Question 1

Consumer surplus measures the benefit to buyers of participating in a market.

Accepted Answer

A) True 
 B)False

Question 2

The willingness to pay is the maximum amount that a buyer will pay for a good and measures how much the buyer values the good.

Accepted Answer

A) True 
 B)False

Question 3

As a result of a decrease in price,

Accepted Answer

A) new buyers enter the market, increasing consumer surplus. 
B) new buyers enter the market, decreasing consumer surplus. 
C) existing buyers exit the market, increasing consumer surplus. 
D) existing buyers exit the market, decreasing consumer surplus. 
A) new buyers enter the market, increasing consumer surplus. 
B) new buyers enter the market, decreasing consumer surplus. 
C) existing buyers exit the market, increasing consumer surplus. 
D) existing buyers exit the market, decreasing consumer surplus.

Question 4

Table 7-12
The numbers reveal the opportunity costs of providing 10 piano lessons of equal quality.  
-Refer to Table 7-12. You wish to purchase 10 piano lessons, so you take bids from each of the sellers. You will not accept a bid below a seller's cost because you are concerned that the seller will not provide all 10 lessons. What bid will you accept?

Accepted Answer

A) $351 
B) $251 
C) $249 
D) $199 
A) $351 
B) $251 
C) $249 
D) $199

Question 5

Efficiency refers to whether a market outcome is fair, while equality refers to whether the maximum amount of output was produced from a given number of inputs.

Accepted Answer

A) True 
 B)False

Question 6

Figure 7-4  
-Refer to Figure 7-4. Which area represents consumer surplus at a price of P2?

Accepted Answer

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

Question 7

Scenario 7-2
Suppose market demand and market supply are given by the equations:  
-Refer to Scenario 7-2. Suppose a reduction in input prices shifts the market supply curve to   How much total consumer surplus goes to new consumers who enter the market after the supply curve shifts?

Accepted Answer

Total consumer surplus increas

Question 8

Table 7-9
The only four consumers in a market have the following willingness to pay for a good:  
-Refer to Table 7-9. If there is only one unit of the good available for purchase, and if the buyers bid against each other for the right to purchase it, then the consumer surplus will be

Accepted Answer

A) $0 or slightly more. 
B) $3 or slightly less. 
C) $4 or slightly more. 
D) $8 or slightly less. 
A) $0 or slightly more. 
B) $3 or slightly less. 
C) $4 or slightly more. 
D) $8 or slightly less.

Question 9

Bill created a new software program he is willing to sell for $300. He sells his first copy and enjoys a producer surplus of $250. What is the price paid for the software?

Accepted Answer

A) $50. 
B) $250. 
C) $300. 
D) $550. 
A) $50. 
B) $250. 
C) $300. 
D) $550.

Question 10

The study of how the allocation of resources affects economic well-being is called

Accepted Answer

A) consumer economics. 
B) macroeconomics. 
C) willingness-to-pay economics. 
D) welfare economics. 
A) consumer economics. 
B) macroeconomics. 
C) willingness-to-pay economics. 
D) welfare economics.

Question 11

An increase in price increases consumer surplus.

Accepted Answer

A) True 
 B)False

Question 12

Consumer surplus

Accepted Answer

A) is closely related to the supply curve for a product. 
B) is represented by a rectangle on a supply-demand graph when the demand curve is a straight, downward-sloping line. 
C) is measured using the demand curve for a product. 
D) does not reflect economic well-being in most markets. 
A) is closely related to the supply curve for a product. 
B) is represented by a rectangle on a supply-demand graph when the demand curve is a straight, downward-sloping line. 
C) is measured using the demand curve for a product. 
D) does not reflect economic well-being in most markets.

Question 13

Figure 7-22  
-Refer to Figure 7-22. If 110 units of the good are bought and sold, then

Accepted Answer

A) the marginal cost to sellers is equal to the marginal value to buyers. 
B) the marginal value to buyers is greater than the marginal cost to sellers. 
C) the marginal cost to buyers is greater than marginal value to sellers. 
D) producer surplus is greater than consumer surplus. 
A) the marginal cost to sellers is equal to the marginal value to buyers. 
B) the marginal value to buyers is greater than the marginal cost to sellers. 
C) the marginal cost to buyers is greater than marginal value to sellers. 
D) producer surplus is greater than consumer surplus.

