Question 1

Which of the following is correct?

Accepted Answer

A) Consumer surplus refers to a situation in which there are more buyers than sellers in a market. 
B) Producer surplus refers to a situation in which there are more sellers than buyers in a market. 
C) Total surplus is measured as the area below the demand curve and above the supply curve, up to the equilibrium quantity. 
D) All of the above are correct. 
A) Consumer surplus refers to a situation in which there are more buyers than sellers in a market. 
B) Producer surplus refers to a situation in which there are more sellers than buyers in a market. 
C) Total surplus is measured as the area below the demand curve and above the supply curve, up to the equilibrium quantity. 
D) All of the above are correct.

Question 2

When demand increases so that market price increases, producer surplus increases because (1) producer surplus received by existing sellers increases, and (2) new sellers enter the market.

Accepted Answer

A) True 
 B)False

Question 3

Denise values a stainless steel dishwasher for her new house at $500. The actual price of the dishwasher is $650. Denise

Accepted Answer

A) buys the dishwasher, and on her purchase she experiences a consumer surplus of $150. 
B) buys the dishwasher, and on her purchase she experiences a consumer surplus of $-150. 
C) does not buy the dishwasher, and on her purchase she experiences a consumer surplus of $150. 
D) does not buy the dishwasher, and on her purchase she experiences a consumer surplus of $0. 
A) buys the dishwasher, and on her purchase she experiences a consumer surplus of $150. 
B) buys the dishwasher, and on her purchase she experiences a consumer surplus of $-150. 
C) does not buy the dishwasher, and on her purchase she experiences a consumer surplus of $150. 
D) does not buy the dishwasher, and on her purchase she experiences a consumer surplus of $0.

Question 4

Cost is a measure of the

Accepted Answer

A) seller's willingness to sell. 
B) seller's producer surplus. 
C) producer shortage. 
D) seller's willingness to buy. 
A) seller's willingness to sell. 
B) seller's producer surplus. 
C) producer shortage. 
D) seller's willingness to buy.

Question 5

Welfare economics explains which of the following in the market for televisions?

Accepted Answer

A) The government sets the price of televisions; firms respond to the price by producing a specific level of output. 
B) The government sets the quantity of televisions; firms respond to the quantity by charging a specific price. 
C) The market equilibrium price for televisions maximizes the total welfare of television buyers and sellers. 
D) The market equilibrium price for televisions maximizes consumer welfare and minimizes producer profit. 
A) The government sets the price of televisions; firms respond to the price by producing a specific level of output. 
B) The government sets the quantity of televisions; firms respond to the quantity by charging a specific price. 
C) The market equilibrium price for televisions maximizes the total welfare of television buyers and sellers. 
D) The market equilibrium price for televisions maximizes consumer welfare and minimizes producer profit.

Question 6

The welfare of sellers is measured by

Accepted Answer

A) consumer surplus. 
B) producer surplus. 
C) total surplus. 
D) price. 
A) consumer surplus. 
B) producer surplus. 
C) total surplus. 
D) price.

Question 7

Total surplus is represented by the area below the

Accepted Answer

A) demand curve and above the price. 
B) price and up to the point of equilibrium. 
C) demand curve and above the supply curve, up to the equilibrium quantity. 
D) demand curve and above the horizontal axis, up to the equilibrium quantity. 
A) demand curve and above the price. 
B) price and up to the point of equilibrium. 
C) demand curve and above the supply curve, up to the equilibrium quantity. 
D) demand curve and above the horizontal axis, up to the equilibrium quantity.

Question 8

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

Accepted Answer

A) $325. 
B) $100. 
C) $300. 
D) $200. 
A) $325. 
B) $100. 
C) $300. 
D) $200.

Question 9

Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day.  
-Refer to Table 7-5. If the market price of an orange is $0.65, then consumer surplus amounts to

Accepted Answer

A) $3.90. 
B) $6.75. 
C) $3.60. 
D) $7.50. 
A) $3.90. 
B) $6.75. 
C) $3.60. 
D) $7.50.

