Question 1

Figure 7-16  
-Refer to Figure 7-16. Producer surplus amounts to $300 if the price of the good is

Accepted Answer

A) $300. 
B) $350. 
C) $400. 
D) $450. 
A) $300. 
B) $350. 
C) $400. 
D) $450.

Question 2

Externalities are

Accepted Answer

A) side effects passed on to a party other than the buyers and sellers in the market. 
B) side effects of government intervention in markets. 
C) external forces that cause the price of a good to be higher than it otherwise would be. 
D) external forces that help establish equilibrium price. 
A) side effects passed on to a party other than the buyers and sellers in the market. 
B) side effects of government intervention in markets. 
C) external forces that cause the price of a good to be higher than it otherwise would be. 
D) external forces that help establish equilibrium price.

Question 3

Free markets allocate (a) the supply of goods to the buyers who value them most highly and (b) the demand for goods to the sellers who can produce them at least cost.

Accepted Answer

A) True 
 B)False

Question 4

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. 
A) ABF. 
B) AGH. 
C) HGCD. 
D) HGBF.

Question 5

If the price of oak lumber increases, what happens to consumer surplus in the market for oak cabinets?

Accepted Answer

A) Consumer surplus increases. 
B) Consumer surplus decreases. 
C) Consumer surplus will not change consumer surplus; only producer surplus changes. 
D) Consumer surplus depends on what event led to the increase in the price of oak lumber. 
A) Consumer surplus increases. 
B) Consumer surplus decreases. 
C) Consumer surplus will not change consumer surplus; only producer surplus changes. 
D) Consumer surplus depends on what event led to the increase in the price of oak lumber.

Question 6

Figure 7-27  
-Refer to Figure 7-27. If the government mandated a price increase from P1 to a higher price, then

Accepted Answer

A) total surplus would decrease. 
B) consumer surplus would increase. 
C) total surplus would increase, since producer surplus would increase. 
D) total surplus would remain unchanged. 
A) total surplus would decrease. 
B) consumer surplus would increase. 
C) total surplus would increase, since producer surplus would increase. 
D) total surplus would remain unchanged.

Question 7

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 the market price for the good is $20, who will purchase the good?

Accepted Answer

A) Ming-la only 
B) Carlos and Quilana only 
C) Quilana and Wilbur only 
D) Quilana, Wilbur, and Ming-la only 
A) Ming-la only 
B) Carlos and Quilana only 
C) Quilana and Wilbur only 
D) Quilana, Wilbur, and Ming-la only

Question 8

Figure 7-24  
-Refer to Figure 7-24. If 6 units of the good are produced and sold, then

Accepted Answer

A) consumer surplus is greater than producer surplus. 
B) producer surplus is maximized. 
C) the sum of consumer surplus and producer surplus is maximized. 
D) consumer surplus equals producer surplus. 
A) consumer surplus is greater than producer surplus. 
B) producer surplus is maximized. 
C) the sum of consumer surplus and producer surplus is maximized. 
D) consumer surplus equals producer surplus.

Question 9

Figure 7-10  
-Refer to Figure 7-10. Which area represents producer surplus when the price is P1?

Accepted Answer

A) BCG 
B) ACH 
C) ABGD 
D) DGH 
A) BCG 
B) ACH 
C) ABGD 
D) DGH

Question 10

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. Michael and Earvin each offer to pay $360 for a ticket, and you sell them the two tickets. What is the total consumer surplus in the market?

Accepted Answer

A) $720 
B) $180 
C) $140 
D) $40 
A) $720 
B) $180 
C) $140 
D) $40

Question 11

Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $250. His consumer surplus is

Accepted Answer

A) $650. 
B) $150. 
C) $250. 
D) $400. 
A) $650. 
B) $150. 
C) $250. 
D) $400.

Question 12

Figure 7-34  
-Refer to Figure 7-34. Suppose there is initially a price ceiling set at $4 in this market. If the government removed the price ceiling, by how much would total producer surplus change?

Accepted Answer

Total producer surplus with th

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

When there is a technological advance in the pork industry, consumer surplus in that market will

Accepted Answer

A) increase. 
B) decrease. 
C) not change, since technology affects producers and not consumers. 
D) not change, since consumers' willingness to pay is unaffected by the technological advance. 
A) increase. 
B) decrease. 
C) not change, since technology affects producers and not consumers. 
D) not change, since consumers' willingness to pay is unaffected by the technological advance.

