Question 1

An example of normative analysis is studying

Accepted Answer

A) how market forces produce equilibrium. 
B) surpluses and shortages. 
C) whether equilibrium outcomes are socially desirable. 
D) income distributions. 
A) how market forces produce equilibrium. 
B) surpluses and shortages. 
C) whether equilibrium outcomes are socially desirable. 
D) income distributions.

Question 2

Which of the following will cause a decrease in producer surplus?

Accepted Answer

A) the imposition of a nonbinding price ceiling in the market 
B) buyers expect the price of a good to be higher next month 
C) the price of a substitute increases 
D) income increases and buyers consider the good to be inferior 
A) the imposition of a nonbinding price ceiling in the market 
B) buyers expect the price of a good to be higher next month 
C) the price of a substitute increases 
D) income increases and buyers consider the good to be inferior

Question 3

A seller's willingness to sell is

Accepted Answer

A) measured by the seller's cost of production. 
B) related to her supply curve, just as a buyer's willingness to buy is related to his demand curve. 
C) less than the price received if producer surplus is a positive number. 
D) All of the above are correct. 
A) measured by the seller's cost of production. 
B) related to her supply curve, just as a buyer's willingness to buy is related to his demand curve. 
C) less than the price received if producer surplus is a positive number. 
D) All of the above are correct.

Question 4

ABC Company incurs a cost of 50 cents to produce a dozen eggs, while XYZ Company incurs a cost of 70 cents to produce a dozen eggs. Which of the following price increases would cause both companies to experience an increase in producer surplus?

Accepted Answer

A) The price of a dozen eggs increases from 40 cents to 55 cents. 
B) The price of a dozen eggs increases from 55 cents to 70 cents. 
C) The price of a dozen eggs increases from 55 cents to 75 cents. 
D) All of these price increases would cause both companies to experience a loss in producer surplus. 
A) The price of a dozen eggs increases from 40 cents to 55 cents. 
B) The price of a dozen eggs increases from 55 cents to 70 cents. 
C) The price of a dozen eggs increases from 55 cents to 75 cents. 
D) All of these price increases would cause both companies to experience a loss in producer surplus.

Question 5

Producer surplus equals

Accepted Answer

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

Question 6

A demand curve reflects each of the following except the

Accepted Answer

A) willingness to pay of all buyers in the market. 
B) value each buyer in the market places on the good. 
C) highest price buyers are willing to pay for each quantity. 
D) ability of buyers to obtain the quantity they desire. 
A) willingness to pay of all buyers in the market. 
B) value each buyer in the market places on the good. 
C) highest price buyers are willing to pay for each quantity. 
D) ability of buyers to obtain the quantity they desire.

Question 7

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 want to hire a professional photographer to take pictures of your family. The table shows the costs of the four potential sellers in the local photography market. You hire Kevin for a price of $500. What is his producer surplus?

Accepted Answer

A) $500 
B) $150 
C) $100 
D) $50 
A) $500 
B) $150 
C) $100 
D) $50

Question 8

Figure 7-7  
-Refer to Figure 7-7. If producer surplus is $14, then the price of the good is

Accepted Answer

A) $11.00. 
B) $12.00. 
C) $13.50. 
D) $14.75. 
A) $11.00. 
B) $12.00. 
C) $13.50. 
D) $14.75.

Question 9

If Gina sells a shirt for $40, and her producer surplus from the sale is $32, her cost must have been

Accepted Answer

A) $72. 
B) $32. 
C) $8. 
D) We would have to know the consumer surplus in order to make this determination. 
A) $72. 
B) $32. 
C) $8. 
D) We would have to know the consumer surplus in order to make this determination.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

If a market is allowed to move freely to its equilibrium price and quantity, then an increase in supply will

Accepted Answer

A) increase consumer surplus. 
B) reduce consumer surplus. 
C) not affect consumer surplus. 
D) Any of the above are possible. 
A) increase consumer surplus. 
B) reduce consumer surplus. 
C) not affect consumer surplus. 
D) Any of the above are possible.

Question 12

Figure 7-15  
-Refer to Figure 7-15. If the government imposes a price floor of $60 in this market, then total surplus will be

Accepted Answer

A) $110.50. 
B) $125.00. 
C) $187.50. 
D) $225.25.. 
A) $110.50. 
B) $125.00. 
C) $187.50. 
D) $225.25..

