Question 1

How does producer surplus differ from the market price?

Accepted Answer

Producer surplus is the measure of the b

Question 2

Lee is willing and able to pay $250 for an iPhone but is able to buy it for $199.Lee's consumer surplus is:

Accepted Answer

A) $0 
B) $51 
C) $199 
D) $250 
A) $0 
B) $51 
C) $199 
D) $250

Question 3

A supply curve provides a graphical measure of a producer's true willingness to sell.

Accepted Answer

A) True 
 B)False

Question 4

Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

Accepted Answer

A) True 
 B)False

Question 5

The producer surplus in a market is the area above the price plus the area below the demand curve.

Accepted Answer

A) True 
 B)False

Question 6

Sharon is bidding on a new camera on an internet auction.She values the camera at $700 and wins the auction with a bid of $650, therefore:

Accepted Answer

A) Sharon's willingness to pay is $700 and her consumer surplus is 0 
B) Sharon's willingness to pay is $700 and her consumer surplus is $50 
C) Sharon's willingness to pay is $650 and her consumer surplus is $50 
D) Sharon's willingness to pay is $650 and her consumer surplus is $0 
A) Sharon's willingness to pay is $700 and her consumer surplus is 0 
B) Sharon's willingness to pay is $700 and her consumer surplus is $50 
C) Sharon's willingness to pay is $650 and her consumer surplus is $50 
D) Sharon's willingness to pay is $650 and her consumer surplus is $0

Question 7

Peter owns a sawmill and produces timber for construction.He sells the timber for $250 per cubic metre.His production costs are $90 per cubic metre.His producer surplus is:

Accepted Answer

A) $250 per cubic metre 
B) $90 per cubic metre 
C) $160 per cubic metre 
D) none of the above 
A) $250 per cubic metre 
B) $90 per cubic metre 
C) $160 per cubic metre 
D) none of the above

Question 8

A consumer's willingness to pay measures:

Accepted Answer

A) the cost of a good to the buyer 
B) how much a buyer values a good 
C) how much a buyer has to pay to receive a good 
D) how much a seller receives from the sale of a good 
A) the cost of a good to the buyer 
B) how much a buyer values a good 
C) how much a buyer has to pay to receive a good 
D) how much a seller receives from the sale of a good

Question 9

Laissez-faire is a French expression that literally means 'let the market fare well'.

Accepted Answer

A) True 
 B)False

Question 10

Graph 7-3  
-According to Graph 7-3, when the price falls from P₂ to P₁, producer surplus:

Accepted Answer

A) decreases by an amount equal to A 
B) decreases by an amount equal to A + C 
C) decreases by an amount equal to A + B 
D) increases by an amount equal to A + B 
A) decreases by an amount equal to A 
B) decreases by an amount equal to A + C 
C) decreases by an amount equal to A + B 
D) increases by an amount equal to A + B

Question 11

Out-of-pocket expenses plus the value of the seller's own resources used in production are considered to be:

Accepted Answer

A) the seller's total revenue 
B) the seller's consumer surplus 
C) producer surplus 
D) the cost of production 
A) the seller's total revenue 
B) the seller's consumer surplus 
C) producer surplus 
D) the cost of production

Question 12

Graph 7-2  
-Refer to Graph 7-2.At the higher price P₂, consumer surplus is:

Accepted Answer

A) A 
B) B 
C) A + B 
D) A + B + C 
A) A 
B) B 
C) A + B 
D) A + B + C

Question 13

The tools of consumer surplus and producer surplus enables us to determine whether free-market allocation of resources is desirable.

Accepted Answer

A) True 
 B)False

Question 14

Graph 7-3  
-Refer to Graph 7-3.When the price falls from P₂ to P₁, which of the following is NOT true?

Accepted Answer

A) the sellers who still sell the good are worse off because they now receive less 
B) some sellers leave the market because they are not willing to sell the good at the lower price 
C) the total cost of what is now sold by sellers is actually higher 
D) all of the above are correct 
A) the sellers who still sell the good are worse off because they now receive less 
B) some sellers leave the market because they are not willing to sell the good at the lower price 
C) the total cost of what is now sold by sellers is actually higher 
D) all of the above are correct

Question 15

Market power refers to the:

Accepted Answer

A) company that generates electricity to firms 
B) buyers and sellers being price takers 
C) ability of to influence price 
D) market situation that only ever happens with a monopoly seller 
A) company that generates electricity to firms 
B) buyers and sellers being price takers 
C) ability of to influence price 
D) market situation that only ever happens with a monopoly seller

Question 16

Total surplus in a market can be measured as the area below the supply curve and the area above the demand curve.

Accepted Answer

A) True 
 B)False

Question 17

A group of people are bidding on an internet auction for a used car.Each bidder will not bid more than a maximum amount that is unique to them.This maximum is called:

Accepted Answer

A) a strategic price 
B) willingness to pay 
C) consumer surplus 
D) price elasticity of demand 
A) a strategic price 
B) willingness to pay 
C) consumer surplus 
D) price elasticity of demand

Question 18

Efficiency is related to the size of the economic pie, whereas equity is related to how the pie gets sliced and distributed.

Accepted Answer

A) True 
 B)False

Question 19

The cost of producing digital cameras decreases.As a result, the consumer surplus associated with digital cameras:

Accepted Answer

A) decreases 
B) increases 
C) doesn't change 
D) could increase or decrease but the overall effect is ambiguous 
A) decreases 
B) increases 
C) doesn't change 
D) could increase or decrease but the overall effect is ambiguous

Question 20

Graph 7-3  
-According to Graph 7-3, at the price P₁, producer surplus is:

Accepted Answer

A) A 
B) A + B 
C) C 
D) A + B + C 
A) A 
B) A + B 
C) C 
D) A + B + C

Exam 7: Consumers, Producers and the Efficiency of Markets

How does producer surplus differ from the market price?

Lee is willing and able to pay $250 for an iPhone but is able to buy it for $199.Lee's consumer surplus is:

A supply curve provides a graphical measure of a producer's true willingness to sell.

Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

The producer surplus in a market is the area above the price plus the area below the demand curve.

Sharon is bidding on a new camera on an internet auction.She values the camera at $700 and wins the auction with a bid of $650, therefore:

Peter owns a sawmill and produces timber for construction.He sells the timber for $250 per cubic metre.His production costs are $90 per cubic metre.His producer surplus is:

A consumer's willingness to pay measures:

Laissez-faire is a French expression that literally means 'let the market fare well'.

Graph 7-3 -According to Graph 7-3, when the price falls from P₂ to P₁, producer surplus:

Out-of-pocket expenses plus the value of the seller's own resources used in production are considered to be:

Graph 7-2 -Refer to Graph 7-2.At the higher price P₂, consumer surplus is:

The tools of consumer surplus and producer surplus enables us to determine whether free-market allocation of resources is desirable.

Graph 7-3 -Refer to Graph 7-3.When the price falls from P₂ to P₁, which of the following is NOT true?

Market power refers to the:

Total surplus in a market can be measured as the area below the supply curve and the area above the demand curve.

A group of people are bidding on an internet auction for a used car.Each bidder will not bid more than a maximum amount that is unique to them.This maximum is called:

Efficiency is related to the size of the economic pie, whereas equity is related to how the pie gets sliced and distributed.

The cost of producing digital cameras decreases.As a result, the consumer surplus associated with digital cameras:

Graph 7-3 -According to Graph 7-3, at the price P₁, producer surplus is:

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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