Question 1

Suppose that the demand for coffee rises.This means that the producer surplus for coffee will:

Accepted Answer

A) increase 
B) decrease 
C) increase or decrease because the effect is ambiguous 
D) neither increase nor decrease because the price hasn't changed 
A) increase 
B) decrease 
C) increase or decrease because the effect is ambiguous 
D) neither increase nor decrease because the price hasn't changed

Question 2

The "generalised price" of a ticket is the sum of the monetary price of the ticket (the amount you pay in dollars) plus the other costs of obtaining that ticket (such as waiting in line).It can be written as:
Generalised Price = Monetary price + time standing in line.Suppose everyone has the same opportunity cost of time.If there are laws against scalping, will tickets go to those individuals who value the ticket the most when we use generalised price? (HINT: Suppose there is one ticket left for a concert for $40, and person A values that ticket at $50 and person B at $60.Who will buy the ticket?)

Accepted Answer

If scalping is outlawed and the price of

Question 3

Table 7-3
Market supply and demand for good X
 $\begin{array}{|c|c|c|}
\hline \text { Price (\$) } & \text { Quantity demanded } & \text { Quantity supplied } \
\hline 12.00 & 0 & 36 \
\hline 10.00 & 12 & 30 \
\hline 8.00 & 24 & 24 \
\hline 6.00 & 36 & 18 \
\hline 4.00 & 48 & 12 \
\hline 2.00 & 60 & 6 \
\hline 0.00 & 72 & 0 \
\hline
\end{array}$
-Refer to Table 7-3.The equilibrium or market-clearing price is:

Accepted Answer

A) $10.00 
B) $8.00 
C) $6.00 
D) $4.00 
A) $10.00 
B) $8.00 
C) $6.00 
D) $4.00

Question 4

Producer surplus measures the:

Accepted Answer

A) wellbeing of sellers 
B) wellbeing of society as a whole 
C) goods and services that the seller cannot find a buyer for 
D) wellbeing of buyers 
A) wellbeing of sellers 
B) wellbeing of society as a whole 
C) goods and services that the seller cannot find a buyer for 
D) wellbeing of buyers

Question 5

An allocation of resources that maximises total surplus is said to be equitable.

Accepted Answer

A) True 
 B)False

Question 6

Table 7-2
The costs of five possible sellers
 $$\begin{array} { | c | c | } 
\hline \text { Seller } & \text { Cast(\$) } \
\hline \text { Kyle } & 18 \
\hline \text { Nathen } & 15 \
\hline \text { Chelsea } & 10 \
\hline \text { Hillary } & 7.50 \
\hline \text { Landon } & 5 \
\hline
\end{array}$$
-Refer to Table 7-2.If the market price is $8, the total cost in the market will be:

Accepted Answer

A) $13 
B) $12.50 
C) $19 
D) $43 
A) $13 
B) $12.50 
C) $19 
D) $43

Question 7

In a perfectly competitive market, consumer surplus and producer surplus are equal.

Accepted Answer

A) True 
 B)False

Question 8

Consumer surplus is the:

Accepted Answer

A) quantity of a good consumers get free 
B) amount a consumer has to pay less the amount the consumer was willing to pay 
C) amount a consumer is willing to pay less the amount the consumer actually pays 
D) total value of a good to a consumer 
A) quantity of a good consumers get free 
B) amount a consumer has to pay less the amount the consumer was willing to pay 
C) amount a consumer is willing to pay less the amount the consumer actually pays 
D) total value of a good to a consumer

Question 9

For producers, the willingness to sell is equivalent to the marginal cost of the product.

Accepted Answer

A) True 
 B)False

Question 10

Michele is willing to pay $12 to see St Trinians for the fourth time.She finds a theatre showing St Trinians for $12.00.Michele's consumer surplus is:

Accepted Answer

A) $0 
B) $12 
C) $8 
D) $9 
A) $0 
B) $12 
C) $8 
D) $9

Question 11

Graph 7-3  
-According to Graph 7-3, area B represents:

Accepted Answer

A) producer surplus to new producers entering the market as the result of price rising from P₁ to P₂ 
B) the increase in consumer surplus that results from an upward-sloping supply curve 
C) a decrease in producer surplus to each producer in the market 
D) an increase in total surplus when sellers are willing and able to increase supply from Q₁ to Q₂ 
A) producer surplus to new producers entering the market as the result of price rising from P₁ to P₂ 
B) the increase in consumer surplus that results from an upward-sloping supply curve 
C) a decrease in producer surplus to each producer in the market 
D) an increase in total surplus when sellers are willing and able to increase supply from Q₁ to Q₂

Question 12

Would a market that was characterised by unregulated pollution be classed as efficient? Why or why not?

