Question 1

Which of the following is not true when the price of a good or service falls?

Accepted Answer

A) Buyers who were already buying the good or service are better off. 
B) Some new buyers, who are now willing to buy, enter the market. 
C) The total consumer surplus in the market increases. 
D) The total value of purchases before and after the price change is the same. 
A) Buyers who were already buying the good or service are better off. 
B) Some new buyers, who are now willing to buy, enter the market. 
C) The total consumer surplus in the market increases. 
D) The total value of purchases before and after the price change is the same.

Question 2

Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25). If there are five buyers in the market, then

Accepted Answer

A) the marginal buyer's willingness to pay for the 100th unit of the good is $25. 
B) the sum of the five buyers' willingness to pay for the 100th unit of the good is $25. 
C) the average of the five buyers' willingness to pay for the 100th unit of the good is $25. 
D) all of the five buyers are willing to pay at least $25 for the 100th unit of the good. 
A) the marginal buyer's willingness to pay for the 100th unit of the good is $25. 
B) the sum of the five buyers' willingness to pay for the 100th unit of the good is $25. 
C) the average of the five buyers' willingness to pay for the 100th unit of the good is $25. 
D) all of the five buyers are willing to pay at least $25 for the 100th unit of the good.

Question 3

Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is

Accepted Answer

A) $150. 
B) $425. 
C) $500. 
D) $850. 
A) $150. 
B) $425. 
C) $500. 
D) $850.

Question 4

Figure 7-26  
-Refer to Figure 7-26. At the equilibrium price, total surplus is

Accepted Answer

A) $600. 
B) $1,200. 
C) $1,500. 
D) $1,800. 
A) $600. 
B) $1,200. 
C) $1,500. 
D) $1,800.

Question 5

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 6

Figure 7-24  
-Refer to Figure 7-24. At equilibrium, total surplus is measured by the area

Accepted Answer

A) ABD. 
B) ABF. 
C) FBD. 
D) HGCI. 
A) ABD. 
B) ABF. 
C) FBD. 
D) HGCI.

Question 7

Scenario 7-1
Suppose market demand is given by the equation  
-Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, how much consumer surplus do consumers entering the market after the price drop receive?

Accepted Answer

The consumers enteri

Question 8

Total surplus = Value to buyers - Costs to sellers.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Donald produces nails at a cost of $350 per ton. If he sells the nails for $500 per ton, his producer surplus is

Accepted Answer

A) $150. 
B) $350. 
C) $500. 
D) $850. 
A) $150. 
B) $350. 
C) $500. 
D) $850.

Question 11

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

Accepted Answer

A) $200. 
B) $100. 
C) $125. 
D) $250. 
A) $200. 
B) $100. 
C) $125. 
D) $250.

Question 12

Consumer surplus

Accepted Answer

A) is the amount a buyer pays for a good minus the amount the buyer is willing to pay for it. 
B) is represented on a supply-demand graph by the area below the price and above the demand curve. 
C) measures the benefit sellers receive from participating in a market. 
D) measures the benefit buyers receive from participating in a market. 
A) is the amount a buyer pays for a good minus the amount the buyer is willing to pay for it. 
B) is represented on a supply-demand graph by the area below the price and above the demand curve. 
C) measures the benefit sellers receive from participating in a market. 
D) measures the benefit buyers receive from participating in a market.

Question 13

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 14

Caroline sharpens knives in her spare time for extra income. Buyers of her service are willing to pay $2.95 per knife for as many knives as Caroline is willing to sharpen. On a particular day, she is willing to sharpen the first knife for $2.00, the second knife for $2.25, the third knife for $2.75, and the fourth knife for $3.50. Assume Caroline is rational in deciding how many knives to sharpen. Her producer surplus is

Accepted Answer

A) $0.95. 
B) $1.15. 
C) $1.30. 
D) $1.85. 
A) $0.95. 
B) $1.15. 
C) $1.30. 
D) $1.85.

Question 15

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 16

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it

Accepted Answer

A) maximizes both the total revenue for firms and the quantity supplied of the product. 
B) maximizes the combined welfare of buyers and sellers. 
C) minimizes costs and maximizes output. 
D) minimizes the level of welfare payments. 
A) maximizes both the total revenue for firms and the quantity supplied of the product. 
B) maximizes the combined welfare of buyers and sellers. 
C) minimizes costs and maximizes output. 
D) minimizes the level of welfare payments.

Question 17

Suppose the demand for peaches decreases. What will happen to producer surplus in the market for peaches?

Accepted Answer

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

Question 18

Chuck would be willing to pay $20 to attend a dog show, but he buys a ticket for $15. Chuck values the dog show at

Accepted Answer

A) $5. 
B) $15. 
C) $20. 
D) $35. 
A) $5. 
B) $15. 
C) $20. 
D) $35.

Question 19

Figure 7-15  
-Refer to Figure 7-15. Area B represents

Accepted Answer

A) the combined profits of all producers when the price is P2. 
B) the increase in producer surplus to all producers as the result of an increase in the price from P1 to P2. 
C) producer surplus to new producers entering the market as the result of an increase in the price from P1 to P2. 
D) that portion of the increase in producer surplus that is offset by a loss in consumer surplus when the price increases from P1 to P2. 
A) the combined profits of all producers when the price is P2. 
B) the increase in producer surplus to all producers as the result of an increase in the price from P1 to P2. 
C) producer surplus to new producers entering the market as the result of an increase in the price from P1 to P2. 
D) that portion of the increase in producer surplus that is offset by a loss in consumer surplus when the price increases from P1 to P2.

Question 20

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.

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

Which of the following is not true when the price of a good or service falls?

Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25). If there are five buyers in the market, then

Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is

Figure 7-26 -Refer to Figure 7-26. At the equilibrium price, total surplus is

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. At equilibrium, total surplus is measured by the area

Scenario 7-1 Suppose market demand is given by the equation -Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, how much consumer surplus do consumers entering the market after the price drop receive?

Total surplus = Value to buyers - Costs to sellers.

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

Donald produces nails at a cost of $350 per ton. If he sells the nails for $500 per ton, his producer surplus is

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

Consumer surplus

Total surplus in a market is equal to

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

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it

Suppose the demand for peaches decreases. What will happen to producer surplus in the market for peaches?

Chuck would be willing to pay $20 to attend a dog show, but he buys a ticket for $15. Chuck values the dog show at

Figure 7-15 -Refer to Figure 7-15. Area B represents

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

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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