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

Markets will always allocate resources efficiently.

Figure 7-20 -Refer to Figure 7-20. At equilibrium, total surplus is measured by the area

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

Producer surplus is the amount a seller is paid minus the cost of production.

If the cost of producing sofas decreases, then consumer surplus in the sofa market will

Raisin bran and milk are complements. An increase in the price of raisins will

All else equal, a decrease in demand will cause an increase in producer surplus.

Suppose that Firms A and B each produce high-resolution computer monitors, but Firm A can do so at a lower cost. Cassie and David each want to purchase a high-resolution computer monitor, but David is willing to pay more than Cassie. If Firm A produces a monitor that Cassie buys but David does not, then the market outcome illustrates which of the following principles? (i) Free markets allocate the supply of goods to the buyers who value them most highly, as measured by their willingness to pay.(ii) Free markets allocate the demand for goods to the sellers who can produce them at the least cost.

A buyer is willing to buy a product at a price greater than or equal to his willingness to pay, but would refuse to buy a product at a price less than his willingness to pay.

Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

Figure 7-11 -Refer to Figure 7-11. At the equilibrium price, producer surplus is

Many economists believe that restrictions against ticket scalping result in each of the following except

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. Buyer Willingnes to Pay Jenrifer \ 10 Bryce \ 15 Dan \ 20 David \ 25 Ker \ 50 Lisa \ 60 -Refer to Table 7-4. If you have two (essentially) identical tickets that you sell to the group in an auction, what will be the selling price for each ticket?

Chad is willing to pay $5.00 to get his first cup of morning latté; he is willing to pay $4.50 for a second cup. He buys his first cup from a vendor selling latté for $3.75 per cup. He returns to that vendor later in the morning to find that the vendor has increased her price to $3.90 per cup. Chad buys a second cup. Which of the following statements is correct?

Table 7-1 Buger Willingnits Ta Raz Lari \ 50.00 Audrey \ 30.00 Zach \ 20.00 Calvin \ 10.00 -Refer to Table 7-1. If the price of the product is $18, then the total consumer surplus is

Figure 7-2 -Refer to Figure 7-2. When the price is P1, consumer surplus is

Figure 7-6 -Refer to Figure 7-6. What happens to the consumer surplus if the price rises from $100 to $150?

Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts?

Ivana produces cookies. Her production cost is $6 per dozen. She sells the cookies for $8 per dozen. Her producer surplus per dozen cookies is

Total surplus in a market will increase when the government