Question 1

Falling prices for a service

Accepted Answer

A)  create incentives for consumers to find cheaper substitutes. 
B)  eliminate shortages. 
C)  decrease quantity supplied of the service. 
D)  create incentives for businesses to produce more. 
E)  do all of the above.

Question 2

At an efficient market outcome,

Accepted Answer

A)  deadweight loss is maximized. 
B)  consumer surplus exceeds producer surplus. 
C)  the total surplus is minimized. 
D)  the total surplus is maximized. 
E)  the sum of consumer surplus and producer surplus is minimized.

Question 3

The concept of producer surplus is easiest to see by reading the supply curve as a marginal cost curve instead of as a supply curve.

Accepted Answer

A) True 
 B)False

Question 4

Figure 4.5.2 
-Figure 4.5.2 shows marginal costs for Betsy's Butter business. If Betsy sells the 1st unit of butter for $6, what is her producer surplus on that unit?

Accepted Answer

A)  $4 
B)  $6 
C)  $9 
D)  $12 
E)  $7

Question 5

At the market-clearing price, everyone who makes a voluntary exchange is better off.

Accepted Answer

A) True 
 B)False

Question 6

In a voluntary exchange, the price must be more than the opportunity cost of the seller.

Accepted Answer

A) True 
 B)False

Question 7

Prices fall if supply decreases.

Accepted Answer

A) True 
 B)False

Question 8

The price of a product rises if

Accepted Answer

A)  demand for the product decreases. 
B)  supply of the product decreases. 
C)  there is a surplus of the product. 
D)  the price of a substitute product decreases. 
E)  the product is an inferior good and income increases.

Question 9

Consumer surplus is the difference between the amount a consumer is willing and able to pay, and the amount actually paid.

Accepted Answer

A) True 
 B)False

Question 10

When demand decreases, price falls to eliminate the shortage.

Accepted Answer

A) True 
 B)False

Question 11

There is a shortage when quantity demanded exceeds quantity supplied.

Accepted Answer

A) True 
 B)False

Question 12

Deadweight loss is zero at an efficient market outcome.

Accepted Answer

A) True 
 B)False

Question 13

Rising prices for automobiles decrease the demand for

Accepted Answer

A)  bicycles and long lineups at the bicycle shops. 
B)  gasoline and a fall in gas prices at the pump. 
C)  public transportation and a fall in fares. 
D)  public transportation and a rise in fares. 
E)  motel rooms and a rise in the price we pay for motel rooms.

Question 14

When demand decreases, price falls and quantity supplied decreases.

Accepted Answer

A) True 
 B)False

Question 15

Figure 4.2.1
Market Demand and Supply for Pet Rocks
 
-In Figure 4.2.1, the equilibrium price is

Accepted Answer

A)  $7. 
B)  $4. 
C)  $5. 
D)  $3. 
E)  $1.

Question 16

If we observe a fall in the equilibrium price of product A, we know that either the demand for A has

Accepted Answer

A)  increased or the supply of A decreased or both. 
B)  increased or the supply of A increased or both. 
C)  decreased or the supply of A increased or both. 
D)  decreased or the supply of A decreased or both. 
E)  none of the above.

Question 17

A market is defined as

Accepted Answer

A)  a process. 
B)  interactions between buyers and sellers. 
C)  a process of competing bids and offers. 
D)  negotiations between buyers and sellers resulting in exchange. 
E)  all of the above.

Question 18

Figure 4.5.3.
-Look at Figure 4.5.3. If If quantity is 200, deadweight loss is area

Accepted Answer

A)  BCF. 
B)  ACG. 
C)  DCE. 
D)  ACH. 
E)  HCG.

Question 19

The miracle of markets is that

Accepted Answer

A)  markets coordinate smart choices of consumers and businesses without any role for government. 
B)  businesses are free to set any prices they choose. 
C)  consumers and businesses learn about each others' personal wants and production capabilities. 
D)  the products and services we want are produced as a byproduct of individual decisions made by complete strangers. 
E)  scarcity is eliminated by the interaction of demand and supply in markets with appropriate property rights.

Question 20

Total surplus is at a maximum when deadweight loss is zero.

Accepted Answer

A) True 
 B)False

Exam 4: Coordinating Smart Choices: Demand and Supply

Falling prices for a service

At an efficient market outcome,

The concept of producer surplus is easiest to see by reading the supply curve as a marginal cost curve instead of as a supply curve.

Figure 4.5.2 -Figure 4.5.2 shows marginal costs for Betsy's Butter business. If Betsy sells the 1st unit of butter for $6, what is her producer surplus on that unit?

At the market-clearing price, everyone who makes a voluntary exchange is better off.

In a voluntary exchange, the price must be more than the opportunity cost of the seller.

Prices fall if supply decreases.

The price of a product rises if

Consumer surplus is the difference between the amount a consumer is willing and able to pay, and the amount actually paid.

When demand decreases, price falls to eliminate the shortage.

There is a shortage when quantity demanded exceeds quantity supplied.

Deadweight loss is zero at an efficient market outcome.

Rising prices for automobiles decrease the demand for

When demand decreases, price falls and quantity supplied decreases.

Figure 4.2.1 Market Demand and Supply for Pet Rocks -In Figure 4.2.1, the equilibrium price is

If we observe a fall in the equilibrium price of product A, we know that either the demand for A has

A market is defined as

Figure 4.5.3. -Look at Figure 4.5.3. If If quantity is 200, deadweight loss is area

The miracle of markets is that

Total surplus is at a maximum when deadweight loss is zero.