Question 1

When markets fail, public policy can

Accepted Answer

A) do nothing to improve the situation. 
B) potentially remedy the problem and increase economic efficiency. 
C) always remedy the problem and increase economic efficiency. 
D) in theory, remedy the problem, but in practice, public policy has proven to be ineffective. 
A) do nothing to improve the situation. 
B) potentially remedy the problem and increase economic efficiency. 
C) always remedy the problem and increase economic efficiency. 
D) in theory, remedy the problem, but in practice, public policy has proven to be ineffective.

Question 2

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

Accepted Answer

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

Question 3

Table 7-16  
-Refer to Table 7-16. The equilibrium price is

Accepted Answer

A) $10.00. 
B) $8.00. 
C) $6.00. 
D) $4.00. 
A) $10.00. 
B) $8.00. 
C) $6.00. 
D) $4.00.

Question 4

Figure 7-21  
-Refer to Figure 7-21. Which area represents producer surplus when the price is P1?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 5

Total surplus = Value to buyers - Costs to sellers.

Accepted Answer

A) True 
 B)False

Question 6

Consumer surplus equals the

Accepted Answer

A) value to buyers minus the amount paid by buyers. 
B) value to buyers minus the cost to sellers. 
C) amount received by sellers minus the cost to sellers. 
D) amount received by sellers minus the amount paid by buyers. 
A) value to buyers minus the amount paid by buyers. 
B) value to buyers minus the cost to sellers. 
C) amount received by sellers minus the cost to sellers. 
D) amount received by sellers minus the amount paid by buyers.

Question 7

Figure 7-5  
-Refer to Figure 7-5. If the price of the good is $6, then consumer surplus is

Accepted Answer

A) $16. 
B) $24. 
C) $30. 
D) $36. 
A) $16. 
B) $24. 
C) $30. 
D) $36.

Question 8

Producer surplus directly measures

Accepted Answer

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

Question 9

Figure 7-21  
-Refer to Figure 7-21. When the price is P1, area C represents

Accepted Answer

A) total benefit. 
B) producer surplus. 
C) consumer surplus. 
D) None of the above is correct. 
A) total benefit. 
B) producer surplus. 
C) consumer surplus. 
D) None of the above is correct.

Question 10

Figure 7-3  
-Refer to Figure 7-3. When the price is P1, consumer surplus is

Accepted Answer

A) A. 
B) A+B. 
C) A+B+C. 
D) A+B+D. 
A) A. 
B) A+B. 
C) A+B+C. 
D) A+B+D.

Question 11

Scenario 7-1
Suppose market demand is given by the equation  
-Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, how much consumer surplus do consumers entering the market after the price drop receive?

Accepted Answer

The consumers enteri

Question 12

Table 7-10
The following table represents the costs of five possible sellers.  
-Refer to Table 7-10. If the market price is $1,000, the producer surplus in the market is

Accepted Answer

A) $1000. 
B) $300. 
C) $1,700. 
D) $700. 
A) $1000. 
B) $300. 
C) $1,700. 
D) $700.

Question 13

Efficiency is attained when

Accepted Answer

A) total surplus is maximized. 
B) producer surplus is maximized. 
C) all resources are being used. 
D) consumer surplus is maximized and producer surplus is minimized. 
A) total surplus is maximized. 
B) producer surplus is maximized. 
C) all resources are being used. 
D) consumer surplus is maximized and producer surplus is minimized.

Question 14

Figure 7-14  
-Refer to Figure 7-14. If the government imposes a price ceiling of $50 in this market, then the new producer surplus will be

Accepted Answer

A) $200. 
B) $100. 
C) $125. 
D) $250. 
A) $200. 
B) $100. 
C) $125. 
D) $250.

Question 15

The "invisible hand" refers to

Accepted Answer

A) the marketplace guiding the self-interests of market participants into promoting general economic well-being. 
B) the fact that social planners sometimes have to intervene, even in perfectly competitive markets, to make those markets more efficient. 
C) the equality that results from market forces allocating the goods produced in the market. 
D) the automatic maximization of consumer surplus in free markets. 
A) the marketplace guiding the self-interests of market participants into promoting general economic well-being. 
B) the fact that social planners sometimes have to intervene, even in perfectly competitive markets, to make those markets more efficient. 
C) the equality that results from market forces allocating the goods produced in the market. 
D) the automatic maximization of consumer surplus in free markets.

