Question 1

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

Accepted Answer

A) True 
 B)False  False

Question 2

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

Accepted Answer

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

Question 3

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.

Accepted Answer

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

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is correct ?

Accepted Answer

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 6

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

Accepted Answer

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

Question 7

Total surplus equals:

Accepted Answer

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 8

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:

Accepted Answer

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

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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:

Accepted Answer

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

Question 11

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:

Accepted Answer

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

Question 12

Deadweight loss is not the result of:

Accepted Answer

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

Question 13

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:

Accepted Answer

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

Question 14

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.

Accepted Answer

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

Question 15

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

Accepted Answer

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

Question 16

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:

Accepted Answer

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

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:

Accepted Answer

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

Question 18

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?

Accepted Answer

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

Question 19

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:

Accepted Answer

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

Question 20

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

Accepted Answer

A) True 
 B)False

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

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

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

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.

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

Which of the following statements is correct ?

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

Total surplus equals:

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:

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

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:

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:

Deadweight loss is not the result of:

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:

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

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:

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:

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?

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:

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