Question 1

Using a demand-supply diagram, completing the labels, identify the following areas:
a.consumer surplus.
b.producer surplus.
c.total surplus.

Accepted Answer

The graph should look like the

Question 2

Economists generally believe that although there may be advantages to society from ticket scalping, the costs to society of this activity outweigh the benefits.

Accepted Answer

A) True 
 B)False

Question 3

The height of the demand curve measures the value buyers place on the good, as measured by their willingness to pay for it.

Accepted Answer

A) True 
 B)False

Question 4

Public policy can improve market efficiency when there are instances of market failure.

Accepted Answer

A) True 
 B)False

Question 5

The marginal seller is the seller who:

Accepted Answer

A) cannot compete with the other sellers in the market 
B) would leave the market first if the price were any lower 
C) can produce at the lowest cost 
D) has the greatest producer surplus 
A) cannot compete with the other sellers in the market 
B) would leave the market first if the price were any lower 
C) can produce at the lowest cost 
D) has the greatest producer surplus

Question 6

Which of the following would be true of the seller's cost?

Accepted Answer

A) the seller would be eager to sell her services at a price higher than her cost 
B) the seller would refuse to sell her services at a price lower than her cost 
C) the seller would be indifferent about selling her services at a price equal to her cost 
D) all of the above are true 
A) the seller would be eager to sell her services at a price higher than her cost 
B) the seller would refuse to sell her services at a price lower than her cost 
C) the seller would be indifferent about selling her services at a price equal to her cost 
D) all of the above are true

Question 7

Australian parrots are smuggled to overseas markets where they can command very high prices.An important innovation for smugglers was the egg vest.This meant that more parrots could be smuggled with higher survival rates and less risk of detection.If this lowered the price of black market Australian parrots, does the increase in consumer surplus necessarily represent a welfare improvement to society?

Accepted Answer

While consumers of parrots may benefit,

Question 8

An efficient allocation of resources would be characterised by:

Accepted Answer

A) a good being produced by the sellers with lowest cost 
B) a shortage at the current market price 
C) a good is not being bought by the buyers at highest value 
D) all of the above are correct 
A) a good being produced by the sellers with lowest cost 
B) a shortage at the current market price 
C) a good is not being bought by the buyers at highest value 
D) all of the above are correct

Question 9

Use the information below to graph a supply curve for this product. $$\begin{array} { | c | c | } 
\hline \text { Seller } & \text { Cost(\$) } \
\hline \text { Jonathan } & 400 \
\hline \text { Joshua} & 300 \
\hline \text { Jessica } & 200 \
\hline \text { Ashley } & 100 \
\hline
\end{array}$$

Accepted Answer

@#IMG-DLM& This question could

Question 10

Total surplus is the area under the demand curve up to the equilibrium quantity, minus the cost to producers.

Accepted Answer

A) True 
 B)False

Question 11

Economists generally agree that the goal in developing the concept of consumer surplus is to:

Accepted Answer

A) make positive judgments about the desirability of market outcomes 
B) make normative judgments about the desirability of market outcomes 
C) measure the profit of firms producing the good 
D) assess the forgone value when the price is too high 
A) make positive judgments about the desirability of market outcomes 
B) make normative judgments about the desirability of market outcomes 
C) measure the profit of firms producing the good 
D) assess the forgone value when the price is too high

Question 12

Suppose the price of DVD rentals increases.Explain what will happen to:
a.potential renters who are illegally downloading movies.
b.renters who have not yet begun downloading movies.
c.the consumer surplus in the DVD rental market.
d.the number of downloads that will now occur.

Accepted Answer

a.Potential buyers will be worse off bec

Question 13

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 price is $11, Landon's producer surplus will be:

Accepted Answer

A) $5 
B) $11 
C) $6 
D) $11.50 
A) $5 
B) $11 
C) $6 
D) $11.50

Question 14

Megan loves donuts.The table shown reflects the value Megan places on each donut she eats:
 $\begin{array}{|l|l|}
\hline \text { Value of first doughnut } & \$ 0.60 \
\hline \text { Value of second doughnut } & \$ 0.50 \
\hline \text { Value of third doughnut } & \$ 0.40 \
\hline \text { Value of fouth doughnut } & \$ 0.30 \
\hline \text { Value of fifth doughnut } & \$ 0.20 \
\hline \text { Value of sixth doughnut } & \$ 0.10 \
\hline
\end{array}$ 
a.Use this information to construct Megan's demand curve for donuts.
b.If the price of doughnuts is $0.20, how many donuts will Megan buy?
c.Show Megan's consumer surplus on your graph.How much consumer surplus would she have at a price of $0.20?
d.If the price of doughnuts rose to $0.40, how many donuts would she purchase now? What would happen to Megan's consumer surplus? Show this change on your graph.

