Question 1

Figure 7-22  
-Refer to Figure 7-22. At the equilibrium price, total surplus is

Accepted Answer

A) $2,500. 
B) $1,000. 
C) $3,500. 
D) $7,000. 
A) $2,500. 
B) $1,000. 
C) $3,500. 
D) $7,000.

Question 2

Figure 7-11  
-Refer to Figure 7-11. If the supply curve is S', the demand curve is D, and the equilibrium price is $150, what is the producer surplus?

Accepted Answer

A) $625 
B) $1,250 
C) $2,500 
D) $5,000 
A) $625 
B) $1,250 
C) $2,500 
D) $5,000

Question 3

We can say that the allocation of resources is efficient if

Accepted Answer

A) producer surplus is maximized. 
B) consumer surplus is maximized. 
C) total surplus is maximized. 
D) sellers' costs are minimized. 
A) producer surplus is maximized. 
B) consumer surplus is maximized. 
C) total surplus is maximized. 
D) sellers' costs are minimized.

Question 4

Scenario 7-1
Suppose market demand is given by the equation  
-Refer to Scenario 7-1. If the market equilibrium price is $10, how much is total consumer surplus in this market?

Accepted Answer

Consumer s

Question 5

Figure 7-23  
-Refer to Figure 7-23. If the price were P1, producer surplus would be represented by the area

Accepted Answer

A) F. 
B) F+G. 
C) D+H+F. 
D) D+H+F+G+I. 
A) F. 
B) F+G. 
C) D+H+F. 
D) D+H+F+G+I.

Question 6

The cost of production plus producer surplus is the price a seller is paid.

Accepted Answer

A) True 
 B)False

Question 7

Suppose your own demand curve for tomatoes slopes downward. Suppose also that, for the last tomato you bought this week, you paid a price exactly equal to your willingness to pay. Then

Accepted Answer

A) you should buy more tomatoes before the end of the week. 
B) you already have bought too many tomatoes this week. 
C) your consumer surplus on the last tomato you bought is zero. 
D) your consumer surplus on all of the tomatoes you have bought this week is zero. 
A) you should buy more tomatoes before the end of the week. 
B) you already have bought too many tomatoes this week. 
C) your consumer surplus on the last tomato you bought is zero. 
D) your consumer surplus on all of the tomatoes you have bought this week is zero.

Question 8

All else equal, an increase in supply will cause an increase in consumer surplus.

Accepted Answer

A) True 
 B)False

Question 9

Figure 7-1  
-Refer to Figure 7-1. If the price of the good is $150, then consumer surplus amounts to

Accepted Answer

A) $150. 
B) $200. 
C) $250. 
D) $300. 
A) $150. 
B) $200. 
C) $250. 
D) $300.

Question 10

Chad is willing to pay $5.00 to get his first cup of morning latté; he is willing to pay $4.50 for a second cup. He buys his first cup from a vendor selling latté for $3.75 per cup. He returns to that vendor later in the morning to find that the vendor has increased her price to $3.90 per cup. Chad buys a second cup. Which of the following statements is correct?

Accepted Answer

A) Chad's willingness to pay for his second cup of latté was smaller than his willingness to pay for his first cup of latté. 
B) Chad's consumer surplus on his second cup of latté was larger than his consumer surplus on his first cup of latté. 
C) Chad is irrational in that he is willing to pay a different price for his second cup of latté than what he is willing to pay for his first cup of latté. 
D) Chad places a higher value on his second cup of latté than on his first cup of latté. 
A) Chad's willingness to pay for his second cup of latté was smaller than his willingness to pay for his first cup of latté. 
B) Chad's consumer surplus on his second cup of latté was larger than his consumer surplus on his first cup of latté. 
C) Chad is irrational in that he is willing to pay a different price for his second cup of latté than what he is willing to pay for his first cup of latté. 
D) Chad places a higher value on his second cup of latté than on his first cup of latté.

Question 11

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   
By how much does total consumer surplus increase for those consumers who were already willing to purchase the good with the original supply curve?

Accepted Answer

For those consumers already in

Question 12

Figure 7-13  
-Refer to Figure 7-13. If the equilibrium price is $60, what is the producer surplus?

Accepted Answer

A) $600 
B) $1,200 
C) $2,400 
D) $4,800 
A) $600 
B) $1,200 
C) $2,400 
D) $4,800

Question 13

Figure 7-10  
-Refer to Figure 7-10. Which area represents the increase in producer surplus when the price rises from P1 to P2 due to new producers entering the market?