Question 15

Table 7-4
The numbers in Table 7-1 reveal the maximum willingness to pay for a ticket to a Chicago Cubs vs. St. Louis Cardinal's baseball game at Wrigley Field.  
-Refer to Table 7-4. If you have a ticket that you sell to the group in an auction, what will be the selling price?

Accepted Answer

A) slightly more than $20. 
B) slightly more than $25. 
C) slightly more than $50. 
D) slightly more than $60. 
A) slightly more than $20. 
B) slightly more than $25. 
C) slightly more than $50. 
D) slightly more than $60.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Figure 7-12  
-Refer to Figure 7-12. If the equilibrium price rises from $200 to $350, what is the producer surplus to new producers?

Accepted Answer

A) $15,000 
B) $3,750 
C) $7,500 
D) $30,000 
A) $15,000 
B) $3,750 
C) $7,500 
D) $30,000

Question 18

Table 7-13
The only four producers in a market have the following costs:  
-Refer to Table 7-13. If the sellers bid against each other for the right to sell the good to a single consumer, then the producer surplus will be

Accepted Answer

A) $0 or slightly more. 
B) $5 or slightly less. 
C) $10 or slightly less. 
D) $25 or slightly less. 
A) $0 or slightly more. 
B) $5 or slightly less. 
C) $10 or slightly less. 
D) $25 or slightly less.

Question 19

Suppose that the market price for pizzas increases. The increase in producer surplus comes from the benefit of the higher prices to

Accepted Answer

A) only existing sellers who now receive higher prices on the pizzas they were already selling. 
B) only new sellers who enter the market because of the higher prices. 
C) both existing sellers who now receive higher prices on the pizzas they were already selling and new sellers who enter the market because of the higher prices. 
D) Producer surplus does not increase; it decreases. 
A) only existing sellers who now receive higher prices on the pizzas they were already selling. 
B) only new sellers who enter the market because of the higher prices. 
C) both existing sellers who now receive higher prices on the pizzas they were already selling and new sellers who enter the market because of the higher prices. 
D) Producer surplus does not increase; it decreases.

Question 20

Welfare economics is the study of

Accepted Answer

A) the well-being of less fortunate people. 
B) welfare programs in the United States. 
C) how the allocation of resources affects economic well-being. 
D) the effect of income redistribution on work effort. 
A) the well-being of less fortunate people. 
B) welfare programs in the United States. 
C) how the allocation of resources affects economic well-being. 
D) the effect of income redistribution on work effort.

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

Figure 7-16 -Refer to Figure 7-16. Producer surplus amounts to $300 if the price of the good is

Externalities are

Free markets allocate (a) the supply of goods to the buyers who value them most highly and (b) the demand for goods to the sellers who can produce them at least cost.

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

If the price of oak lumber increases, what happens to consumer surplus in the market for oak cabinets?

Figure 7-27 -Refer to Figure 7-27. If the government mandated a price increase from P1 to a higher price, then

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 the market price for the good is $20, who will purchase the good?

Figure 7-24 -Refer to Figure 7-24. If 6 units of the good are produced and sold, then

Figure 7-10 -Refer to Figure 7-10. Which area represents producer surplus when the price is P1?

Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $250. His consumer surplus is

Figure 7-34 -Refer to Figure 7-34. Suppose there is initially a price ceiling set at $4 in this market. If the government removed the price ceiling, by how much would total producer surplus change?

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.

When there is a technological advance in the pork industry, consumer surplus in that market will

Table 7-4 The numbers in Table 7-1 reveal the maximum willingness to pay for a ticket to a Chicago Cubs vs. St. Louis Cardinal's baseball game at Wrigley Field. -Refer to Table 7-4. If you have a ticket that you sell to the group in an auction, what will be the selling price?

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

Figure 7-12 -Refer to Figure 7-12. If the equilibrium price rises from $200 to $350, what is the producer surplus to new producers?

Table 7-13 The only four producers in a market have the following costs: -Refer to Table 7-13. If the sellers bid against each other for the right to sell the good to a single consumer, then the producer surplus will be

Suppose that the market price for pizzas increases. The increase in producer surplus comes from the benefit of the higher prices to

Welfare economics is the study of

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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