Question 1

Figure 7-12  
-Refer to Figure 7-12. Area A represents

Accepted Answer

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

Question 2

Table 7-10
 $$\begin{array} { | l | r | } 
\hline \text { Seller } & \text { Cost } \
\hline \text { Lepran } & \$ 700 \
\hline \text { Kabe } & \$ 600 \
\hline \text { Kevin } & \$ 450 \
\hline \text { Steve } & \$ 400 \
\hline
\end{array}$$
-Refer to Table 7-10. You and your best friend want to hire a professional photographer to take pictures of your two families. The table shows the costs of the four potential sellers in the local photography market. You and your friend take bids from the sellers. Who offers the two winning bids, and what do they offer to charge for the photography sessions?

Accepted Answer

A) LeBron and Kobe; more than $450 but less than $600 
B) Kevin and Steve; more than $450 but less than $600 
C) LeBron and Kobe; more than $700 
D) Kevin and Steve; less than $400 
A) LeBron and Kobe; more than $450 but less than $600 
B) Kevin and Steve; more than $450 but less than $600 
C) LeBron and Kobe; more than $700 
D) Kevin and Steve; less than $400

Question 3

Market power and externalities are examples of

Accepted Answer

A) laissez-faire economics. 
B) public policy. 
C) market failure. 
D) welfare economics. 
A) laissez-faire economics. 
B) public policy. 
C) market failure. 
D) welfare economics.

Question 4

Figure 7-12  
-Refer to Figure 7-12. When the price is P2, producer surplus is

Accepted Answer

A) A. 
B) A+C. 
C) A+B+C. 
D) D+G. 
A) A. 
B) A+C. 
C) A+B+C. 
D) D+G.

Question 5

The equilibrium of supply and demand in a market maximizes the total benefits to buyers and sellers of participating in that market.

Accepted Answer

A) True 
 B)False

Question 6

Table 7-11
 $$\begin{array} { | c | c | c } 
\hline \text { Price } & \begin{array} { c } 
\text { Quantity } \
\text { Demanded }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { Supplied }
\end{array} \
\hline \$ 12.00 & 0 & 36 \
\hline \$ 10.00 & 3 & 30 \
\hline \$ 8.00 & 6 & 24 \
\hline \$ 6.00 & 9 & 18 \
\hline \$ 4.00 & 12 & 12 \
\hline \$ 2.00 & 15 & 6 \
\hline \$ 0.00 & 18 & 0 \
\hline
\end{array}$$
-Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. At equilibrium, consumer surplus is

Accepted Answer

A) $24. 
B) $36. 
C) $42. 
D) $48. 
A) $24. 
B) $36. 
C) $42. 
D) $48.

Question 7

The lower the price, the lower the producer surplus, all else equal.

Accepted Answer

A) True 
 B)False

Question 8

Figure 7-3  
-Refer to Figure 7-3. Which area represents consumer surplus at a price of P1?

Accepted Answer

A) ABD 
B) ACG 
C) BCDF 
D) DFG 
A) ABD 
B) ACG 
C) BCDF 
D) DFG

Question 9

Externalities are

Accepted Answer

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

Question 10

Welfare economics explains which of the following in the market for DVDs?

Accepted Answer

A) The government sets the price of DVDs; firms respond to the price by producing a specific level of output. 
B) The government sets the quantity of DVDs; firms respond to the quantity by charging a specific price. 
C) The market equilibrium price for DVDs maximizes the total welfare to DVD buyers and sellers. 
D) The market equilibrium price for DVDs maximizes consumer welfare but minimizes producer welfare. 
A) The government sets the price of DVDs; firms respond to the price by producing a specific level of output. 
B) The government sets the quantity of DVDs; firms respond to the quantity by charging a specific price. 
C) The market equilibrium price for DVDs maximizes the total welfare to DVD buyers and sellers. 
D) The market equilibrium price for DVDs maximizes consumer welfare but minimizes producer welfare.

Question 11

At present, the maximum legal price for a human kidney is $0. The price of $0 maximizes

Accepted Answer

A) consumer surplus but not producer surplus. 
B) producer surplus but not consumer surplus. 
C) both consumer and producer surplus. 
D) neither consumer nor producer surplus. 
A) consumer surplus but not producer surplus. 
B) producer surplus but not consumer surplus. 
C) both consumer and producer surplus. 
D) neither consumer nor producer surplus.

Question 12

Which of the following is not correct?

Accepted Answer

A) Market power can cause markets to be inefficient. 
B) When the decisions of buyers and sellers affect nonparticipants, markets may be inefficient. 
C) The tools of welfare economics cannot help economists when markets are inefficient. 
D) Externalities can cause markets to be inefficient. 
A) Market power can cause markets to be inefficient. 
B) When the decisions of buyers and sellers affect nonparticipants, markets may be inefficient. 
C) The tools of welfare economics cannot help economists when markets are inefficient. 
D) Externalities can cause markets to be inefficient.

