Question 1

Consumer surplus is a good measure of economic welfare if policymakers want to

Accepted Answer

A) maximize total benefit. 
B) minimize deadweight loss. 
C) respect the preferences of sellers. 
D) respect the preferences of buyers. 
A) maximize total benefit. 
B) minimize deadweight loss. 
C) respect the preferences of sellers. 
D) respect the preferences of buyers.

Question 2

All else equal, an increase in demand will always increase consumer surplus.

Accepted Answer

A) True 
 B)False

Question 3

Figure 7-31  
-Refer to Figure 7-31. If the market equilibrium price rises from $25 to $35, how much is the producer surplus for the producers entering the market after the price increase?

Accepted Answer

The producer surplus

Question 4

Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is   . If 80 units of the good are produced and sold, then producer surplus amounts to $1,200.

Accepted Answer

A) True 
 B)False

Question 5

Figure 7-11  
-Refer to Figure 7-11. If the supply curve is S and the demand curve shifts from D to D', what is the increase in producer surplus due to new producers entering the market?

Accepted Answer

A) $625 
B) $2,500 
C) $3,125 
D) $5,625 
A) $625 
B) $2,500 
C) $3,125 
D) $5,625

Question 6

The lower the price, the lower the consumer surplus, all else equal.

Accepted Answer

A) True 
 B)False

Question 7

Suppose John's cost for performing some carpentry work is $120. If John is paid $200 for the carpentry work, what is his producer surplus?

Accepted Answer

His produc

Question 8

Total surplus in a market is equal to

Accepted Answer

A) consumer surplus + producer surplus. 
B) value to buyers - amount paid by buyers. 
C) amount received by sellers - costs of sellers. 
D) producer surplus - consumer surplus. 
A) consumer surplus + producer surplus. 
B) value to buyers - amount paid by buyers. 
C) amount received by sellers - costs of sellers. 
D) producer surplus - consumer surplus.

Question 9

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 B produces a monitor that David buys, 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) 
A) (i) only 
B) (ii) only 
C) both (i) and (ii) 
D) neither (i) nor (ii)

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Scenario 7-2
Suppose market demand and market supply are given by the equations:  
-Refer to Scenario 7-2. How much is total consumer surplus at the equilibrium price in this market?

Accepted Answer

Total consumer surpl

Question 12

Economists typically measure efficiency using

Accepted Answer

A) the price paid by buyers. 
B) the quantity supplied by sellers. 
C) total surplus. 
D) profits to firms. 
A) the price paid by buyers. 
B) the quantity supplied by sellers. 
C) total surplus. 
D) profits to firms.

Question 13

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 tickets sell for $25 each, then what is the total consumer surplus in the market?

Accepted Answer

A) $25 
B) $35 
C) $60 
D) $110 
A) $25 
B) $35 
C) $60 
D) $110

Question 14

Figure 7-25  
-Refer to Figure 7-25. At the equilibrium price, total surplus is

Accepted Answer

A) $288. 
B) $576. 
C) $1,152. 
D) $2,304. 
A) $288. 
B) $576. 
C) $1,152. 
D) $2,304.

Question 15

Table 7-2
This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke.  
-Refer to Table 7-2. If the market price is $3.80,

Accepted Answer

A) David's consumer surplus is $4.70 and total consumer surplus for the five individuals is $9.50. 
B) Megan's consumer surplus is $1.70 and total consumer surplus for the five individuals is $9.80. 
C) David, Laura, and Megan will be the only buyers of Vanilla Coke. 
D) the demand curve for Vanilla Coke, taking the five individuals into account, is horizontal. 
A) David's consumer surplus is $4.70 and total consumer surplus for the five individuals is $9.50. 
B) Megan's consumer surplus is $1.70 and total consumer surplus for the five individuals is $9.80. 
C) David, Laura, and Megan will be the only buyers of Vanilla Coke. 
D) the demand curve for Vanilla Coke, taking the five individuals into account, is horizontal.

Question 16

Figure 7-9  
-Refer to Figure 7-9. If the price of the good is $14, then producer surplus is

Accepted Answer

A) $19.50. 
B) $22.50. 
C) $20.50. 
D) $25.00. 
A) $19.50. 
B) $22.50. 
C) $20.50. 
D) $25.00.

Question 17

Table 7-19  
-Refer to Table 7-19. How much is total surplus at the equilibrium price in this market?

Accepted Answer

Total surp

Question 18

Figure 7-16  
-Refer to Figure 7-16. Suppose the price of the good is $400. Then, on the first unit of the good that is sold, producer surplus amounts to

Accepted Answer

A) $200. 
B) $300. 
C) $400. 
D) $450. 
A) $200. 
B) $300. 
C) $400. 
D) $450.

Question 19

Market power refers to the

Accepted Answer

A) side effects that may occur in a market. 
B) government regulations imposed on the sellers in a market. 
C) ability of market participants to influence price. 
D) forces of supply and demand in determining equilibrium price. 
A) side effects that may occur in a market. 
B) government regulations imposed on the sellers in a market. 
C) ability of market participants to influence price. 
D) forces of supply and demand in determining equilibrium price.

Question 20

What happens to consumer surplus in the iPod market if iPods are normal goods and buyers of iPods experience an increase in income?

Accepted Answer

A) Consumer surplus decreases. 
B) Consumer surplus remains unchanged. 
C) Consumer surplus increases. 
D) Consumer surplus may increase, decrease, or remain unchanged. 
A) Consumer surplus decreases. 
B) Consumer surplus remains unchanged. 
C) Consumer surplus increases. 
D) Consumer surplus may increase, decrease, or remain unchanged.

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

Consumer surplus is a good measure of economic welfare if policymakers want to

All else equal, an increase in demand will always increase consumer surplus.

Figure 7-31 -Refer to Figure 7-31. If the market equilibrium price rises from $25 to $35, how much is the producer surplus for the producers entering the market after the price increase?

Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is . If 80 units of the good are produced and sold, then producer surplus amounts to $1,200.

Figure 7-11 -Refer to Figure 7-11. If the supply curve is S and the demand curve shifts from D to D', what is the increase in producer surplus due to new producers entering the market?

The lower the price, the lower the consumer surplus, all else equal.

Suppose John's cost for performing some carpentry work is $120. If John is paid $200 for the carpentry work, what is his producer surplus?

Total surplus in a market is equal to

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

Scenario 7-2 Suppose market demand and market supply are given by the equations: -Refer to Scenario 7-2. How much is total consumer surplus at the equilibrium price in this market?

Economists typically measure efficiency using

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 tickets sell for $25 each, then what is the total consumer surplus in the market?

Figure 7-25 -Refer to Figure 7-25. At the equilibrium price, total surplus is

Table 7-2 This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. -Refer to Table 7-2. If the market price is $3.80,

Figure 7-9 -Refer to Figure 7-9. If the price of the good is $14, then producer surplus is

Table 7-19 -Refer to Table 7-19. How much is total surplus at the equilibrium price in this market?

Figure 7-16 -Refer to Figure 7-16. Suppose the price of the good is $400. Then, on the first unit of the good that is sold, producer surplus amounts to

Market power refers to the

What happens to consumer surplus in the iPod market if iPods are normal goods and buyers of iPods experience an increase in income?

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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