Question 1

Suppose that Firms A and B each produce high-resolution computer monitors,but Firm A can do so at a lower cost.Cassie and David each want to purchase a high-resolution computer monitor,but David is willing to pay more than Cassie.If Firm A produces a monitor that Cassie buys but David does not,then the market outcome illustrates which of the following principles? (i) Free markets allocate the supply of goods to the buyers who value them most highly,as measured by their willingness to pay.
(ii) Free markets allocate the demand for goods to the sellers who can produce them at the least cost.

Accepted Answer

A)   (i) only
B)   (ii) only
C)   both (i) and (ii) 
D)   neither (i) nor (ii) E) A) and B)
F) A) and C)

Question 2

Efficiency is related to the size of the economic pie,whereas equality is related to how the pie gets sliced and distributed.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following equations is valid?

Accepted Answer

A)   Consumer surplus = Total surplus - Cost to sellers
B)   Producer surplus = Total surplus - Consumer surplus
C)   Total surplus = Value to buyers - Amount paid by buyers
D)   Total surplus = Amount received by sellers - Cost to sellersE) B) and D)
F) C) and D)

Question 4

Which of the following will cause an increase in producer surplus?

Accepted Answer

A)   the imposition of a binding price ceiling in the market
B)   buyers expect the price of the good to be lower next month
C)   the price of a substitute increases
D)   income increases and buyers consider the good to be inferiorE) C) and D)
F) All of the above

Question 5

Figure 7-2 
-Refer to Figure 7-2.When the price rises from P1 to P2,which of the following statements is not true?

Accepted Answer

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)   Buyers place a higher value on the good after the price increase.
D)   Consumer surplus in the market falls.E) B) and D)
F) None of the above

Question 6

If the government removes a binding price ceiling in a market,then the producer surplus in that market will increase.

Accepted Answer

A) True 
 B)False

Question 7

Suppose that the equilibrium price in the market for widgets is $5.If a law increased the minimum legal price for widgets to $6,producer surplus

Accepted Answer

A)   would necessarily increase even if the higher price resulted in a surplus of widgets.
B)   would necessarily decrease because the higher price would create a surplus of widgets.
C)   might increase or decrease.
D)   would be unaffected.E) A) and D)
F) C) and D)

Question 8

If the demand for leather decreases,producer surplus in the leather market

Accepted Answer

A)   increases.
B)   decreases.
C)   remains the same.
D)   may increase,decrease,or remain the same.E) C) and D)
F) B) and C)

Question 9

Even though participants in the economy are motivated by self-interest,the "invisible hand" of the marketplace guides this self-interest into promoting general economic well-being.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)   Consumer surplus increases.
B)   Consumer surplus decreases.
C)   Consumer surplus is not affected by this change in market forces.
D)   We would have to know whether the demand for lemons is elastic or inelastic to make this determination.E) A) and B)
F) A) and C)

Question 11

Denise values a stainless steel dishwasher for her new house at $500.The actual price of the dishwasher is $650.Denise

Accepted Answer

A)   buys the dishwasher,and on her purchase she experiences a consumer surplus of $150.
B)   buys the dishwasher,and on her purchase she experiences a consumer surplus of $-150.
C)   does not buy the dishwasher,and on her purchase she experiences a consumer surplus of $150.
D)   does not buy the dishwasher,and on her purchase she experiences a consumer surplus of $0.E) A) and B)
F) None of the above

Question 12

A seller's willingness to sell is

Accepted Answer

A)   measured by the seller's cost of production.
B)   related to her supply curve,just as a buyer's willingness to buy is related to his demand curve.
C)   less than the price received if producer surplus is a positive number.
D)   All of the above are correct.E) All of the above
F) A) and C)

Question 13

Figure 7-14 rd unit is $225.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." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 7-14.Suppose the willingness to pay of the marginal buyer of the 3rd unit is $225.Then total surplus is maximized if

Accepted Answer

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.E) None of the above
F) C) and D)

Question 14

Figure 7-12 
-Refer to Figure 7-12.When the price rises from P1 to P2,which area represents the increase in producer surplus due to new producers entering the market?

Accepted Answer

A)   A
B)   B
C)   A+B
D)   GE) All of the above
F) A) and C)

Question 15

Figure 7-11 
-Refer to Figure 7-11.At the equilibrium price,producer surplus is

Accepted Answer

A)   $200.
B)   $400.
C)   $450.
D)   $900.E) All of the above
F) A) and B)

Question 16

When policymakers are considering a particular action,they can use consumer surplus as a(n)

Accepted Answer

A)   objective measure of the benefits to buyers as determined by policymakers.
B)   measure of the benefits to buyers as the buyers perceive them.
C)   potentially flawed measure of the benefits to buyers if the buyers are not rational.
D)   Both b) and c) are correct.E) C) and D)
F) A) and D)