Question 13

Producer surplus is

Accepted Answer

A) measured using the demand curve for a good. 
B) always a negative number for sellers in a competitive market. 
C) the amount a seller is paid minus the cost of production. 
D) the opportunity cost of production minus the cost of producing goods that go unsold. 
A) measured using the demand curve for a good. 
B) always a negative number for sellers in a competitive market. 
C) the amount a seller is paid minus the cost of production. 
D) the opportunity cost of production minus the cost of producing goods that go unsold.

Question 14

If the current allocation of resources in the market for hammers is inefficient, then it must be the case that

Accepted Answer

A) producer surplus exceeds consumer surplus in the market for hammers. 
B) consumer surplus exceeds producer surplus in the market for hammers. 
C) the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources. 
D) the costs that sellers of hammers are incurring could be reduced by moving to a different allocation of resources. 
A) producer surplus exceeds consumer surplus in the market for hammers. 
B) consumer surplus exceeds producer surplus in the market for hammers. 
C) the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources. 
D) the costs that sellers of hammers are incurring could be reduced by moving to a different allocation of resources.

Question 15

If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the

Accepted Answer

A) consumer has consumer surplus of $2 if he or she buys the good. 
B) consumer does not purchase the good. 
C) market is not a competitive market. 
D) price of the good will fall due to market forces. 
A) consumer has consumer surplus of $2 if he or she buys the good. 
B) consumer does not purchase the good. 
C) market is not a competitive market. 
D) price of the good will fall due to market forces.

Question 16

Figure 7-23  
-Refer to Figure 7-23. Which of the following statements is correct?

Accepted Answer

A) The market is in equilibrium at Q1. 
B) At Q2, the cost to sellers exceeds the value to buyers. 
C) At Q4, the value to buyers is less than the cost to sellers. 
D) At Q3, the market is producing too much output. 
A) The market is in equilibrium at Q1. 
B) At Q2, the cost to sellers exceeds the value to buyers. 
C) At Q4, the value to buyers is less than the cost to sellers. 
D) At Q3, the market is producing too much output.

Question 17

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is

Accepted Answer

A) zero. 
B) negative, and the consumer would not purchase the product. 
C) positive, and the consumer would purchase the product. 
D) There is not enough information given to answer this question. 
A) zero. 
B) negative, and the consumer would not purchase the product. 
C) positive, and the consumer would purchase the product. 
D) There is not enough information given to answer this question.

Question 18

If the government allowed a free market in organs for transplant there would be

Accepted Answer

A) a decrease in the shortage of organs for transplant. 
B) a decrease in producer surplus. 
C) an decrease in consumer surplus 
D) an increase in the waiting period for transplant organs. 
A) a decrease in the shortage of organs for transplant. 
B) a decrease in producer surplus. 
C) an decrease in consumer surplus 
D) an increase in the waiting period for transplant organs.

Question 19

If a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will

Accepted Answer

A) increase producer surplus. 
B) reduce producer surplus. 
C) not affect producer surplus. 
D) Any of the above are possible. 
A) increase producer surplus. 
B) reduce producer surplus. 
C) not affect producer surplus. 
D) Any of the above are possible.

Question 20

Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called

Accepted Answer

A) deadweight loss. 
B) willingness to pay. 
C) consumer surplus. 
D) producer surplus. 
A) deadweight loss. 
B) willingness to pay. 
C) consumer surplus. 
D) producer surplus.

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

An example of normative analysis is studying

Which of the following will cause a decrease in producer surplus?

A seller's willingness to sell is

ABC Company incurs a cost of 50 cents to produce a dozen eggs, while XYZ Company incurs a cost of 70 cents to produce a dozen eggs. Which of the following price increases would cause both companies to experience an increase in producer surplus?

Producer surplus equals

A demand curve reflects each of the following except the

Figure 7-7 -Refer to Figure 7-7. If producer surplus is $14, then the price of the good is

If Gina sells a shirt for $40, and her producer surplus from the sale is $32, her cost must have been

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

If a market is allowed to move freely to its equilibrium price and quantity, then an increase in supply will

Figure 7-15 -Refer to Figure 7-15. If the government imposes a price floor of $60 in this market, then total surplus will be

Producer surplus is

If the current allocation of resources in the market for hammers is inefficient, then it must be the case that

If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the

Figure 7-23 -Refer to Figure 7-23. Which of the following statements is correct?

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is

If the government allowed a free market in organs for transplant there would be

If a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will

Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called

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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