Question 1

Figure 7-18  
-Refer to Figure 7-18. If 40 units of the good are being bought and sold, then

Accepted Answer

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

Question 2

Economists typically measure efficiency using

Accepted Answer

A) the price paid by buyers. 
B) the quantity supplied by sellers. 
C) total surplus. 
D) profits to firms. 
A) the price paid by buyers. 
B) the quantity supplied by sellers. 
C) total surplus. 
D) profits to firms.

Question 3

Janine would be willing to pay $50 to see Les Misérables, but she buys a ticket for only $30. Janine values the performance at

Accepted Answer

A) $20. 
B) $30. 
C) $50. 
D) $80. 
A) $20. 
B) $30. 
C) $50. 
D) $80.

Question 4

Given the following two equations:
 1) Tatal Suplus = Consumer Suplus + Produce Suplus
2) Total Surglus = Value to Buyers - Cost to Sellers Show how equation (1) can be used to derive equation (2).

Accepted Answer

Start with the equation: Total Surplus =

Question 5

Suppose Lauren, Leslie and Lydia all purchase bulletin boards for their rooms for $15 each. Lauren's willingness to pay was $35, Leslie's willingness to pay was $25, and Lydia's willingness to pay was $30. Total consumer surplus for these three would be

Accepted Answer

A) $15. 
B) $30. 
C) $45. 
D) $90. 
A) $15. 
B) $30. 
C) $45. 
D) $90.

Question 6

An example of positive analysis is studying

Accepted Answer

A) how market forces produce equilibrium. 
B) whether equilibrium outcomes are fair. 
C) whether equilibrium outcomes are socially desirable. 
D) if income distributions are fair. 
A) how market forces produce equilibrium. 
B) whether equilibrium outcomes are fair. 
C) whether equilibrium outcomes are socially desirable. 
D) if income distributions are fair.

Question 7

Total surplus in a market is equal to

Accepted Answer

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

Question 8

Which of the following statements is correct?

Accepted Answer

A) Buyers always want to pay less and sellers always want to be paid more. 
B) Buyers always want to pay less and sellers always want to be paid less. 
C) Buyers always want to pay more and sellers always want to be paid more. 
D) Buyers always want to pay more and sellers always want to be paid less. 
A) Buyers always want to pay less and sellers always want to be paid more. 
B) Buyers always want to pay less and sellers always want to be paid less. 
C) Buyers always want to pay more and sellers always want to be paid more. 
D) Buyers always want to pay more and sellers always want to be paid less.

Question 9

Figure 7-5  
-Refer to Figure 7-5. At the equilibrium price, consumer surplus is

Accepted Answer

A) $200. 
B) $300. 
C) $500. 
D) $600. 
A) $200. 
B) $300. 
C) $500. 
D) $600.

Question 10

Figure 7-19  
-Refer to Figure 7-19. If the price were P3, consumer surplus would be represented by the area

Accepted Answer

A) A. 
B) A+B+C. 
C) D+H+F. 
D) A+B+C+D+H+F. 
A) A. 
B) A+B+C. 
C) D+H+F. 
D) A+B+C+D+H+F.

Question 11

The "invisible hand" refers to

Accepted Answer

A) the marketplace guiding the self-interests of market participants into promoting general economic well-being. 
B) the fact that social planners sometimes have to intervene, even in perfectly competitive markets, to make those markets more efficient. 
C) the equality that results from market forces allocating the goods produced in the market. 
D) the automatic maximization of consumer surplus in free markets. 
A) the marketplace guiding the self-interests of market participants into promoting general economic well-being. 
B) the fact that social planners sometimes have to intervene, even in perfectly competitive markets, to make those markets more efficient. 
C) the equality that results from market forces allocating the goods produced in the market. 
D) the automatic maximization of consumer surplus in free markets.

Question 12

Figure 7-1  
-Refer to Figure 7-1. The value of the good to consumers minus the cost of the good to consumers amounts to $325 if the price of the good is

Accepted Answer

A) $200. 
B) $150. 
C) $125. 
D) $100. 
A) $200. 
B) $150. 
C) $125. 
D) $100.

Question 13

Answer the following questions based on the graph that represents J.R.'s demand for ribs per week at Judy's Rib Shack.
a. At the equilibrium price, how many ribs would J.R. be willing to purchase?
b. How much is J.R. willing to pay for 20 ribs?
c. What is the magnitude of J.R.'s consumer surplus at the equilibrium price?
d. At the equilibrium price, how many ribs would Judy be willing to sell?
e. How high must the price of ribs be for Judy to supply 20 ribs to the market?
f. At the equilibrium price, what is the magnitude of total surplus in the market?
g. If the price of ribs rose to $10, what would happen to J.R.'s consumer surplus?
h. If the price of ribs fell to $5, what would happen to Judy's producer surplus?
i. Explain why the graph that is shown verifies the fact that the market equilibrium (quantity) maximizes the sum of producer and consumer surplus.

Accepted Answer

a. 40
b. $10.00
c. $80.00.d. 40
e. $5
f

Question 14

Figure 7-17  
-Refer to Figure 7-17. Which area represents total surplus in the market when the price is P1?

Accepted Answer

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

Question 15

Answer each of the following questions about demand and consumer surplus.
a.What is consumer surplus, and how is it measured?
b.What is the relationship between the demand curve and the willingness to pay?
c.Other things equal, what happens to consumer surplus if the price of a good falls? Why? Illustrate using a demand curve.
d.In what way does the demand curve represent the benefit consumers receive from participating in a market? In addition to the demand curve, what else must be considered to determine consumer surplus?