Question 17

Figure 7-18 
-Refer to Figure 7-18.At the equilibrium price,total surplus is

Accepted Answer

A)   $480.
B)   $640.
C)   $1,120.
D)   $1,280.E) A) and D)
F) None of the above

Question 18

The "invisible hand" is

Accepted Answer

A)   used to describe the welfare system in the United States.
B)   a concept developed by Adam Smith to describe the virtues of free markets.
C)   a concept used by J.M.Keynes to describe the role of government in guiding the allocation of resources in the economy.
D)   a term used by some economists to characterize the role of government in an economy - inevitable but invisible.E) A) and B)
F) A) and C)

Question 19

Table 7-1
 
-Refer to Table 7-1.If price of the product is $30,then the total consumer surplus is

Accepted Answer

A)   $-10.
B)   $-6.
C)   $20.
D)   $30.E) All of the above
F) None of the above

Question 20

Table 7-6
 
-Refer to Table 7-6.You have an extra ticket to the Midwest Regional Sweet 16 game in the men's NCAA basketball tournament.The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game.You hold an auction to sell the ticket.Michael bids $410 for the ticket,and you sell him the ticket.What is his consumer surplus?

Accepted Answer

A)   $410
B)   $90
C)   $10
D)   $0E) None of the above
F) All of the above

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

Suppose that the equilibrium price in the market for widgets is $5.If a law increased the minimum legal price for widgets to $6,producer surplus

Correct Answer
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Figure 7-12 -Refer to Figure 7-12.When the price rises from P1 to P2,which area represents the increase in producer surplus due to new producers entering the market?

Correct Answer
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Table 7-1 -Refer to Table 7-1.If price of the product is $30,then the total consumer surplus is

Correct Answer
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Which of the following equations is valid?

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Denise values a stainless steel dishwasher for her new house at $500.The actual price of the dishwasher is $650.Denise

Correct Answer
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The "invisible hand" is

Correct Answer
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Figure 7-11 -Refer to Figure 7-11.At the equilibrium price,producer surplus is

Correct Answer
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Figure 7-18 -Refer to Figure 7-18.At the equilibrium price,total surplus is

Correct Answer
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Even though participants in the economy are motivated by self-interest,the "invisible hand" of the marketplace guides this self-interest into promoting general economic well-being.

Correct Answer
verified

Efficiency is related to the size of the economic pie,whereas equality is related to how the pie gets sliced and distributed.

Correct Answer
verified

A seller's willingness to sell is

Correct Answer
verified

When policymakers are considering a particular action,they can use consumer surplus as a(n)

Correct Answer
verified

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

Correct Answer
verified

If the government removes a binding price ceiling in a market,then the producer surplus in that market will increase.

Correct Answer
verified

Figure 7-2 -Refer to Figure 7-2.When the price rises from P1 to P2,which of the following statements is not true?

Correct Answer
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If the demand for leather decreases,producer surplus in the leather market

Correct Answer
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Figure 7-14 -Refer to Figure 7-14.Suppose the willingness to pay of the marginal buyer of the 3^rd unit is $225.Then total surplus is maximized if

Correct Answer
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Which of the following will cause an increase in producer surplus?

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

Suppose that the equilibrium price in the market for widgets is $5.If a law increased the minimum legal price for widgets to $6,producer surplus

Correct AnswerverifiedShow Answer

Figure 7-12 -Refer to Figure 7-12.When the price rises from P1 to P2,which area represents the increase in producer surplus due to new producers entering the market?

Correct AnswerverifiedShow Answer

Table 7-1 -Refer to Table 7-1.If price of the product is $30,then the total consumer surplus is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following equations is valid?

Correct AnswerverifiedShow Answer

Denise values a stainless steel dishwasher for her new house at $500.The actual price of the dishwasher is $650.Denise

Correct AnswerverifiedShow Answer

The "invisible hand" is

Correct AnswerverifiedShow Answer

Figure 7-11 -Refer to Figure 7-11.At the equilibrium price,producer surplus is

Correct AnswerverifiedShow Answer

Figure 7-18 -Refer to Figure 7-18.At the equilibrium price,total surplus is

Correct AnswerverifiedShow Answer

Even though participants in the economy are motivated by self-interest,the "invisible hand" of the marketplace guides this self-interest into promoting general economic well-being.

Correct AnswerverifiedShow Answer

Efficiency is related to the size of the economic pie,whereas equality is related to how the pie gets sliced and distributed.

Correct AnswerverifiedShow Answer

A seller's willingness to sell is

Correct AnswerverifiedShow Answer

When policymakers are considering a particular action,they can use consumer surplus as a(n)

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the government removes a binding price ceiling in a market,then the producer surplus in that market will increase.

Correct AnswerverifiedShow Answer

Figure 7-2 -Refer to Figure 7-2.When the price rises from P1 to P2,which of the following statements is not true?

Correct AnswerverifiedShow Answer

If the demand for leather decreases,producer surplus in the leather market

Correct AnswerverifiedShow Answer

Figure 7-14 -Refer to Figure 7-14.Suppose the willingness to pay of the marginal buyer of the 3rd unit is $225.Then total surplus is maximized if

Correct AnswerverifiedShow Answer

Which of the following will cause an increase in producer surplus?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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Figure 7-14 -Refer to Figure 7-14.Suppose the willingness to pay of the marginal buyer of the 3^rd unit is $225.Then total surplus is maximized if

Correct Answer
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