Question 1

Figure 7-9  
-Refer to Figure 7-9. If the demand curve is D and the supply curve shifts from S' to S, what is the change in producer surplus?

Accepted Answer

A) Producer surplus increases by $625. 
B) Producer surplus increases by $1,875. 
C) Producer surplus decreases by $625. 
D) Producer surplus decreases by $1,875. 
A) Producer surplus increases by $625. 
B) Producer surplus increases by $1,875. 
C) Producer surplus decreases by $625. 
D) Producer surplus decreases by $1,875.

Question 2

Tammy loves donuts. The table shown reflects the value Tammy places on each donut she eats:
$$\begin{array} { | l | l | } 
\hline \text { Value of first donut } & \$ 0.60 \
\hline \text { Value of second donut } & \$ 0.50 \
\hline \text { Value of third donut } & \$ 0.40 \
\hline \text { Value of fourth donut } & \$ 0.30 \
\hline \text { Value of fifth donut } & \$ 0.20 \
\hline \text { Value of sixth donut } & \$ 0.10 \
\hline
\end{array}$$
a.Use this information to construct Tammy's demand curve for donuts.
b.If the price of donuts is $0.20, how many donuts will Tammy buy?
c.Show Tammy's consumer surplus on your graph. How much consumer surplus would she have at a price of $0.20?
d.If the price of donuts rose to $0.40, how many donuts would she purchase now? What would happen to Tammy's consumer surplus? Show this change on your graph.

Accepted Answer

a.
@#IMG-DLM&b.At a price of $0.20, Tammy would bu

Question 3

Figure 7-18  
-Refer to Figure 7-18. If 110 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 is 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 is greater than consumer surplus.

Question 4

Even though participants in the economy are motivated by self-interest, the "invisible hand" of the marketplace guides this self-interest into promoting general economic well-being.

Accepted Answer

A) True 
 B)False

Question 5

Figure 7-16  
-Refer to Figure 7-16. For quantities greater than M, the value to the marginal buyer is

Accepted Answer

A) greater than the cost to the marginal seller, so increasing the quantity increases total surplus. 
B) less than the cost to the marginal seller, so increasing the quantity increases total surplus. 
C) greater than the cost to the marginal seller, so decreasing the quantity increases total surplus. 
D) less than the cost to the marginal seller, so decreasing the quantity increases total surplus. 
A) greater than the cost to the marginal seller, so increasing the quantity increases total surplus. 
B) less than the cost to the marginal seller, so increasing the quantity increases total surplus. 
C) greater than the cost to the marginal seller, so decreasing the quantity increases total surplus. 
D) less than the cost to the marginal seller, so decreasing the quantity increases total surplus.

Question 6

Figure 7-17  
-Refer to Figure 7-17. When the price is P1, area A represents

Accepted Answer

A) total benefit. 
B) producer surplus. 
C) consumer surplus. 
D) None of the above is correct. 
A) total benefit. 
B) producer surplus. 
C) consumer surplus. 
D) None of the above is correct.

Question 7

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is

Accepted Answer

A) $175. 
B) $575. 
C) $750. 
D) $1,325. 
A) $175. 
B) $575. 
C) $750. 
D) $1,325.

Question 8

Consumer surplus can be measured as the area between the demand curve and the supply curve.

Accepted Answer

A) True 
 B)False

Question 9

The willingness to pay is the maximum amount that a buyer will pay for a good and measures how much the buyer values the good.

Accepted Answer

A) True 
 B)False

Question 10

When a buyer's willingness to pay for a good is equal to the price of the good, the

Accepted Answer

A) buyer's consumer surplus for that good is maximized. 
B) buyer will buy as much of the good as the buyer's budget allows. 
C) price of the good exceeds the value that the buyer places on the good. 
D) buyer is indifferent between buying the good and not buying it. 
A) buyer's consumer surplus for that good is maximized. 
B) buyer will buy as much of the good as the buyer's budget allows. 
C) price of the good exceeds the value that the buyer places on the good. 
D) buyer is indifferent between buying the good and not buying it.

Question 11

Which of the following is correct?

Accepted Answer

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

Question 12

Table 7-9
The numbers reveal the opportunity costs of providing 10 piano lessons of equal quality. $$\begin{array} { | c | c | } 
\hline \text { Sallar } & \text { Cast } \
\hline \text { Marcia } & \$ 200 \
\hline \text { Jan } & \$ 250 \
\hline \text { Cindy } & \$ 350 \
\hline \text { Grea } & \$ 400 \
\hline \text { Peter } & \$ 700 \
\hline \text { Babby } & \$ 800 \
\hline
\end{array}$$
-Refer to Table 7-9. You wish to purchase 10 piano lessons, so you take bids from each of the sellers. The bids are required to be rounded to the nearest dollar. You will not accept a bid below a seller's cost because you are concerned that the seller will not provide all 10 lessons. Your parents have given you $450 to spend on piano lessons. You believe that the sellers with higher opportunity costs offer higher quality lessons. You want the highest quality lessons that you can afford, but you can spend any remaining money on dinner with friends. From whom will you take lessons, and how much money will you spend?

