Question 1

The area below the price and above the supply curve measures the producer surplus in a market.

Accepted Answer

A) True 
 B)False

Question 2

Table 7-11
The only four producers in a market have the following costs:
Seller
Cost
Evan
$50
Selena
$100
Angie
$150
Kris
$200
-Refer to Table 7-11. If the sellers bid against each other for the right to sell the good to a consumer, then the producer surplus will be

Accepted Answer

A)  $0 or slightly more.
B)  $50 or slightly less.
C)  $150 or slightly less.
D)  $200 or slightly more.E) A) and B)
F) A) and C)

Question 3

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is

Accepted Answer

A)  $175.
B)  $575.
C)  $750.
D)  $1,325.E) B) and D)
F) C) and D)

Question 4

Figure 7-2 
-Refer to Figure 7-2. If the price of the good is $100, then consumer surplus amounts to

Accepted Answer

A)  $50.
B)  $75.
C)  $100.
D)  $125.E) B) and C)
F) A) and C)

Question 5

An example of normative analysis is studying

Accepted Answer

A)  how market forces produce equilibrium.
B)  surpluses and shortages.
C)  whether equilibrium outcomes are socially desirable.
D)  income distributions.E) A) and C)
F) B) and C)

Question 6

Producer surplus is the area

Accepted Answer

A)  under the supply curve.
B)  between the supply and demand curves.
C)  below the price and above the supply curve.
D)  under the demand curve and above the price.E) A) and C)
F) None of the above

Question 7

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

Accepted Answer

A)  ABF.
B)  AGH.
C)  HGCD.
D)  HGBF.E) B) and D)
F) B) and C)

Question 8

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

Accepted Answer

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

Question 9

Figure 7-16 
-Refer to Figure 7-16. If the price of the good is $300, then producer surplus amounts to

Accepted Answer

A)  $100.
B)  $200.
C)  $300.
D)  $400.E) B) and C)
F) A) and D)

Question 10

If a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will

Accepted Answer

A)  increase producer surplus.
B)  reduce producer surplus.
C)  not affect producer surplus.
D)  Any of the above are possible.E) C) and D)
F) B) and D)

Question 11

Answer each of the following questions about supply and producer surplus.
a.What is producer surplus, and how is it measured?
b.What is the relationship between the cost to sellers and the supply curve?
c.Other things equal, what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve.

Accepted Answer

a.Producer surplus measures the benefit ...

Question 12

Justin builds fences for a living. Justin's out-of-pocket expenses (for wood, paint, etc.)  plus the value that he places on his own time amount to his

Accepted Answer

A)  producer surplus.
B)  producer deficit.
C)  cost of building fences.
D)  profit.E) All of the above
F) A) and B)

Question 13

Which of the following is correct?

Accepted Answer

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.E) All of the above
F) B) and D)

Question 14

Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day. 
-Refer to Table 7-5. If the market price of an orange is $0.40, then

Accepted Answer

A)  6 oranges are demanded per day, and consumer surplus amounts to $4.95.
B)  6 oranges are demanded per day, and consumer surplus amounts to $5.10.
C)  7 oranges are demanded per day, and consumer surplus amounts to $5.30.
D)  7 oranges are demanded per day, and consumer surplus amounts to $5.15.E) All of the above
F) A) and B)

Question 15

Figure 7-3 
-Refer to Figure 7-3. When the price rises from P1 to P2, consumer surplus

Accepted Answer

A)  increases by an amount equal to A.
B)  decreases by an amount equal to B+C.
C)  increases by an amount equal to B+C.
D)  decreases by an amount equal to C.E) All of the above
F) A) and D)

Question 16

The 2005 Boston Globe article discussing ticket scalping points out that the price people will pay for tickets will rise when

Accepted Answer

A)  supply and demand are both limited.
B)  supply is limited and demand is not limited.
C)  supply is not limited and demand is  limited.
D)  supply and demand are both not limited.E) None of the above
F) B) and C)

Question 17

Which of the following statements is not correct?

Accepted Answer

A)  A seller would be eager to sell her product at a price higher than her cost.
B)  A seller would refuse to sell her product at a price lower than her cost.
C)  A seller would be indifferent about selling her product at a price equal to her cost.
D)  Since sellers cannot set the price for their product, they must be willing to sell their product at any price.E) A) and B)
F) A) and C)

Question 18

Figure 7-10 
-Refer to Figure 7-10. Which area represents the increase in producer surplus when the price rises from P1 to P2?

Accepted Answer

A)  BCG
B)  ACH
C)  ABGD
D)  AHGBE) A) and B)
F) A) and C)

Question 19

What happens to consumer surplus in the iPod market if iPods are normal goods and buyers of iPods experience an increase in income?

