Question 1

Producer surplus directly measures

Accepted Answer

A)   the well-being of sellers.
B)   production costs.
C)   excess demand.
D)   unsold inventories.E) B) and C)
F) B) and D)

Question 2

Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

Accepted Answer

A) True 
 B)False

Question 3

Tom tunes pianos in his spare time for extra income. Buyers of his service are willing to pay $155 per tuning. One particular week, Tom is willing to tune the first piano for $120, the second piano for $125, the third piano for $140, and the fourth piano for $160. Assume Tom is rational in deciding how many pianos to tune. His producer surplus is

Accepted Answer

A)   $95.
B)   $80.
C)   $75.
D)   $60.E) B) and C)
F) None of the above

Question 4

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 increases from $0.80 to $1.05, then consumer surplus

Accepted Answer

A)   increases by $0.75.
B)   decreases by $0.95.
C)   decreases by $0.75.
D)   decreases by $1.00.E) B) and D)
F) B) and C)

Question 5

Figure 7-10 
-Refer to Figure 7-10. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?

Accepted Answer

A)   BCG
B)   ACH
C)   DGH
D)   ABGDE) C) and D)
F) A) and B)

Question 6

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

Accepted Answer

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

Question 7

Producer surplus measures the benefit to sellers from receiving a price above their costs.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

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

Question 9

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

Accepted Answer

A)   increase consumer surplus.
B)   reduce consumer surplus.
C)   not affect consumer surplus.
D)   Any of the above are possible.E) None of the above
F) A) and C)

Question 10

Which of the following is correct?

Accepted Answer

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.E) C) and D)
F) B) and D)

Question 11

Table 7-7 
-Refer to Table 7-7. You have two essentially identical extra tickets 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 two tickets. Who makes the winning bids, and what do they offer to pay for the tickets?

Accepted Answer

A)   Michael and Earvin; more than $350 but less than or equal to $400
B)   Michael and Earvin; more than $400 but less than or equal to $500
C)   Earvin and Larry; more than $300 but less than or equal to $350
D)   Larry and Charles; less than $300E) None of the above
F) A) and D)

Question 12

The maximum price that a buyer will pay for a good is called

Accepted Answer

A)   consumer surplus.
B)   willingness to pay.
C)   equilibrium.
D)   efficiency.E) A) and D)
F) A) and C)

Question 13

Producing a soccer ball costs Jake $5. He sells it to Darby for $35. Darby values the soccer ball at $50. For this transaction, the total surplus in the market is $40.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)   $400.
B)   $800.
C)   $1,200.
D)   $900.E) None of the above
F) A) and B)

Question 15

In order to conclude that markets are efficient, we assume that they are perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 16

Table 7-3
The only four consumers in a market have the following willingness to pay for a good: 
-Refer to Table 7-3. If there is only one unit of the good and if the buyers bid against each other for the right to purchase it, then the good will sell for

Accepted Answer

A)   $15 or slightly less.
B)   $25 or slightly more.
C)   $35 or slightly more.
D)   $45 or slightly less.E) All of the above
F) C) and D)

Question 17

Welfare economics is the study of how

Accepted Answer

A)   the allocation of resources affects economic well-being.
B)   a price ceiling compares to a price floor.
C)   the government helps poor people.
D)   a consumer's optimal choice affects her demand curve.E) A) and C)
F) A) and B)

Question 18

Suppose that the equilibrium price in the market for tomatoes is $3 per pound. If a law reduced the maximum legal price for tomatoes to $2 per pound,

Accepted Answer

A)   any possible increase in consumer surplus would be larger than the loss of producer surplus.
B)   any possible increase in consumer surplus would be smaller than the loss of producer surplus.
C)   the resulting increase in producer surplus would be larger than any possible loss of consumer surplus.
D)   the resulting increase in producer surplus would be smaller than any possible loss of consumer surplus.E) B) and D)
F) A) and B)

Question 19

Table 7-17 
-Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, producer surplus will be

Accepted Answer

A)   $16.
B)   $18.
C)   $24.
D)   $26.E) A) and D)
F) None of the above

Question 20

Table 7-20 
-Refer to Table 7-20. How much is total producer surplus at the equilibrium price in this market?

Accepted Answer

Total producer surpl...

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

Welfare economics is the study of how

Correct Answer
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Which of the following is correct?

Correct Answer
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Figure 7-10 -Refer to Figure 7-10. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?

Correct Answer
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Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

Correct Answer
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Table 7-3 The only four consumers in a market have the following willingness to pay for a good: -Refer to Table 7-3. If there is only one unit of the good and if the buyers bid against each other for the right to purchase it, then the good will sell for

Correct Answer
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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

Correct Answer
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Producer surplus measures the benefit to sellers from receiving a price above their costs.

Correct Answer
verified

Producing a soccer ball costs Jake $5. He sells it to Darby for $35. Darby values the soccer ball at $50. For this transaction, the total surplus in the market is $40.

Correct Answer
verified

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

Correct Answer
verified

The maximum price that a buyer will pay for a good is called

Correct Answer
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Table 7-20 -Refer to Table 7-20. How much is total producer surplus at the equilibrium price in this market?

Correct Answer
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Total producer surpl...
View Answer

Producer surplus directly measures

Correct Answer
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In order to conclude that markets are efficient, we assume that they are perfectly competitive.

Correct Answer
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Table 7-17 -Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, producer surplus will be

Correct Answer
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Correct Answer
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Correct Answer
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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

Correct Answer
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Correct Answer
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Suppose that the equilibrium price in the market for tomatoes is $3 per pound. If a law reduced the maximum legal price for tomatoes to $2 per pound,

Correct Answer
verified

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

Correct Answer
verified

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

Welfare economics is the study of how

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Figure 7-10 -Refer to Figure 7-10. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?

Correct AnswerverifiedShow Answer

Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

Correct AnswerverifiedShow Answer

Table 7-3 The only four consumers in a market have the following willingness to pay for a good: -Refer to Table 7-3. If there is only one unit of the good and if the buyers bid against each other for the right to purchase it, then the good will sell for

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 due to new producers entering the market would be

Correct AnswerverifiedShow Answer

Producer surplus measures the benefit to sellers from receiving a price above their costs.

Correct AnswerverifiedShow Answer

Producing a soccer ball costs Jake $5. He sells it to Darby for $35. Darby values the soccer ball at $50. For this transaction, the total surplus in the market is $40.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The maximum price that a buyer will pay for a good is called

Correct AnswerverifiedShow Answer

Table 7-20 -Refer to Table 7-20. How much is total producer surplus at the equilibrium price in this market?

Correct AnswerverifiedTotal producer surpl...View AnswerShow Answer

Producer surplus directly measures

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In order to conclude that markets are efficient, we assume that they are perfectly competitive.

Correct AnswerverifiedShow Answer

Table 7-17 -Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, producer surplus will be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that the equilibrium price in the market for tomatoes is $3 per pound. If a law reduced the maximum legal price for tomatoes to $2 per pound,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Total producer surpl...
View Answer

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