Question 10

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 11

Figure 7-22  
-Refer to Figure 7-22. The efficient price is

Accepted Answer

A) $80, and the efficient quantity is 50. 
B) $70, and the efficient quantity is 60. 
C) $70, and the efficient quantity is 100. 
D) $50, and the efficient quantity is 60. 
A) $80, and the efficient quantity is 50. 
B) $70, and the efficient quantity is 60. 
C) $70, and the efficient quantity is 100. 
D) $50, and the efficient quantity is 60.

Question 12

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 13

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

Accepted Answer

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

Question 14

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 15

At Nick's Bakery, the cost to make homemade chocolate cake is $4 per cake. As a result of selling five cakes, Nick experiences a producer surplus in the amount of $17.50. Nick must be selling his cakes for

Accepted Answer

A) $6.50 each. 
B) $7.50 each. 
C) $9.50 each. 
D) $10.50 each. 
A) $6.50 each. 
B) $7.50 each. 
C) $9.50 each. 
D) $10.50 each.

Question 16

Table 7-10
The following table represents the costs of five possible sellers.
Seller
Cost
Abby
$1,600
Bobby
$1,300
Dianne
$1,100
Evaline
$900
Carlos
$800
-Refer to Table 7-10. If the market price is $1,100, the combined total cost of all participating sellers is

Accepted Answer

A) $2,800. 
B) $2,900. 
C) $1,700. 
D) $4,000. 
A) $2,800. 
B) $2,900. 
C) $1,700. 
D) $4,000.

Question 17

Total surplus in a market is equal to

Accepted Answer

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

Question 18

What do economists call the highest amount a consumer will pay to purchase a good?

Accepted Answer

The (maxim

Question 19

Figure 7-20  
-Refer to Figure 7-20. For quantities less than M, the value to the marginal buyer is

Accepted Answer

A) greater than the cost to the marginal seller, so increasing the quantity increases total surplus. 
B) less than the cost to the marginal seller, so increasing the quantity increases total surplus. 
C) greater than the cost to the marginal seller, so decreasing the quantity increases total surplus. 
D) less than the cost to the marginal seller, so decreasing the quantity increases total surplus. 
A) greater than the cost to the marginal seller, so increasing the quantity increases total surplus. 
B) less than the cost to the marginal seller, so increasing the quantity increases total surplus. 
C) greater than the cost to the marginal seller, so decreasing the quantity increases total surplus. 
D) less than the cost to the marginal seller, so decreasing the quantity increases total surplus.

Question 20

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.

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

Which of the following is correct?

When demand increases so that market price increases, producer surplus increases because (1) producer surplus received by existing sellers increases, and (2) new sellers enter the market.

Denise values a stainless steel dishwasher for her new house at $500. The actual price of the dishwasher is $650. Denise

Cost is a measure of the

Welfare economics explains which of the following in the market for televisions?

The welfare of sellers is measured by

Total surplus is represented by the area below the

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

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

Figure 7-22 -Refer to Figure 7-22. The efficient price is

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.

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

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

At Nick's Bakery, the cost to make homemade chocolate cake is $4 per cake. As a result of selling five cakes, Nick experiences a producer surplus in the amount of $17.50. Nick must be selling his cakes for

Table 7-10 The following table represents the costs of five possible sellers. Seller Cost Abby $1,600 Bobby $1,300 Dianne $1,100 Evaline $900 Carlos $800 -Refer to Table 7-10. If the market price is $1,100, the combined total cost of all participating sellers is

Total surplus in a market is equal to

What do economists call the highest amount a consumer will pay to purchase a good?

Figure 7-20 -Refer to Figure 7-20. For quantities less than M, the value to the marginal buyer is

Market power refers to 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

Applications: 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

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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