-22
Refer to Figure 7-22.At the equilibrium price,total surplus is

A)$2,500.
B)$1,000.
C)$3,500.
D)$7,000.

Question 50

Figure 7-22
Refer to Figure 7-22.Assume demand increases,which causes the equilibrium price to increase from $50 to $70.The increase in producer surplus to producers already in the market would be

A)$1,600.
B)$600.
C)$800.
D)$1,200.

Question 51

Figure 7-23
Refer to Figure 7-23.At equilibrium,consumer surplus is represented by the area

A)A.
B)A+B+C.
C)D+H+F.
D)A+B+C+D+H+F.

Question 52

Figure 7-23
Refer to Figure 7-23.The efficient price-quantity combination is

A)P1 and Q1.
B)P2 and Q2.
C)P3 and Q1.
D)P4 and 0.

Question 53

Figure 7-23
Refer to Figure 7-23.If the price were P3,consumer surplus would be represented by the area

A)A.
B)A+B+C.
C)D+H+F.
D)A+B+C+D+H+F.

Question 54

Figure 7-23
Refer to Figure 7-23.The equilibrium price is

A)P1.
B)P2.
C)P3.
D)P4.

Question 55

Figure 7-23
Refer to Figure 7-23.At equilibrium,total surplus is represented by the area

A)A+B+C.
B)A+B+D+F.
C)A+B+C+D+H+F.
D)A+B+C+D+H+F+G+I.

Question 56

Figure 7-22
Refer to Figure 7-22.The efficient price is

A)$80,and the efficient quantity is 50.
B)$70,and the efficient quantity is 60.
C)$70,and the efficient quantity is 100.
D)$50,and the efficient quantity is 60.

Question 57

Figure 7-22
Refer to Figure 7-22.At the equilibrium price,consumer surplus is

A)$1,000.
B)$2,000.
C)$3,500.
D)$500.

Question 58

Figure 7-22
Refer to Figure 7-22.At the equilibrium price,producer surplus is

A)$5,000.
B)$2,500.
C)$3,500.
D)$1,750.

Question 59

Figure 7-22
Refer to Figure 7-22.If 40 units of the good are bought and sold,then

A)the marginal cost to sellers is equal to the marginal value to buyers.
B)the marginal value to buyers is greater than the marginal cost to sellers.
C)the marginal cost to sellers is greater than the marginal value to buyers.
D)producer surplus would be greater than consumer surplus.

Question 60

Figure 7-23
Refer to Figure 7-23.At equilibrium,producer surplus is represented by the area

A)F.
B)F+G.
C)D+H+F.
D)D+H+F+G+I.

Question 61

Figure 7-24
Refer to Figure 7-24.If 6 units of the good are produced and sold,then

A)efficiency is achieved in this market.
B)the marginal value to buyers equals the marginal cost to sellers.
C)the sum of consumer surplus and producer surplus is maximized.
D)All of the above are correct.

Question 62

Figure 7-24
Refer to Figure 7-24.If 6 units of the good are produced and sold,then

A)consumer surplus is greater than producer surplus.
B)producer surplus is maximized.
C)the sum of consumer surplus and producer surplus is maximized.
D)consumer surplus equals producer surplus.

Question 63

Figure 7-24
Refer to Figure 7-24.If the government imposes a price ceiling at $12,then producer surplus is

A)CDI.
B)BDF.
C)BCIF.
D)HGCD.

Question 64

Figure 7-24
Refer to Figure 7-24.If the government imposes a price floor at $18,then consumer surplus is

A)ABF.
B)AGH.
C)HGCD.
D)HGBF.

Question 65

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

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

Question 66

Figure 7-25
Refer to Figure 7-25.Suppose the government imposes a price floor of $28 in this market.If the sellers with the lowest cost are the ones who sell the good and the government does not purchase any excess units produced,then total surplus will be

A)$400.
B)$800.
C)$1,120.
D)$1,184.

Question 67

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

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

Question 68

Figure 7-26
Refer to Figure 7-26.If the government imposes a price floor of $90 in this market,then consumer surplus will be

A)$225.
B)$450.
C)$975.
D)$1,350

Question 69

Figure 7-26
Refer to Figure 7-26.At the equilibrium price,total surplus is

A)$600.
B)$1,200.
C)$1,500.
D)$1,800.

Question 70

Figure 7-25
Refer to Figure 7-25.Suppose the government imposes a price ceiling of $16 in this market.If the buyers with the highest willingness to pay purchase the good,then total surplus will be

A)$256.
B)$768.
C)$1,024.
D)$1,280.

Question 71

Figure 7-24
Refer to Figure 7-24.If 10 units of the good are produced and sold,then

A)the marginal cost to sellers exceeds the marginal value to buyers.
B)producer surplus is maximized.
C)total surplus is minimized.
D)the marginal value to buyers exceeds the marginal cost to sellers.

Question 72

Figure 7-24
Refer to Figure 7-24.At equilibrium,total surplus is measured by the area

A)ABD.
B)ABF.
C)FBD.
D)HGCI.

Question 73

Figure 7-24
Refer to Figure 7-24.At equilibrium,producer surplus is measured by the area

A)ABD.
B)ABF.
C)CDI.
D)BDF.

Question 74

Figure 7-26
Refer to Figure 7-26.At the equilibrium price,consumer surplus is

A)$600.
B)$900.
C)$1,500.
D)$1,800.

Question 75

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

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

Question 76

Figure 7-27
Refer to Figure 7-27.Buyers who value this good more than the equilibrium price are represented by which line segment?

A)AC.
B)CK.
C)BC.
D)CH.

Question 77

Figure 7-26
Refer to Figure 7-26.At the equilibrium price,producer surplus is

A)$600.
B)$900.
C)$1,200.
D)$1,800.

Question 78

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

A)$36.
B)$54.
C)$18.
D)$108.

Question 79

Figure 7-24
Refer to Figure 7-24.If 4 units of the good are produced and sold,then

A)producer surplus is greater than consumer surplus.
B)consumer surplus is $16.
C)total surplus is minimized.
D)total surplus is not maximized.

Question 80

Figure 7-24
Refer to Figure 7-24.The equilibrium allocation of resources is

A)efficient because total surplus is maximized at the equilibrium.
B)efficient because consumer surplus is maximized at the equilibrium.
C)inefficient because consumer surplus is larger than producer surplus at the equilibrium.
D)inefficient because producer surplus is not maximized.