Accepted Answer

a.See the graph.b.At a price of $0.20, M

Question 15

Refer to Graph 7-2.When the price rises from P₁ to P₂, which of the following is NOT true?

Accepted Answer

A) the buyers who still buy the good are worse off because they now pay more 
B) some buyers leave the market because they are not willing to buy the good at the higher price 
C) the total value of what is now purchased by buyers is actually higher 
D) consumer surplus in the market falls 
A) the buyers who still buy the good are worse off because they now pay more 
B) some buyers leave the market because they are not willing to buy the good at the higher price 
C) the total value of what is now purchased by buyers is actually higher 
D) consumer surplus in the market falls

Question 16

Gene buys a new medium-format camera for $1000.He receives consumer surplus of $20 on his purchase.Gene's willingness to pay is:

Accepted Answer

A) $20 
B) $1000 
C) $1020 
D) $980 
A) $20 
B) $1000 
C) $1020 
D) $980

Question 17

When a market is in equilibrium but too high for some consumers:

Accepted Answer

A) the government will intervene to set the correct prices 
B) the price determines which buyers and sellers participate in the market, and those unable to afford the good will opt out 
C) those buyers who value the good less than the price choose to buy the good 
D) those sellers whose costs are more than the price choose to produce and sell the good 
A) the government will intervene to set the correct prices 
B) the price determines which buyers and sellers participate in the market, and those unable to afford the good will opt out 
C) those buyers who value the good less than the price choose to buy the good 
D) those sellers whose costs are more than the price choose to produce and sell the good

Question 18

A consumer's willingness to pay is:

Accepted Answer

A) always equal to the market price 
B) the maximum amount he or she is prepared to pay for a good 
C) the average amount he or she is prepared to pay for a good 
D) always more than the market price 
A) always equal to the market price 
B) the maximum amount he or she is prepared to pay for a good 
C) the average amount he or she is prepared to pay for a good 
D) always more than the market price

Question 19

As a general rule, a consumer's willingness to pay is never greater than twice the product's price.

Accepted Answer

A) True 
 B)False

Question 20

Consumer surplus equals the:

Accepted Answer

A) value to buyers less the amount paid by buyers 
B) amount received by sellers less the costs of sellers 
C) value to buyers plus the amount paid by buyers 
D) amount received by sellers plus the costs of sellers 
A) value to buyers less the amount paid by buyers 
B) amount received by sellers less the costs of sellers 
C) value to buyers plus the amount paid by buyers 
D) amount received by sellers plus the costs of sellers

Exam 7: Consumers, Producers and the Efficiency of Markets

Using a demand-supply diagram, completing the labels, identify the following areas: a.consumer surplus. b.producer surplus. c.total surplus.

Economists generally believe that although there may be advantages to society from ticket scalping, the costs to society of this activity outweigh the benefits.

The height of the demand curve measures the value buyers place on the good, as measured by their willingness to pay for it.

Public policy can improve market efficiency when there are instances of market failure.

The marginal seller is the seller who:

Which of the following would be true of the seller's cost?

An efficient allocation of resources would be characterised by:

Total surplus is the area under the demand curve up to the equilibrium quantity, minus the cost to producers.

Economists generally agree that the goal in developing the concept of consumer surplus is to:

Suppose the price of DVD rentals increases.Explain what will happen to: a.potential renters who are illegally downloading movies. b.renters who have not yet begun downloading movies. c.the consumer surplus in the DVD rental market. d.the number of downloads that will now occur.

Refer to Graph 7-2.When the price rises from P₁ to P₂, which of the following is NOT true?

Gene buys a new medium-format camera for $1000.He receives consumer surplus of $20 on his purchase.Gene's willingness to pay is:

When a market is in equilibrium but too high for some consumers:

A consumer's willingness to pay is:

As a general rule, a consumer's willingness to pay is never greater than twice the product's price.

Consumer surplus equals the:

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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