Accepted Answer

a.Consumer surplus measures the benefit

Question 16

Efficiency is attained when

Accepted Answer

A) total surplus is maximized. 
B) producer surplus is maximized. 
C) all resources are being used. 
D) consumer surplus is maximized and producer surplus is minimized. 
A) total surplus is maximized. 
B) producer surplus is maximized. 
C) all resources are being used. 
D) consumer surplus is maximized and producer surplus is minimized.

Question 17

Total surplus measures the

Accepted Answer

A) loss to buyers from paying higher prices plus the benefit to sellers from receiving lower prices. 
B) buyers' willingnesses to pay less the sellers' costs. 
C) fairness of the distribution of resources in society. 
D) value to the government of goods and services sold in society. 
A) loss to buyers from paying higher prices plus the benefit to sellers from receiving lower prices. 
B) buyers' willingnesses to pay less the sellers' costs. 
C) fairness of the distribution of resources in society. 
D) value to the government of goods and services sold in society.

Question 18

Which of the following statements is not correct?

Accepted Answer

A) An invisible hand leads buyers and sellers to an equilibrium that maximizes total surplus. 
B) Market power can cause markets to be inefficient. 
C) Externalities can cause markets to be inefficient. 
D) The invisible hand can remedy most if not all types of market failures. 
A) An invisible hand leads buyers and sellers to an equilibrium that maximizes total surplus. 
B) Market power can cause markets to be inefficient. 
C) Externalities can cause markets to be inefficient. 
D) The invisible hand can remedy most if not all types of market failures.

Question 19

At Nick's Bakery, the cost to make homemade chocolate cake is $3 per cake. As a result of selling three cakes, Nick experiences a producer surplus in the amount of $19.50. Nick must be selling his cakes for

Accepted Answer

A) $6.50 each. 
B) $7.50 each. 
C) $9.50 each. 
D) $10.50 each. 
A) $6.50 each. 
B) $7.50 each. 
C) $9.50 each. 
D) $10.50 each.

Question 20

Table 7-4
The numbers in Table 7-1 reveal the maximum willingness to pay for a ticket to a Chicago Cubs vs. St. Louis Cardinal's baseball game at Wrigley Field. $$\begin{array} { | c | c | } 
\hline \text { Buyer } & \text { Willingnes to Pay } \
\hline \text { Jenrifer } & \$ 10 \
\hline \text { Bryce } & \$ 15 \
\hline \text { Dan } & \$ 20 \
\hline \text { David } & \$ 25 \
\hline \text { Ker } & \$ 50 \
\hline \text { Lisa } & \$ 60 \
\hline
\end{array}$$
-Refer to Table 7-4. If you have a ticket that you sell to the group in an auction, what will be the selling price?

Accepted Answer

A) $21 
B) $26 
C) $51 
D) $61 
A) $21 
B) $26 
C) $51 
D) $61

Figure 7-18 -Refer to Figure 7-18. If 40 units of the good are being bought and sold, then

Economists typically measure efficiency using

Janine would be willing to pay $50 to see Les Misérables, but she buys a ticket for only $30. Janine values the performance at

Given the following two equations: 1) Tatal Suplus = Consumer Suplus + Produce Suplus 2) Total Surglus = Value to Buyers - Cost to Sellers Show how equation (1) can be used to derive equation (2).

Suppose Lauren, Leslie and Lydia all purchase bulletin boards for their rooms for $15 each. Lauren's willingness to pay was $35, Leslie's willingness to pay was $25, and Lydia's willingness to pay was $30. Total consumer surplus for these three would be

An example of positive analysis is studying

Total surplus in a market is equal to

Which of the following statements is correct?

Figure 7-5 -Refer to Figure 7-5. At the equilibrium price, consumer surplus is

Figure 7-19 -Refer to Figure 7-19. If the price were P3, consumer surplus would be represented by the area

The "invisible hand" refers to

Figure 7-1 -Refer to Figure 7-1. The value of the good to consumers minus the cost of the good to consumers amounts to $325 if the price of the good is

Figure 7-17 -Refer to Figure 7-17. Which area represents total surplus in the market when the price is P1?

Efficiency is attained when

Total surplus measures the

Which of the following statements is not correct?

At Nick's Bakery, the cost to make homemade chocolate cake is $3 per cake. As a result of selling three cakes, Nick experiences a producer surplus in the amount of $19.50. Nick must be selling his cakes for

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

Figure 7-18 -Refer to Figure 7-18. If 40 units of the good are being bought and sold, then

Economists typically measure efficiency using

Janine would be willing to pay $50 to see Les Misérables, but she buys a ticket for only $30. Janine values the performance at

Given the following two equations: 1) Tatal Suplus = Consumer Suplus + Produce Suplus 2) Total Surglus = Value to Buyers - Cost to Sellers Show how equation (1) can be used to derive equation (2).

Suppose Lauren, Leslie and Lydia all purchase bulletin boards for their rooms for $15 each. Lauren's willingness to pay was $35, Leslie's willingness to pay was $25, and Lydia's willingness to pay was $30. Total consumer surplus for these three would be

An example of positive analysis is studying

Total surplus in a market is equal to

Which of the following statements is correct?

Figure 7-5 -Refer to Figure 7-5. At the equilibrium price, consumer surplus is

Figure 7-19 -Refer to Figure 7-19. If the price were P3, consumer surplus would be represented by the area

The "invisible hand" refers to

Figure 7-1 -Refer to Figure 7-1. The value of the good to consumers minus the cost of the good to consumers amounts to $325 if the price of the good is

Figure 7-17 -Refer to Figure 7-17. Which area represents total surplus in the market when the price is P1?

Efficiency is attained when

Total surplus measures the

Which of the following statements is not correct?

At Nick's Bakery, the cost to make homemade chocolate cake is $3 per cake. As a result of selling three cakes, Nick experiences a producer surplus in the amount of $19.50. Nick must be selling his cakes for

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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