Accepted Answer

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

Question 14

Table 7-16  
-Refer to Table 7-16. Both the demand curve and the supply curve are straight lines. If 6 units are bought and sold, then total surplus is

Accepted Answer

A) $18 lower than it would be if the equilibrium number of units were bought and sold. 
B) $22 lower than it would be if the equilibrium number of units were bought and sold. 
C) $26 lower than it would be if the equilibrium number of units were bought and sold. 
D) $6 higher than it would be if the equilibrium number of units were bought and sold. 
A) $18 lower than it would be if the equilibrium number of units were bought and sold. 
B) $22 lower than it would be if the equilibrium number of units were bought and sold. 
C) $26 lower than it would be if the equilibrium number of units were bought and sold. 
D) $6 higher than it would be if the equilibrium number of units were bought and sold.

Question 15

A simultaneous increase in both the demand for MP3 players and the supply of MP3 players would imply that

Accepted Answer

A) both the value of MP3 players to consumers and the cost of producing MP3 players has increased. 
B) both the value of MP3 players to consumers and the cost of producing MP3 players has decreased. 
C) the value of MP3 players to consumers has decreased, and the cost of producing MP3 players has increased. 
D) the value of MP3 players to consumers has increased, and the cost of producing MP3 players has decreased. 
A) both the value of MP3 players to consumers and the cost of producing MP3 players has increased. 
B) both the value of MP3 players to consumers and the cost of producing MP3 players has decreased. 
C) the value of MP3 players to consumers has decreased, and the cost of producing MP3 players has increased. 
D) the value of MP3 players to consumers has increased, and the cost of producing MP3 players has decreased.

Question 16

Externalities are

Accepted Answer

A) side effects passed on to a party other than the buyers and sellers in the market. 
B) side effects of government intervention in markets. 
C) external forces that cause the price of a good to be higher than it otherwise would be. 
D) external forces that help establish equilibrium price. 
A) side effects passed on to a party other than the buyers and sellers in the market. 
B) side effects of government intervention in markets. 
C) external forces that cause the price of a good to be higher than it otherwise would be. 
D) external forces that help establish equilibrium price.

Question 17

If the United States changed its laws to allow for the legal sale of a kidney, which of the following is likely to occur?

Accepted Answer

A) The price of kidneys would rise to balance supply and demand. 
B) The gains from trade would make both buyers and sellers better off. 
C) Thousands of lives would be saved. 
D) All of the above are correct. 
A) The price of kidneys would rise to balance supply and demand. 
B) The gains from trade would make both buyers and sellers better off. 
C) Thousands of lives would be saved. 
D) All of the above are correct.

Question 18

Table 7-17
The following table shows the willingness to pay for a good for the only four consumers in a market.  
-Refer to Table 7-17. If the price of the good is $20, how much is the total consumer surplus?

Accepted Answer

Total cons

Question 19

Figure 7-4  
-Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers?

Accepted Answer

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

Question 20

Figure 7-33  
-Refer to Figure 7-33. How much is total producer surplus in this market at the equilibrium price?

Accepted Answer

Total producer surpl

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

Figure 7-22 -Refer to Figure 7-22. At the equilibrium price, total surplus is

Figure 7-11 -Refer to Figure 7-11. If the supply curve is S', the demand curve is D, and the equilibrium price is $150, what is the producer surplus?

We can say that the allocation of resources is efficient if

Scenario 7-1 Suppose market demand is given by the equation -Refer to Scenario 7-1. If the market equilibrium price is $10, how much is total consumer surplus in this market?

Figure 7-23 -Refer to Figure 7-23. If the price were P1, producer surplus would be represented by the area

The cost of production plus producer surplus is the price a seller is paid.

Suppose your own demand curve for tomatoes slopes downward. Suppose also that, for the last tomato you bought this week, you paid a price exactly equal to your willingness to pay. Then

All else equal, an increase in supply will cause an increase in consumer surplus.

Figure 7-1 -Refer to Figure 7-1. If the price of the good is $150, then consumer surplus amounts to

Figure 7-13 -Refer to Figure 7-13. If the equilibrium price is $60, what is the producer surplus?

Figure 7-10 -Refer to Figure 7-10. Which area represents the increase in producer surplus when the price rises from P1 to P2 due to new producers entering the market?

Table 7-16 -Refer to Table 7-16. Both the demand curve and the supply curve are straight lines. If 6 units are bought and sold, then total surplus is

A simultaneous increase in both the demand for MP3 players and the supply of MP3 players would imply that

Externalities are

If the United States changed its laws to allow for the legal sale of a kidney, which of the following is likely to occur?

Table 7-17 The following table shows the willingness to pay for a good for the only four consumers in a market. -Refer to Table 7-17. If the price of the good is $20, how much is the total consumer surplus?

Figure 7-4 -Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers?

Figure 7-33 -Refer to Figure 7-33. How much is total producer surplus in this market at the equilibrium price?

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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