Question 1

Suppose consumer income increases.If grass seed is a normal good,what happens to the equilibrium price of grass seed and producer surplus

Accepted Answer

A) They both decrease. 
B) They both increase. 
C) The equilibrium price will decrease, and producer surplus in the industry will increase. 
D) The equilibrium price will increase, and producer surplus in the industry will decrease. 
A) They both decrease. 
B) They both increase. 
C) The equilibrium price will decrease, and producer surplus in the industry will increase. 
D) The equilibrium price will increase, and producer surplus in the industry will decrease.

Question 2

The area below the price and above the supply curve measures the producer surplus in a market.

Accepted Answer

A) True 
 B)False

Question 3

Consider the following two equations:
1) Total surplus = Consumer surplus + Producer surplus
2) Total surplus = Value to buyers - Cost to sellers
Show how equation (1) can be used to derive equation (2).

Accepted Answer

Start with equation (1): Total surplus =

Question 4

Answer each of the following questions on supply and producer surplus.
a.What is producer surplus,and how is it measured
b.What is the relationship between the cost to sellers and the supply curve
c.Other things equal,what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve.

Accepted Answer

a. Producer surplus measures the benefit

Question 5

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 6

Which comparison of efficiency and equity is most accurate

Accepted Answer

A) Efficiency deals with the size of the economic pie and equity deals with how fairly the pie is sliced. 
B) Equity can be judged on positive grounds, whereas efficiency requires normative judgments. 
C) Efficiency is more difficult to evaluate than equity. 
D) Equity and efficiency are both maximized in a society when total surplus is maximized. 
A) Efficiency deals with the size of the economic pie and equity deals with how fairly the pie is sliced. 
B) Equity can be judged on positive grounds, whereas efficiency requires normative judgments. 
C) Efficiency is more difficult to evaluate than equity. 
D) Equity and efficiency are both maximized in a society when total surplus is maximized.

Question 7

Figure 7-2
  
-Refer to Figure 7-2.When the price falls from P₁ to P₂,which area represents the increase in consumer surplus to existing buyers

Accepted Answer

A) ABD 
B) ACF 
C) BCED 
D) DEF 
A) ABD 
B) ACF 
C) BCED 
D) DEF

Question 8

Which occurrence would NOT show an inefficient market

Accepted Answer

A) a scalper selling Montreal Canadians hockey tickets on the sidewalk 
B) the only gas station in a location that is 100 kilometres from the next closest gas station 
C) a steel mill that also produces pollution 
D) a college student attending a private university 
A) a scalper selling Montreal Canadians hockey tickets on the sidewalk 
B) the only gas station in a location that is 100 kilometres from the next closest gas station 
C) a steel mill that also produces pollution 
D) a college student attending a private university

Question 9

Market demand is given as QD = 150 - P.Market supply is given as QS = 4P.In a perfectly competitive equilibrium,what will be the value of producer surplus

Accepted Answer

A) $1800 
B) $2304 
C) $7200 
D) $9216 
A) $1800 
B) $2304 
C) $7200 
D) $9216

Question 10

What is the French expression used to express the free market concept that literally translates to "allow them to do"

Accepted Answer

A) laissez-faire 
B) je ne sais pas 
C) s'il vous plait 
D) maintien de la paix 
A) laissez-faire 
B) je ne sais pas 
C) s'il vous plait 
D) maintien de la paix

Question 11

When markets fail,what can public policy do

Accepted Answer

A) nothing to improve the situation 
B) potentially remedy the problem and increase economic efficiency 
C) always remedy the problem and increase economic efficiency 
D) in theory, remedy the problem, but in practice, has proven to be ineffective 
A) nothing to improve the situation 
B) potentially remedy the problem and increase economic efficiency 
C) always remedy the problem and increase economic efficiency 
D) in theory, remedy the problem, but in practice, has proven to be ineffective

Question 12

Table 7-3
  
-Refer to Table 7-3.If the market price is $1000,what is the producer surplus in the market

Accepted Answer

A) $450 
B) $950 
C) $1450 
D) $3700 
A) $450 
B) $950 
C) $1450 
D) $3700

Question 13

Market demand is given as QD = 140 - 5P.Market supply is given as QS = 2P.In a perfectly competitive equilibrium,what will be the value of producer surplus

Accepted Answer

A) $400 
B) $600 
C) $800 
D) $1000 
A) $400 
B) $600 
C) $800 
D) $1000

Question 14

Figure 7-6
​
  
-Refer to Figure 7-6.Assume demand increases and as a result,equilibrium price increases to $22 and equilibrium quantity increases to 110.What would be the increase in total producer surplus

Accepted Answer

A) $210 
B) $360 
C) $480 
D) $570 
A) $210 
B) $360 
C) $480 
D) $570

Question 15

Suppose that the equilibrium price in the market for widgets is $8.If a law reduced the maximum legal price for widgets to $7,what would happen to consumer surplus

Accepted Answer

A) It would necessarily increase even if the lower price resulted in a shortage of widgets. 
B) It would necessarily decrease because the lower price would create a shortage of widgets. 
C) It might increase or decrease. 
D) It would be unaffected. 
A) It would necessarily increase even if the lower price resulted in a shortage of widgets. 
B) It would necessarily decrease because the lower price would create a shortage of widgets. 
C) It might increase or decrease. 
D) It would be unaffected.