Accepted Answer

An efficient market assumes that the mar

Question 13

Table 7-7
 $\begin{array}{|c|c|c|}\hline \text { Price of pizza }&\text { Quantity of pizza demanded }\
\hline & \text { Fred } & \text { Frieda } \
\hline>\$ 15 & 0 & 0 \
\hline \$ 14 & 1 & 0 \
\hline \$ 13 & 3 & 1 \
\hline \$ 12 & 5 & 3 \
\hline \$ 11 & 7 & 5 \
\hline \$ 10 & 9 & 7 \
\hline \$ 9 & 11 & 9 \
\hline
\end{array}$ Antonio's Pizza
 $\begin{array}{|c|c|}
\hline \text { Price } & \text { Quantity supplied } \
\hline \$ 15 & 28 \
\hline \$ 14 & 24 \
\hline \$ 13 & 20 \
\hline \$ 12 & 16 \
\hline \$ 11 & 12 \
\hline \$ 10 & 8 \
\hline \$ 9 & 4 \
\hline<\$ 9 & 0 \
\hline
\end{array}$
-Based on Table 7-7, if Fred and Frieda are the only buyers in the pizza market and Antonio's is the only seller, what is the:
a.market equilibrium price?
b.market equilibrium quantity?
c.total consumer surplus at the market equilibrium?
d.total producer surplus at the market equilibrium?
e.total benefit to society of this market?

Accepted Answer

a.$11
b.12

Question 14

Even though participants in the economy are motivated by self-interest, the 'invisible hand' of the marketplace guides this self-interest into promoting general economic wellbeing.

Accepted Answer

A) True 
 B)False

Question 15

Graph 7-4  
-In Graph 7-4, the efficient price-quantity combination is:

Accepted Answer

A) P₁ - Q₁ 
B) P₂ - Q₂ 
C) P₃ - Q₁ 
D) none of the combinations are efficient 
A) P₁ - Q₁ 
B) P₂ - Q₂ 
C) P₃ - Q₁ 
D) none of the combinations are efficient

Question 16

If demand increases, the price of a product, as well as producer surplus:

Accepted Answer

A) increases 
B) decreases 
C) remains the same 
D) may increase, decrease or remain the same 
A) increases 
B) decreases 
C) remains the same 
D) may increase, decrease or remain the same

Question 17

Welfare economics is the study of the welfare system.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is NOT correct?

Accepted Answer

A) consumer surplus = value to buyers - Amount paid by buyers 
B) producer surplus = amount received by sellers - Cost of sellers 
C) total surplus = value to buyers - Amount paid by buyers + Amount received by sellers - Costs of sellers 
D) total surplus = Value to sellers - Costs of sellers 
A) consumer surplus = value to buyers - Amount paid by buyers 
B) producer surplus = amount received by sellers - Cost of sellers 
C) total surplus = value to buyers - Amount paid by buyers + Amount received by sellers - Costs of sellers 
D) total surplus = Value to sellers - Costs of sellers

Question 19

If Dale sells a shirt for $80 and his producer surplus from the sale is $13, his cost must have been:

Accepted Answer

A) $93 
B) $80 
C) $13 
D) $67 
A) $93 
B) $80 
C) $13 
D) $67

Question 20

Graph 7-4  
-In Graph 7-4, at the market-clearing equilibrium, total surplus is represented by the area:

Accepted Answer

A) A + B + C 
B) A + B + D + F 
C) A + B + C + D + E +F 
D) A + B + C + D + E + F + G + H 
A) A + B + C 
B) A + B + D + F 
C) A + B + C + D + E +F 
D) A + B + C + D + E + F + G + H

Exam 7: Consumers, Producers and the Efficiency of Markets

Suppose that the demand for coffee rises.This means that the producer surplus for coffee will:

Producer surplus measures the:

An allocation of resources that maximises total surplus is said to be equitable.

In a perfectly competitive market, consumer surplus and producer surplus are equal.

Consumer surplus is the:

For producers, the willingness to sell is equivalent to the marginal cost of the product.

Michele is willing to pay $12 to see St Trinians for the fourth time.She finds a theatre showing St Trinians for $12.00.Michele's consumer surplus is:

Graph 7-3 -According to Graph 7-3, area B represents:

Would a market that was characterised by unregulated pollution be classed as efficient? Why or why not?

Even though participants in the economy are motivated by self-interest, the 'invisible hand' of the marketplace guides this self-interest into promoting general economic wellbeing.

Graph 7-4 -In Graph 7-4, the efficient price-quantity combination is:

If demand increases, the price of a product, as well as producer surplus:

Welfare economics is the study of the welfare system.

Which of the following is NOT correct?

If Dale sells a shirt for $80 and his producer surplus from the sale is $13, his cost must have been:

Graph 7-4 -In Graph 7-4, at the market-clearing equilibrium, total surplus is represented by the area:

Ten Lessons From 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

Business Strategy and Oligopoly

Competition Policy

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

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 Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

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