Question 13

Figure 7-20  
-Refer to Figure 7-20. At equilibrium, total surplus is

Accepted Answer

A) $36. 
B) $72. 
C) $108. 
D) $144. 
A) $36. 
B) $72. 
C) $108. 
D) $144.

Question 14

Which of the following events would increase producer surplus?

Accepted Answer

A) Sellers' costs stay the same and the price of the good increases. 
B) Sellers' costs increase and the price of the good stays the same. 
C) Sellers' costs increase and the price of the good decreases. 
D) All of the above are correct. 
A) Sellers' costs stay the same and the price of the good increases. 
B) Sellers' costs increase and the price of the good stays the same. 
C) Sellers' costs increase and the price of the good decreases. 
D) All of the above are correct.

Question 15

If Rosa is willing to pay $450 for hockey tickets and has consumer surplus of $175, the price of the tickets is $625.

Accepted Answer

A) True 
 B)False

Question 16

Unless markets are perfectly competitive, they may fail to maximize the total benefits to buyers and sellers.

Accepted Answer

A) True 
 B)False

Question 17

Consumer surplus is equal to the

Accepted Answer

A) Value to buyers - Amount paid by buyers. 
B) Amount paid by buyers - Costs of sellers. 
C) Value to buyers - Costs of sellers. 
D) Value to buyers - Willingness to pay of buyers. 
A) Value to buyers - Amount paid by buyers. 
B) Amount paid by buyers - Costs of sellers. 
C) Value to buyers - Costs of sellers. 
D) Value to buyers - Willingness to pay of buyers.

Question 18

PlayStations and PlayStation games are complementary goods. A technological advance in the production of PlayStations will

Accepted Answer

A) increase consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games. 
B) increase consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. 
C) decrease consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. 
D) decrease consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games. 
A) increase consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games. 
B) increase consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. 
C) decrease consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. 
D) decrease consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games.

Question 19

Figure 7-20  
-Refer to Figure 7-20. If 6 units of the good are produced and sold, then

Accepted Answer

A) efficiency is achieved in this market. 
B) the marginal value to buyers equals the marginal cost to sellers. 
C) the sum of consumer surplus and producer surplus is maximized. 
D) All of the above are correct. 
A) efficiency is achieved in this market. 
B) the marginal value to buyers equals the marginal cost to sellers. 
C) the sum of consumer surplus and producer surplus is maximized. 
D) All of the above are correct.

Question 20

Table 7-7
The following table represents the costs of five possible sellers. $$\begin{array} { | l | l | } 
\hline \text { Seller } & \text { Cost } \
\hline \text { Abby } & \$ 1,500 \
\hline \text { Babby } & \$ 1,200 \
\hline \text { Carlos } & \$ 1,000 \
\hline \text { Dianne } & \$ 750 \
\hline \text { Evalina } & \$ 500 \
\hline
\end{array}$$
-Refer to Table 7-7. If the market price is $900, the producer surplus in the market is

Accepted Answer

A) $350. 
B) $550. 
C) $750. 
D) $1,000. 
A) $350. 
B) $550. 
C) $750. 
D) $1,000.

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

Figure 7-12 -Refer to Figure 7-12. Area A represents

Market power and externalities are examples of

Figure 7-12 -Refer to Figure 7-12. When the price is P2, producer surplus is

The equilibrium of supply and demand in a market maximizes the total benefits to buyers and sellers of participating in that market.

Table 7-11 Price Quantity Demanded Quantity Supplied \ 12.00 0 36 \ 10.00 3 30 \ 8.00 6 24 \ 6.00 9 18 \ 4.00 12 12 \ 2.00 15 6 \ 0.00 18 0 -Refer to Table 7-11. Both the demand curve and the supply curve are straight lines. At equilibrium, consumer surplus is

The lower the price, the lower the producer surplus, all else equal.

Figure 7-3 -Refer to Figure 7-3. Which area represents consumer surplus at a price of P1?

Externalities are

Welfare economics explains which of the following in the market for DVDs?

At present, the maximum legal price for a human kidney is $0. The price of $0 maximizes

Which of the following is not correct?

Figure 7-20 -Refer to Figure 7-20. At equilibrium, total surplus is

Which of the following events would increase producer surplus?

If Rosa is willing to pay $450 for hockey tickets and has consumer surplus of $175, the price of the tickets is $625.

Unless markets are perfectly competitive, they may fail to maximize the total benefits to buyers and sellers.

Consumer surplus is equal to the

PlayStations and PlayStation games are complementary goods. A technological advance in the production of PlayStations will

Figure 7-20 -Refer to Figure 7-20. If 6 units of the good are produced and sold, then

Table 7-7 The following table represents the costs of five possible sellers. Seller Cost Abby \ 1,500 Babby \ 1,200 Carlos \ 1,000 Dianne \ 750 Evalina \ 500 -Refer to Table 7-7. If the market price is $900, the producer surplus in the market is

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

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

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

Six Debates Over Macroeconomic Policy

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