Question 1

Which of the following will cause a decrease in producer surplus?

Accepted Answer

A) the imposition of a binding price ceiling in the market 
B) an increase in the number of buyers of the good 
C) income increases and buyers consider the good to be normal 
D) the price of a complement decreases 
A) the imposition of a binding price ceiling in the market 
B) an increase in the number of buyers of the good 
C) income increases and buyers consider the good to be normal 
D) the price of a complement decreases

Question 2

Figure 7-28  
-Refer to Figure 7-28. At the quantity Q3,

Accepted Answer

A) the market is in equilibrium. 
B) consumer surplus is maximized. 
C) the sum of consumer surplus and producer surplus is maximized. 
D) the marginal value to buyers is less than the marginal cost to sellers. 
A) the market is in equilibrium. 
B) consumer surplus is maximized. 
C) the sum of consumer surplus and producer surplus is maximized. 
D) the marginal value to buyers is less than the marginal cost to sellers.

Question 3

Table 7-1  
-Refer to Table 7-1. If the market price is $105,

Accepted Answer

A) Calvin's consumer surplus is $45 and total consumer surplus is $85. 
B) Sam's consumer surplus is $30 and total consumer surplus is $90. 
C) Andrew's consumer surplus is $15 and total consumer surplus is $67.50. 
D) Lori's consumer surplus is -$2 and total consumer surplus is $100. 
A) Calvin's consumer surplus is $45 and total consumer surplus is $85. 
B) Sam's consumer surplus is $30 and total consumer surplus is $90. 
C) Andrew's consumer surplus is $15 and total consumer surplus is $67.50. 
D) Lori's consumer surplus is -$2 and total consumer surplus is $100.

Question 4

Table 7-11
The only four producers in a market have the following costs:  
-Refer to Table 7-11. If Evan, Selena, and Angie sell the good, and the resulting producer surplus is $300, then the price must have been

Accepted Answer

A) $200. 
B) $300. 
C) $450. 
D) $600. 
A) $200. 
B) $300. 
C) $450. 
D) $600.

Question 5

The French expression used by free-market advocates, which literally translates as "allow them to do," is

Accepted Answer

A) laissez-faire. 
B) je ne sais pas. 
C) si'l vous plait. 
D) tête-à-tête. 
A) laissez-faire. 
B) je ne sais pas. 
C) si'l vous plait. 
D) tête-à-tête.

Question 6

Figure 7-30  
-Refer to Figure 7-30. If the market equilibrium price falls from $120 to $80, how much consumer surplus do consumers entering the market after the price drop receive?

Accepted Answer

Consumers entering t

Question 7

Suppose Larry, Moe, and Curly are bidding in an auction for a mint-condition video of Charlie Chaplin's first movie. Each has in mind a maximum amount that he will bid. This maximum is called

Accepted Answer

A) a resistance price. 
B) willingness to pay. 
C) consumer surplus. 
D) producer surplus. 
A) a resistance price. 
B) willingness to pay. 
C) consumer surplus. 
D) producer surplus.

Question 8

Figure 7-16  
-Refer to Figure 7-16. Sellers will be unwilling to sell more than

Accepted Answer

A) 1 unit of the good if its price is below $200. 
B) 2 units of the good if its price is below $450. 
C) 3 units of the good if its price is below $700. 
D) All of the above are correct. 
A) 1 unit of the good if its price is below $200. 
B) 2 units of the good if its price is below $450. 
C) 3 units of the good if its price is below $700. 
D) All of the above are correct.

Question 9

Figure 7-17  
-Refer to Figure 7-17. If the demand curve is D and the supply curve shifts left from S to S', what is the change in producer surplus when comparing the new equilibrium with the original equilibrium?

Accepted Answer

A) Producer surplus increases by $225. 
B) Producer surplus increases by $675. 
C) Producer surplus decreases by $225. 
D) Producer surplus decreases by $675. 
A) Producer surplus increases by $225. 
B) Producer surplus increases by $675. 
C) Producer surplus decreases by $225. 
D) Producer surplus decreases by $675.

Question 10

Total surplus measures the

Accepted Answer

A) loss to buyers from paying higher prices plus the benefit to sellers from receiving lower prices. 
B) buyers' willingness to pay less the sellers' costs. 
C) fairness of the distribution of resources in society. 
D) value to the government of goods and services sold in society. 
A) loss to buyers from paying higher prices plus the benefit to sellers from receiving lower prices. 
B) buyers' willingness to pay less the sellers' costs. 
C) fairness of the distribution of resources in society. 
D) value to the government of goods and services sold in society.

Question 11

Figure 7-2  
-Refer to Figure 7-2. If the price of the good is $80, then consumer surplus amounts to

Accepted Answer

A) $110. 
B) $135. 
C) $160. 
D) $185. 
A) $110. 
B) $135. 
C) $160. 
D) $185.

Question 12

Figure 7-24  
-Refer to Figure 7-24. At equilibrium, producer surplus is

Accepted Answer

A) $36. 
B) $72. 
C) $54. 
D) $18. 
A) $36. 
B) $72. 
C) $54. 
D) $18.