Accepted Answer

A)  Consumer surplus decreases.
B)  Consumer surplus remains unchanged.
C)  Consumer surplus increases.
D)  Consumer surplus may increase, decrease, or remain unchanged.E) A) and D)
F) None of the above

Question 20

Figure 7-7 
-Refer to Figure 7-7. What happens to the consumer surplus if the price rises from $100 to $150?

Accepted Answer

A)  The new consumer surplus is half of the original consumer surplus.
B)  The new consumer surplus is 25 percent of the original consumer surplus.
C)  The new consumer surplus is double the original consumer surplus.
D)  The new consumer surplus is triple the original consumer surplus.E) A) and B)
F) A) and C)

Exam 7: Consumers, Producers, and the Efficiency of Markets

Producer surplus is the area

Correct Answer
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Figure 7-10 -Refer to Figure 7-10. Which area represents the increase in producer surplus when the price rises from P1 to P2?

Correct Answer
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Table 7-11 The only four producers in a market have the following costs: Seller Cost Evan $50 Selena $100 Angie $150 Kris $200 -Refer to Table 7-11. If the sellers bid against each other for the right to sell the good to a consumer, then the producer surplus will be

Correct Answer
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Which of the following statements is not correct?

Correct Answer
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Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is

Correct Answer
verified

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

Correct Answer
verified

Justin builds fences for a living. Justin's out-of-pocket expenses (for wood, paint, etc.) plus the value that he places on his own time amount to his

Correct Answer
verified

Figure 7-3 -Refer to Figure 7-3. When the price rises from P1 to P2, consumer surplus

Correct Answer
verified

What happens to consumer surplus in the iPod market if iPods are normal goods and buyers of iPods experience an increase in income?

Correct Answer
verified

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

Correct Answer
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Correct Answer
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Figure 7-16 -Refer to Figure 7-16. If the price of the good is $300, then producer surplus amounts to

Correct Answer
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Correct Answer
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a.Producer surplus measures the benefit ...
View Answer

Figure 7-7 -Refer to Figure 7-7. What happens to the consumer surplus if the price rises from $100 to $150?

Correct Answer
verified

If a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will

Correct Answer
verified

The area below the price and above the supply curve measures the producer surplus in a market.

Correct Answer
verified

The 2005 Boston Globe article discussing ticket scalping points out that the price people will pay for tickets will rise when

Correct Answer
verified

Figure 7-2 -Refer to Figure 7-2. If the price of the good is $100, then consumer surplus amounts to

Correct Answer
verified

An example of normative analysis is studying

Correct Answer
verified

Which of the following is correct?

Correct Answer
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Exam 7: Consumers, Producers, and the Efficiency of Markets

Producer surplus is the area

Correct AnswerverifiedShow Answer

Figure 7-10 -Refer to Figure 7-10. Which area represents the increase in producer surplus when the price rises from P1 to P2?

Correct AnswerverifiedShow Answer

Table 7-11 The only four producers in a market have the following costs: Seller Cost Evan $50 Selena $100 Angie $150 Kris $200 -Refer to Table 7-11. If the sellers bid against each other for the right to sell the good to a consumer, then the producer surplus will be

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Justin builds fences for a living. Justin's out-of-pocket expenses (for wood, paint, etc.) plus the value that he places on his own time amount to his

Correct AnswerverifiedShow Answer

Figure 7-3 -Refer to Figure 7-3. When the price rises from P1 to P2, consumer surplus

Correct AnswerverifiedShow Answer

What happens to consumer surplus in the iPod market if iPods are normal goods and buyers of iPods experience an increase in income?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 7-16 -Refer to Figure 7-16. If the price of the good is $300, then producer surplus amounts to

Correct AnswerverifiedShow Answer

Correct Answerverifieda.Producer surplus measures the benefit ...View AnswerShow Answer

Figure 7-7 -Refer to Figure 7-7. What happens to the consumer surplus if the price rises from $100 to $150?

Correct AnswerverifiedShow Answer

If a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will

Correct AnswerverifiedShow Answer

The area below the price and above the supply curve measures the producer surplus in a market.

Correct AnswerverifiedShow Answer

The 2005 Boston Globe article discussing ticket scalping points out that the price people will pay for tickets will rise when

Correct AnswerverifiedShow Answer

Figure 7-2 -Refer to Figure 7-2. If the price of the good is $100, then consumer surplus amounts to

Correct AnswerverifiedShow Answer

An example of normative analysis is studying

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

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a.Producer surplus measures the benefit ...
View Answer

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