Question 14

George produces cupcakes. His production cost is $10 per dozen. He sells the cupcakes for $16 per dozen. His producer surplus per dozen cupcakes is

Accepted Answer

A) $6. 
B) $10. 
C) $16. 
D) $26. 
A) $6. 
B) $10. 
C) $16. 
D) $26.

Question 15

Figure 7-14  
-Refer to Figure 7-14. If the market price increases to $130 due to an increase in demand, then producer surplus is

Accepted Answer

A) $1,800. 
B) $900. 
C) $975. 
D) $1,950. 
A) $1,800. 
B) $900. 
C) $975. 
D) $1,950.

Question 16

Dallas buys strawberries, and he would be willing to pay more than he now pays. Suppose that Dallas has a change in his tastes such that he values strawberries more than before. If the market price is the same as before, then

Accepted Answer

A) Dallas's consumer surplus would be unaffected. 
B) Dallas's consumer surplus would increase. 
C) Dallas's consumer surplus would decrease. 
D) Dallas would be wise to buy fewer strawberries than before. 
A) Dallas's consumer surplus would be unaffected. 
B) Dallas's consumer surplus would increase. 
C) Dallas's consumer surplus would decrease. 
D) Dallas would be wise to buy fewer strawberries than before.

Question 17

Figure 7-15  
-Refer to Figure 7-15. When the price falls from P2 to P1, producer surplus

Accepted Answer

A) decreases by an amount equal to C. 
B) decreases by an amount equal to A+B. 
C) decreases by an amount equal to A+C. 
D) increases by an amount equal to A+B. 
A) decreases by an amount equal to C. 
B) decreases by an amount equal to A+B. 
C) decreases by an amount equal to A+C. 
D) increases by an amount equal to A+B.

Question 18

Table 7-16  
-Refer to Table 7-16. 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. 
A) $16. 
B) $18. 
C) $24. 
D) $26.

Question 19

Figure 7-3  
-Refer to Figure 7-3. When the price rises from P1 to P2, which of the following statements is not true?

Accepted Answer

A) The buyers who still buy the good are worse off because they now pay more. 
B) Some buyers leave the market because they are not willing to buy the good at the higher price. 
C) Buyers place a higher value on the good after the price increase. 
D) Consumer surplus in the market falls. 
A) The buyers who still buy the good are worse off because they now pay more. 
B) Some buyers leave the market because they are not willing to buy the good at the higher price. 
C) Buyers place a higher value on the good after the price increase. 
D) Consumer surplus in the market falls.

Question 20

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. 
A) increase consumer surplus. 
B) reduce consumer surplus. 
C) not affect consumer surplus. 
D) Any of the above are possible.

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

Consumer surplus measures the benefit to buyers of participating in a market.

The willingness to pay is the maximum amount that a buyer will pay for a good and measures how much the buyer values the good.

As a result of a decrease in price,

Efficiency refers to whether a market outcome is fair, while equality refers to whether the maximum amount of output was produced from a given number of inputs.

Figure 7-4 -Refer to Figure 7-4. Which area represents consumer surplus at a price of P2?

Scenario 7-2 Suppose market demand and market supply are given by the equations: -Refer to Scenario 7-2. Suppose a reduction in input prices shifts the market supply curve to How much total consumer surplus goes to new consumers who enter the market after the supply curve shifts?

Table 7-9 The only four consumers in a market have the following willingness to pay for a good: -Refer to Table 7-9. If there is only one unit of the good available for purchase, and if the buyers bid against each other for the right to purchase it, then the consumer surplus will be

Bill created a new software program he is willing to sell for $300. He sells his first copy and enjoys a producer surplus of $250. What is the price paid for the software?

The study of how the allocation of resources affects economic well-being is called

An increase in price increases consumer surplus.

Consumer surplus

Figure 7-22 -Refer to Figure 7-22. If 110 units of the good are bought and sold, then

George produces cupcakes. His production cost is $10 per dozen. He sells the cupcakes for $16 per dozen. His producer surplus per dozen cupcakes is

Figure 7-14 -Refer to Figure 7-14. If the market price increases to $130 due to an increase in demand, then producer surplus is

Dallas buys strawberries, and he would be willing to pay more than he now pays. Suppose that Dallas has a change in his tastes such that he values strawberries more than before. If the market price is the same as before, then

Figure 7-15 -Refer to Figure 7-15. When the price falls from P2 to P1, producer surplus

Table 7-16 -Refer to Table 7-16. 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

Figure 7-3 -Refer to Figure 7-3. When the price rises from P1 to P2, which of the following statements is not true?

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

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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