Question 16

What will occur when the price of a good or service falls

Accepted Answer

A) Buyers who were already buying the good or service are worse off. 
B) Some new buyers, who are now willing to buy, enter the market. 
C) The total value of what is purchased decreases. 
D) The total value of what is purchased increases. 
A) Buyers who were already buying the good or service are worse off. 
B) Some new buyers, who are now willing to buy, enter the market. 
C) The total value of what is purchased decreases. 
D) The total value of what is purchased increases.

Suppose consumer income increases.If grass seed is a normal good,what happens to the equilibrium price of grass seed and producer surplus

The area below the price and above the supply curve measures the producer surplus in a market.

Consider the following two equations: 1) Total surplus = Consumer surplus + Producer surplus 2) Total surplus = Value to buyers - Cost to sellers Show how equation (1) can be used to derive equation (2).

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

Which comparison of efficiency and equity is most accurate

Figure 7-2 -Refer to Figure 7-2.When the price falls from P₁ to P₂,which area represents the increase in consumer surplus to existing buyers

Which occurrence would NOT show an inefficient market

Market demand is given as Q_D= 150 - P.Market supply is given as Q_S= 4P.In a perfectly competitive equilibrium,what will be the value of producer surplus

What is the French expression used to express the free market concept that literally translates to "allow them to do"

When markets fail,what can public policy do

Table 7-3 -Refer to Table 7-3.If the market price is $1000,what is the producer surplus in the market

Market demand is given as Q_D= 140 - 5P.Market supply is given as Q_S= 2P.In a perfectly competitive equilibrium,what will be the value of producer surplus

Figure 7-6 -Refer to Figure 7-6.Assume demand increases and as a result,equilibrium price increases to $22 and equilibrium quantity increases to 110.What would be the increase in total producer surplus

Suppose that the equilibrium price in the market for widgets is $8.If a law reduced the maximum legal price for widgets to $7,what would happen to consumer surplus

What will occur when the price of a good or service falls

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

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

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Filters

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

Suppose consumer income increases.If grass seed is a normal good,what happens to the equilibrium price of grass seed and producer surplus

The area below the price and above the supply curve measures the producer surplus in a market.

Consider the following two equations: 1) Total surplus = Consumer surplus + Producer surplus 2) Total surplus = Value to buyers - Cost to sellers Show how equation (1) can be used to derive equation (2).

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

Which comparison of efficiency and equity is most accurate

Figure 7-2 -Refer to Figure 7-2.When the price falls from P₁ to P₂,which area represents the increase in consumer surplus to existing buyers

Which occurrence would NOT show an inefficient market

Market demand is given as QD = 150 - P.Market supply is given as QS = 4P.In a perfectly competitive equilibrium,what will be the value of producer surplus

What is the French expression used to express the free market concept that literally translates to "allow them to do"

When markets fail,what can public policy do

Table 7-3 -Refer to Table 7-3.If the market price is $1000,what is the producer surplus in the market

Market demand is given as QD = 140 - 5P.Market supply is given as QS = 2P.In a perfectly competitive equilibrium,what will be the value of producer surplus

Figure 7-6 ​ -Refer to Figure 7-6.Assume demand increases and as a result,equilibrium price increases to $22 and equilibrium quantity increases to 110.What would be the increase in total producer surplus

Suppose that the equilibrium price in the market for widgets is $8.If a law reduced the maximum legal price for widgets to $7,what would happen to consumer surplus

What will occur when the price of a good or service falls

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

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

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Filters

Market demand is given as Q_D= 150 - P.Market supply is given as Q_S= 4P.In a perfectly competitive equilibrium,what will be the value of producer surplus

Market demand is given as Q_D= 140 - 5P.Market supply is given as Q_S= 2P.In a perfectly competitive equilibrium,what will be the value of producer surplus

Figure 7-6 -Refer to Figure 7-6.Assume demand increases and as a result,equilibrium price increases to $22 and equilibrium quantity increases to 110.What would be the increase in total producer surplus