Accepted Answer

A) Peter; $450 
B) Cindy; $450 
C) Greg; $401 
D) Cindy; $401 
A) Peter; $450 
B) Cindy; $450 
C) Greg; $401 
D) Cindy; $401

Question 13

Alex is willing to pay $10, and Bella is willing to pay $8, for 1 pound of ribeye steak. When the price of ribeye steak increases from $9 to $11,

Accepted Answer

A) Alex experiences a decrease in consumer surplus, but Bella does not. 
B) Bella experiences a decrease in consumer surplus, but Alex does not. 
C) both Bella and Alex experience a decrease in consumer surplus. 
D) neither Bella nor Alex experiences a decrease in consumer surplus. 
A) Alex experiences a decrease in consumer surplus, but Bella does not. 
B) Bella experiences a decrease in consumer surplus, but Alex does not. 
C) both Bella and Alex experience a decrease in consumer surplus. 
D) neither Bella nor Alex experiences a decrease in consumer surplus.

Question 14

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

Accepted Answer

A) $187.50. 
B) $212.50. 
C) $250.00. 
D) $266.67. 
A) $187.50. 
B) $212.50. 
C) $250.00. 
D) $266.67.

Question 15

Figure 7-22  
-Refer to Figure 7-22. At the quantity Q2, the marginal value to buyers

Accepted Answer

A) and the marginal cost to sellers are both P2. 
B) is P2, and the marginal cost to sellers is P3. 
C) and the marginal cost to sellers are both P3. 
D) is P3, and the marginal cost to sellers is P2. 
A) and the marginal cost to sellers are both P2. 
B) is P2, and the marginal cost to sellers is P3. 
C) and the marginal cost to sellers are both P3. 
D) is P3, and the marginal cost to sellers is P2.

Question 16

The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate

Accepted Answer

A) increases, and producer surplus increases. 
B) increases, and producer surplus decreases. 
C) decreases, and producer surplus increases. 
D) decreases, and producer surplus decreases. 
A) increases, and producer surplus increases. 
B) increases, and producer surplus decreases. 
C) decreases, and producer surplus increases. 
D) decreases, and producer surplus decreases.

Question 17

Figure 7-13  
-Refer to Figure 7-13. Sellers will be unwilling to sell more than

Accepted Answer

A) 1 unit of the good if its price is below $200. 
B) 2 units of the good if its price is below $450. 
C) 3 units of the good if its price is below $700. 
D) All of the above are correct. 
A) 1 unit of the good if its price is below $200. 
B) 2 units of the good if its price is below $450. 
C) 3 units of the good if its price is below $700. 
D) All of the above are correct.

Question 18

Figure 7-13  
-Refer to Figure 7-13. If the price of the good is $600, then

Accepted Answer

A) consumer surplus is $800. 
B) consumer surplus is $900. 
C) producer surplus is $900. 
D) producer surplus is $1,000. 
A) consumer surplus is $800. 
B) consumer surplus is $900. 
C) producer surplus is $900. 
D) producer surplus is $1,000.

Question 19

Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?

Accepted Answer

A) profits and costs to firms 
B) consumer and producer surplus 
C) the equilibrium price and quantity 
D) incomes of and prices paid by buyers 
A) profits and costs to firms 
B) consumer and producer surplus 
C) the equilibrium price and quantity 
D) incomes of and prices paid by buyers

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 $1,000, the producer surplus in the market is

Accepted Answer

A) $700. 
B) $750. 
C) $2,250. 
D) $3,700. 
A) $700. 
B) $750. 
C) $2,250. 
D) $3,700.

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

Figure 7-9 -Refer to Figure 7-9. If the demand curve is D and the supply curve shifts from S' to S, what is the change in producer surplus?

Figure 7-18 -Refer to Figure 7-18. If 110 units of the good are being bought and sold, then

Even though participants in the economy are motivated by self-interest, the "invisible hand" of the marketplace guides this self-interest into promoting general economic well-being.

Figure 7-16 -Refer to Figure 7-16. For quantities greater than M, the value to the marginal buyer is

Figure 7-17 -Refer to Figure 7-17. When the price is P1, area A represents

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is

Consumer surplus can be measured as the area between the demand curve and the supply curve.

The willingness to pay is the maximum amount that a buyer will pay for a good and measures how much the buyer values the good.

When a buyer's willingness to pay for a good is equal to the price of the good, the

Which of the following is correct?

Alex is willing to pay $10, and Bella is willing to pay $8, for 1 pound of ribeye steak. When the price of ribeye steak increases from $9 to $11,

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

Figure 7-22 -Refer to Figure 7-22. At the quantity Q2, the marginal value to buyers

The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate

Figure 7-13 -Refer to Figure 7-13. Sellers will be unwilling to sell more than

Figure 7-13 -Refer to Figure 7-13. If the price of the good is $600, then

Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?

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 $1,000, 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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