Question 16

The marginal seller is the seller

Accepted Answer

A) for whom the marginal cost of producing one more unit of output is the lowest among all sellers, and the marginal buyer is the buyer for whom the marginal benefit of one more unit of the good is the highest among all buyers. 
B) who supplies the smallest quantity of the good among all sellers, and the marginal buyer is the buyer who demands the smallest quantity of the good among all buyers. 
C) who would leave the market first if the price were any lower, and the marginal buyer is the buyer who would leave the market first if the price were any higher. 
D) who has the largest producer surplus, and the marginal buyer is the buyer who has the largest consumer surplus. 
A) for whom the marginal cost of producing one more unit of output is the lowest among all sellers, and the marginal buyer is the buyer for whom the marginal benefit of one more unit of the good is the highest among all buyers. 
B) who supplies the smallest quantity of the good among all sellers, and the marginal buyer is the buyer who demands the smallest quantity of the good among all buyers. 
C) who would leave the market first if the price were any lower, and the marginal buyer is the buyer who would leave the market first if the price were any higher. 
D) who has the largest producer surplus, and the marginal buyer is the buyer who has the largest consumer surplus.

Question 17

If the government imposes a binding price floor in a market, then the consumer surplus in that market will decrease.

Accepted Answer

A) True 
 B)False

Question 18

Figure 7-15  
-Refer to Figure 7-15. Area A represents

Accepted Answer

A) producer surplus to new producers entering the market as the result of an increase in price from P1 to P2. 
B) the increase in consumer surplus that results from an upward-sloping supply curve. 
C) the increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2. 
D) the increase in producer surplus to those producers already in the market when the price increases from P1 to P2. 
A) producer surplus to new producers entering the market as the result of an increase in price from P1 to P2. 
B) the increase in consumer surplus that results from an upward-sloping supply curve. 
C) the increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2. 
D) the increase in producer surplus to those producers already in the market when the price increases from P1 to P2.

Question 19

The cost of production plus producer surplus is the price a seller is paid.

Accepted Answer

A) True 
 B)False

Question 20

Figure 7-23  
-Refer to Figure 7-23. The efficient price-quantity combination is

Accepted Answer

A) P1 and Q1. 
B) P2 and Q2. 
C) P3 and Q1. 
D) P4 and 0. 
A) P1 and Q1. 
B) P2 and Q2. 
C) P3 and Q1. 
D) P4 and 0.

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

When markets fail, public policy can

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

Table 7-16 -Refer to Table 7-16. The equilibrium price is

Figure 7-21 -Refer to Figure 7-21. Which area represents producer surplus when the price is P1?

Total surplus = Value to buyers - Costs to sellers.

Consumer surplus equals the

Figure 7-5 -Refer to Figure 7-5. If the price of the good is $6, then consumer surplus is

Producer surplus directly measures

Figure 7-21 -Refer to Figure 7-21. When the price is P1, area C represents

Figure 7-3 -Refer to Figure 7-3. When the price is P1, consumer surplus is

Scenario 7-1 Suppose market demand is given by the equation -Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, how much consumer surplus do consumers entering the market after the price drop receive?

Table 7-10 The following table represents the costs of five possible sellers. -Refer to Table 7-10. If the market price is $1,000, the producer surplus in the market is

Efficiency is attained when

Figure 7-14 -Refer to Figure 7-14. If the government imposes a price ceiling of $50 in this market, then the new producer surplus will be

The "invisible hand" refers to

The marginal seller is the seller

If the government imposes a binding price floor in a market, then the consumer surplus in that market will decrease.

Figure 7-15 -Refer to Figure 7-15. Area A represents

The cost of production plus producer surplus is the price a seller is paid.

Figure 7-23 -Refer to Figure 7-23. The efficient price-quantity combination is

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

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