Question 13

Figure 7-4  
-Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers?

Accepted Answer

A) BDF 
B) AFG 
C) BCGD 
D) ABC 
A) BDF 
B) AFG 
C) BCGD 
D) ABC

Question 14

Consumer surplus can be measured as the area between the demand curve and the supply curve.

Accepted Answer

A) True 
 B)False

Question 15

Table 7-8
During the last two days, Chad purchased a latte from two different stores. The table below shows Chad's willingness to pay on each day and his consumer surplus from each purchase.  
-Refer to Table 7-8. The price that Chad paid for a latte on the first day is

Accepted Answer

A) $3.75. 
B) $6.25. 
C) $5.00. 
D) $5.50. 
A) $3.75. 
B) $6.25. 
C) $5.00. 
D) $5.50.

Question 16

Figure 7-23  
-Refer to Figure 7-23. At equilibrium, producer surplus is represented by the area

Accepted Answer

A) F. 
B) F+G. 
C) D+H+F. 
D) D+H+F+G+I. 
A) F. 
B) F+G. 
C) D+H+F. 
D) D+H+F+G+I.

Question 17

Which of the following statements is not correct?

Accepted Answer

A) An invisible hand leads buyers and sellers to an equilibrium that maximizes total surplus. 
B) Market power can cause markets to be inefficient. 
C) Externalities can cause markets to be inefficient. 
D) The invisible hand can remedy all types of market failures. 
A) An invisible hand leads buyers and sellers to an equilibrium that maximizes total surplus. 
B) Market power can cause markets to be inefficient. 
C) Externalities can cause markets to be inefficient. 
D) The invisible hand can remedy all types of market failures.

Question 18

If the current allocation of resources in the market for hammers is inefficient, then it must be the case that

Accepted Answer

A) producer surplus exceeds consumer surplus in the market for hammers. 
B) consumer surplus exceeds producer surplus in the market for hammers. 
C) the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources. 
D) the costs that sellers of hammers are incurring could be reduced by moving to a different allocation of resources. 
A) producer surplus exceeds consumer surplus in the market for hammers. 
B) consumer surplus exceeds producer surplus in the market for hammers. 
C) the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources. 
D) the costs that sellers of hammers are incurring could be reduced by moving to a different allocation of resources.

Question 19

Economists say that a market where goods are not consumed by those valuing the goods most highly is

Accepted Answer

A) laissez-faire.. 
B) unequal. 
C) inefficient. 
D) rational. 
A) laissez-faire.. 
B) unequal. 
C) inefficient. 
D) rational.

Question 20

A seller is willing to sell a product only if the seller receives a price that is at least as great as the

Accepted Answer

A) seller's producer surplus. 
B) seller's cost of production. 
C) seller's profit. 
D) average willingness to pay of buyers of the product. 
A) seller's producer surplus. 
B) seller's cost of production. 
C) seller's profit. 
D) average willingness to pay of buyers of the product.

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

Which of the following will cause a decrease in producer surplus?

Figure 7-28 -Refer to Figure 7-28. At the quantity Q3,

Table 7-1 -Refer to Table 7-1. If the market price is $105,

Table 7-11 The only four producers in a market have the following costs: -Refer to Table 7-11. If Evan, Selena, and Angie sell the good, and the resulting producer surplus is $300, then the price must have been

The French expression used by free-market advocates, which literally translates as "allow them to do," is

Figure 7-30 -Refer to Figure 7-30. If the market equilibrium price falls from $120 to $80, how much consumer surplus do consumers entering the market after the price drop receive?

Suppose Larry, Moe, and Curly are bidding in an auction for a mint-condition video of Charlie Chaplin's first movie. Each has in mind a maximum amount that he will bid. This maximum is called

Figure 7-16 -Refer to Figure 7-16. Sellers will be unwilling to sell more than

Figure 7-17 -Refer to Figure 7-17. If the demand curve is D and the supply curve shifts left from S to S', what is the change in producer surplus when comparing the new equilibrium with the original equilibrium?

Total surplus measures the

Figure 7-2 -Refer to Figure 7-2. If the price of the good is $80, then consumer surplus amounts to

Figure 7-24 -Refer to Figure 7-24. At equilibrium, producer surplus is

Figure 7-4 -Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers?

Consumer surplus can be measured as the area between the demand curve and the supply curve.

Table 7-8 During the last two days, Chad purchased a latte from two different stores. The table below shows Chad's willingness to pay on each day and his consumer surplus from each purchase. -Refer to Table 7-8. The price that Chad paid for a latte on the first day is

Figure 7-23 -Refer to Figure 7-23. At equilibrium, producer surplus is represented by the area

Which of the following statements is not correct?

If the current allocation of resources in the market for hammers is inefficient, then it must be the case that

Economists say that a market where goods are not consumed by those valuing the goods most highly is

A seller is willing to sell a product only if the seller receives a price that is at least as great as the

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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