Question 1

Figure 7-16  
-Refer to Figure 7-16. If the price of the good is $500, then producer surplus amounts to

Accepted Answer

A) $450. 
B) $575. 
C) $700. 
D) $800. 
A) $450. 
B) $575. 
C) $700. 
D) $800.

Question 2

Figure 7-27  
-Refer to Figure 7-27. Buyers who value this good less than the equilibrium price are represented by which line segment?

Accepted Answer

A) AC. 
B) CK. 
C) BC. 
D) CH. 
A) AC. 
B) CK. 
C) BC. 
D) CH.

Question 3

Given the following two equations:
1)Total Surplus = Consumer Surplus + Producer Surplus
2)Total Surplus = Value to Buyers - Cost to Sellers
Show how equation (1) can be used to derive equation (2).

Accepted Answer

Start with the equation: Total Surplus =

Question 4

Figure 7-34  
-Refer to Figure 7-34. Suppose there is initially a price floor set at $10 in this market. If the government removed the price floor, by how much would total consumer surplus increase for those consumers who were purchasing the good when the price floor was in place?

Accepted Answer

Those consumers who were alrea

Question 5

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. Which of the following statements is correct?

Accepted Answer

A) Neither Bob's consumer surplus nor Charisse's consumer surplus can exceed Allison's consumer surplus, for any price of an orange. 
B) All three individuals will buy at least one orange only if the price of an orange is less than $0.25. 
C) If the price of an orange is $0.60, then consumer surplus is $4.90. 
D) All of the above are correct. 
A) Neither Bob's consumer surplus nor Charisse's consumer surplus can exceed Allison's consumer surplus, for any price of an orange. 
B) All three individuals will buy at least one orange only if the price of an orange is less than $0.25. 
C) If the price of an orange is $0.60, then consumer surplus is $4.90. 
D) All of the above are correct.

Question 6

Table 7-12
The numbers reveal the opportunity costs of providing 10 piano lessons of equal quality.
Seller
Cost
Marcia
$200
Jan
$250
Cindy
$350
Greg
$400
Peter
$700
Bobby
$800
-Refer to Table 7-12. The equilibrium market price for 10 piano lessons is $400. What is the total producer surplus in the market?

Accepted Answer

A) $0 
B) $300 
C) $400 
D) $700 
A) $0 
B) $300 
C) $400 
D) $700

Question 7

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, who will buy the ticket?

Accepted Answer

A) Dan 
B) David 
C) Ken 
D) Lisa 
A) Dan 
B) David 
C) Ken 
D) Lisa

Question 8

When markets fail, public policy can potentially remedy the problem and increase economic efficiency.

Accepted Answer

A) True 
 B)False

Question 9

Figure 7-26  
-Refer to Figure 7-26. If the government imposes a price floor of $90 in this market, then consumer surplus will be

Accepted Answer

A) $225. 
B) $450. 
C) $975. 
D) $1,350 
A) $225. 
B) $450. 
C) $975. 
D) $1,350

Question 10

Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, producer surplus

Accepted Answer

A) would necessarily increase even if the higher price resulted in a surplus of widgets. 
B) would necessarily decrease because the higher price would create a surplus of widgets. 
C) might increase or decrease. 
D) would be unaffected. 
A) would necessarily increase even if the higher price resulted in a surplus of widgets. 
B) would necessarily decrease because the higher price would create a surplus of widgets. 
C) might increase or decrease. 
D) would be unaffected.

Question 11

The marginal seller is the seller who

Accepted Answer

A) cannot compete with the other sellers in the market. 
B) would leave the market first if the price were any lower. 
C) can produce at the lowest cost. 
D) has the largest producer surplus. 
A) cannot compete with the other sellers in the market. 
B) would leave the market first if the price were any lower. 
C) can produce at the lowest cost. 
D) has the largest producer surplus.

Question 12

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 13

Figure 7-19  
-Refer to Figure 7-19. At the equilibrium price, total surplus is

Accepted Answer

A) $125. 
B) $450. 
C) $250. 
D) $500. 
A) $125. 
B) $450. 
C) $250. 
D) $500.

Question 14

The maximum price that a buyer will pay for a good is called

Accepted Answer

A) consumer surplus. 
B) willingness to pay. 
C) equilibrium. 
D) efficiency. 
A) consumer surplus. 
B) willingness to pay. 
C) equilibrium. 
D) efficiency.

Question 15

Figure 7-10  
-Refer to Figure 7-10. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?

Accepted Answer

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

Question 16

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

Accepted Answer

A) producer surplus equals consumer surplus in the market for wallpaper. 
B) the market for wallpaper is in equilibrium. 
C) on the last unit of wallpaper that was produced and sold, the value to buyers exceeded the cost to sellers. 
D) All of the above are correct. 
A) producer surplus equals consumer surplus in the market for wallpaper. 
B) the market for wallpaper is in equilibrium. 
C) on the last unit of wallpaper that was produced and sold, the value to buyers exceeded the cost to sellers. 
D) All of the above are correct.

Question 17

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 to existing producers?

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 18

Which of the following will cause no change in producer surplus?

Accepted Answer

A) the imposition of a nonbinding price ceiling in the market 
B) buyers expect the price of a good to be higher next month 
C) the price of a substitute increases 
D) income increases and buyers consider the good to be inferior 
A) the imposition of a nonbinding price ceiling in the market 
B) buyers expect the price of a good to be higher next month 
C) the price of a substitute increases 
D) income increases and buyers consider the good to be inferior

Question 19

Janine would be willing to pay $50 to see Les Misérables, but she buys a ticket for only $30. Janine values the performance at

Accepted Answer

A) $20. 
B) $30. 
C) $50. 
D) $80. 
A) $20. 
B) $30. 
C) $50. 
D) $80.

Question 20

Answer each of the following questions about demand and consumer surplus.
a.What is consumer surplus, and how is it measured?
b.What is the relationship between the demand curve and the willingness to pay?
c.Other things equal, what happens to consumer surplus if the price of a good falls? Why? Illustrate using a demand curve.
d.In what way does the demand curve represent the benefit consumers receive from participating in a market? In addition to the demand curve, what else must be considered to determine consumer surplus?

Accepted Answer

a.Consumer surplus measures the benefit

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

Figure 7-16 -Refer to Figure 7-16. If the price of the good is $500, then producer surplus amounts to

Figure 7-27 -Refer to Figure 7-27. Buyers who value this good less than the equilibrium price are represented by which line segment?

Given the following two equations: 1)Total Surplus = Consumer Surplus + Producer Surplus 2)Total Surplus = Value to Buyers - Cost to Sellers Show how equation (1) can be used to derive equation (2).

Figure 7-34 -Refer to Figure 7-34. Suppose there is initially a price floor set at $10 in this market. If the government removed the price floor, by how much would total consumer surplus increase for those consumers who were purchasing the good when the price floor was in place?

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, who will buy the ticket?

When markets fail, public policy can potentially remedy the problem and increase economic efficiency.

Figure 7-26 -Refer to Figure 7-26. If the government imposes a price floor of $90 in this market, then consumer surplus will be

Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, producer surplus

The marginal seller is the seller who

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

Figure 7-19 -Refer to Figure 7-19. At the equilibrium price, total surplus is

The maximum price that a buyer will pay for a good is called

Figure 7-10 -Refer to Figure 7-10. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?

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

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 to existing producers?

Which of the following will cause no change in producer surplus?

Janine would be willing to pay $50 to see Les Misérables, but she buys a ticket for only $30. Janine values the performance at

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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