Question 1

Total surplus in a market equals:

Accepted Answer

A) value to buyers - amount paid by buyers 
B) amount received by sellers - costs of sellers 
C) producer surplus - consumer surplus 
D) consumer surplus + producer surplus 
A) value to buyers - amount paid by buyers 
B) amount received by sellers - costs of sellers 
C) producer surplus - consumer surplus 
D) consumer surplus + producer surplus

Question 2

Externalities are:

Accepted Answer

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

Question 3

Amy buys a new computer for her studies for $1500.She receives consumer surplus of $250 from the purchase.How much does Amy value her computer?

Accepted Answer

A) $250 
B) $1500 
C) $1250 
D) $1750 
A) $250 
B) $1500 
C) $1250 
D) $1750

Question 4

Gayle decides that she would pay as much as $900 for a new laptop computer.She buys the computer and realises a consumer surplus of $600.How much did Gayle pay for her computer?

Accepted Answer

A) $900 
B) $600 
C) $1500 
D) $300 
A) $900 
B) $600 
C) $1500 
D) $300

Question 5

What is the relationship between the demand curve and the willingness to pay?

Accepted Answer

Because the demand curve shows

Question 6

Suppose the price of music downloads falls.Explain what will happen to:
a.existing buyers who were already downloading music.
b.potential buyers who have not yet begun downloading music.
c.the consumer surplus in this market.
d.the number of downloads that will now occur.

Accepted Answer

a.Exsting buyers will be better off beca

Question 7

Graph 7-6  
-In Graph 7-6, beyond the equilibrium quantity in a free market:

Accepted Answer

A) the value to buyers is greater than the cost to sellers 
B) the cost to sellers is greater than the value to buyers 
C) cost to sellers is equal to the value to buyers 
D) producer surplus would be greater than consumer surplus 
A) the value to buyers is greater than the cost to sellers 
B) the cost to sellers is greater than the value to buyers 
C) cost to sellers is equal to the value to buyers 
D) producer surplus would be greater than consumer surplus

Question 8

If you pay a price exactly equal to your willingness to pay, then:

Accepted Answer

A) your willingness to pay is less than your consumer surplus 
B) .your consumer surplus is negative 
C) you have no consumer surplus 
D) you place little value on the good 
A) your willingness to pay is less than your consumer surplus 
B) .your consumer surplus is negative 
C) you have no consumer surplus 
D) you place little value on the good

Question 9

The 'invisible hand':

Accepted Answer

A) is the name of an old radio program 
B) is a concept used by Adam Smith to describe the virtues of free markets 
C) is a concept used by J.M.Keynes to describe the role of government in guiding the allocation of resources in the economy 
D) always rewards individuals for using the wellbeing of society as the basis for economic decision making 
A) is the name of an old radio program 
B) is a concept used by Adam Smith to describe the virtues of free markets 
C) is a concept used by J.M.Keynes to describe the role of government in guiding the allocation of resources in the economy 
D) always rewards individuals for using the wellbeing of society as the basis for economic decision making

Question 10

At all quantity levels the price given by the supply curve shows the cost of the lowest cost seller.

Accepted Answer

A) True 
 B)False

Question 11

A seller would be willing to sell a product ONLY if the price received is:

Accepted Answer

A) less than the cost of production 
B) at least as great as the cost of production 
C) equal to the cost of production 
D) at least double the cost of production 
A) less than the cost of production 
B) at least as great as the cost of production 
C) equal to the cost of production 
D) at least double the cost of production

Question 12

Graph 7-5  
-In Graph 7-5, at the quantity Q₂:

Accepted Answer

A) the market is in equilibrium 
B) willingness to pay is greater than willingness to sell 
C) consumer surplus plus producer surplus is maximised 
D) willingness to pay is less than willingness to sell 
A) the market is in equilibrium 
B) willingness to pay is greater than willingness to sell 
C) consumer surplus plus producer surplus is maximised 
D) willingness to pay is less than willingness to sell

Question 13

If a consumer is not willing to purchase a product, her willingness to pay must be below the market price.

Accepted Answer

A) True 
 B)False

Question 14

In order for market outcomes to maximise the total benefits to buyers and sellers, the markets must be perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 15

Other things being equal, if the price of a good falls, the consumer surplus:

Accepted Answer

A) decreases 
B) increases 
C) is unchanged 
D) may increase, decrease or remain unchanged 
A) decreases 
B) increases 
C) is unchanged 
D) may increase, decrease or remain unchanged

Question 16

Total surplus = Value to buyers - Costs to sellers.

Accepted Answer

A) True 
 B)False

Question 17

Economists tend to see ticket scalping as:

Accepted Answer

A) a way for a few to profit while producing nothing of value 
B) an inequitable interference in the orderly process of ticket distribution 
C) a way of increasing the efficiency of ticket distribution 
D) an unproductive activity which should be made illegal everywhere 
A) a way for a few to profit while producing nothing of value 
B) an inequitable interference in the orderly process of ticket distribution 
C) a way of increasing the efficiency of ticket distribution 
D) an unproductive activity which should be made illegal everywhere

Question 18

Suppose hail storms damage vineyards in South Australia.The supply of grapes to local winemakers declines.What happens to consumer surplus in the market for South Australian wine?

Accepted Answer

A) it increases 
B) there is no change to the consumer surplus 
C) it decreases 
D) the overall effect is ambiguous as consumer surplus could rise or fall 
A) it increases 
B) there is no change to the consumer surplus 
C) it decreases 
D) the overall effect is ambiguous as consumer surplus could rise or fall

Question 19

Many economists believe that a market in human organs would lead to an efficient allocation of organs.

Accepted Answer

A) True 
 B)False

Question 20

Restrictions against ticket scalping actually drive up the cost of many tickets.

Accepted Answer

A) True 
 B)False

Exam 7: Consumers, Producers and the Efficiency of Markets

Total surplus in a market equals:

Externalities are:

Amy buys a new computer for her studies for $1500.She receives consumer surplus of $250 from the purchase.How much does Amy value her computer?

Gayle decides that she would pay as much as $900 for a new laptop computer.She buys the computer and realises a consumer surplus of $600.How much did Gayle pay for her computer?

What is the relationship between the demand curve and the willingness to pay?

Suppose the price of music downloads falls.Explain what will happen to: a.existing buyers who were already downloading music. b.potential buyers who have not yet begun downloading music. c.the consumer surplus in this market. d.the number of downloads that will now occur.

Graph 7-6 -In Graph 7-6, beyond the equilibrium quantity in a free market:

If you pay a price exactly equal to your willingness to pay, then:

The 'invisible hand':

At all quantity levels the price given by the supply curve shows the cost of the lowest cost seller.

A seller would be willing to sell a product ONLY if the price received is:

Graph 7-5 -In Graph 7-5, at the quantity Q₂:

If a consumer is not willing to purchase a product, her willingness to pay must be below the market price.

In order for market outcomes to maximise the total benefits to buyers and sellers, the markets must be perfectly competitive.

Other things being equal, if the price of a good falls, the consumer surplus:

Total surplus = Value to buyers - Costs to sellers.

Economists tend to see ticket scalping as:

Suppose hail storms damage vineyards in South Australia.The supply of grapes to local winemakers declines.What happens to consumer surplus in the market for South Australian wine?

Many economists believe that a market in human organs would lead to an efficient allocation of organs.

Restrictions against ticket scalping actually drive up the cost of many tickets.

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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