Question 1

If an allocation of resources is efficient, then

Accepted Answer

A) consumer surplus is maximized. 
B) producer surplus is maximized. 
C) all potential gains from trade among buyers are sellers are being realized. 
D) the allocation achieves equality as well. 
A) consumer surplus is maximized. 
B) producer surplus is maximized. 
C) all potential gains from trade among buyers are sellers are being realized. 
D) the allocation achieves equality as well.

Question 2

Table 7-6
 $$\begin{array} { | l | c } 
\hline \text { Buygr } & \text { Willingrins to Pay } \
\hline \text { Michad } & \$ 500 \
\hline \text { Farvin } & \$ 400 \
\hline \text { Larry } & \$ 350 \
\hline \text { Charles } & \$ 300 \
\hline
\end{array}$$
-Refer to Table 7-6. You have an extra ticket to the Midwest Regional Sweet 16 game in the men's NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You hold an auction to sell the ticket. Michael bids $410 for the ticket, and you sell him the ticket. What is his consumer surplus?

Accepted Answer

A) $410 
B) $90 
C) $10 
D) $0 
A) $410 
B) $90 
C) $10 
D) $0

Question 3

Caroline sharpens knives in her spare time for extra income. Buyers of her service are willing to pay $2.95 per knife for as many knives as Caroline is willing to sharpen. On a particular day, she is willing to sharpen the first knife for $2.00, the second knife for $2.25, the third knife for $2.75, and the fourth knife for $3.50. Assume Caroline is rational in deciding how many knives to sharpen. Her producer surplus is

Accepted Answer

A) $0.95. 
B) $1.15. 
C) $1.30. 
D) $1.85. 
A) $0.95. 
B) $1.15. 
C) $1.30. 
D) $1.85.

Question 4

Welfare economics is the study of

Accepted Answer

A) taxes and subsidies. 
B) how technology is best put to use in the production of goods and services. 
C) government welfare programs for needy people. 
D) how the allocation of resources affects economic well-being. 
A) taxes and subsidies. 
B) how technology is best put to use in the production of goods and services. 
C) government welfare programs for needy people. 
D) how the allocation of resources affects economic well-being.

Question 5

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it

Accepted Answer

A) maximizes costs of the seller. 
B) maximizes tax revenue for the government. 
C) maximizes the combined welfare of buyers and sellers. 
D) minimizes the expenditure of buyers. 
A) maximizes costs of the seller. 
B) maximizes tax revenue for the government. 
C) maximizes the combined welfare of buyers and sellers. 
D) minimizes the expenditure of buyers.

Question 6

Market power refers to the

Accepted Answer

A) side effects that may occur in a market. 
B) government regulations imposed on the sellers in a market. 
C) ability of market participants to influence price. 
D) forces of supply and demand in determining equilibrium price. 
A) side effects that may occur in a market. 
B) government regulations imposed on the sellers in a market. 
C) ability of market participants to influence price. 
D) forces of supply and demand in determining equilibrium price.

Question 7

On a graph, consumer surplus is represented by the area

Accepted Answer

A) between the demand and supply curves. 
B) below the demand curve and above price. 
C) below the price and above the supply curve. 
D) below the demand curve and to the right of equilibrium price. 
A) between the demand and supply curves. 
B) below the demand curve and above price. 
C) below the price and above the supply curve. 
D) below the demand curve and to the right of equilibrium price.

Question 8

Figure 7-18  
-Refer to Figure 7-18. Assume demand increases and as a result, equilibrium price increases to $22 and equilibrium quantity increases to 110. The increase in producer surplus due to new producers entering the market would be

Accepted Answer

A) $90. 
B) $210. 
C) $360. 
D) $480. 
A) $90. 
B) $210. 
C) $360. 
D) $480.

Question 9

If the government imposes a binding price ceiling in a market, then the producer surplus in that market will increase.

Accepted Answer

A) True 
 B)False

Question 10

Suppose consumer income increases. If grass seed is a normal good, the equilibrium price of grass seed will

Accepted Answer

A) decrease, and producer surplus in the industry will decrease. 
B) increase, and producer surplus in the industry will increase. 
C) decrease, and producer surplus in the industry will increase. 
D) increase, and producer surplus in the industry will decrease. 
A) decrease, and producer surplus in the industry will decrease. 
B) increase, and producer surplus in the industry will increase. 
C) decrease, and producer surplus in the industry will increase. 
D) increase, and producer surplus in the industry will decrease.

Question 11

When demand increases so that market price increases, producer surplus increases because (1) producer surplus received by existing sellers increases, and (2) new sellers enter the market.

Accepted Answer

A) True 
 B)False

Question 12

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. If the price is $4 but only 6 units are bought and sold, consumer surplus will be

Accepted Answer

A) $21. 
B) $28. 
C) $36. 
D) $42. 
A) $21. 
B) $28. 
C) $36. 
D) $42.

Question 13

Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market

Accepted Answer

A) decreases. 
B) is unchanged. 
C) increases. 
D) may increase, decrease, or remain unchanged. 
A) decreases. 
B) is unchanged. 
C) increases. 
D) may increase, decrease, or remain unchanged.

Question 14

Dawn's bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit of the lower prices to

Accepted Answer

A) only existing customers who now get lower prices on the gowns they were already planning to purchase. 
B) only new customers who enter the market because of the lower prices. 
C) both existing customers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices. 
D) Consumer surplus does not increase; it decreases. 
A) only existing customers who now get lower prices on the gowns they were already planning to purchase. 
B) only new customers who enter the market because of the lower prices. 
C) both existing customers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices. 
D) Consumer surplus does not increase; it decreases.

Question 15

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, who will buy the ticket?

Accepted Answer

A) Dan 
B) David 
C) Ken 
D) Lisa 
A) Dan 
B) David 
C) Ken 
D) Lisa

Question 16

Which of the following statements is not correct?

Accepted Answer

A) A seller would be eager to sell her product at a price higher than her cost. 
B) A seller would refuse to sell her product at a price lower than her cost. 
C) A seller would be indifferent about selling her product at a price equal to her cost. 
D) Since sellers cannot set the price for their product, they must be willing to sell their product at any price. 
A) A seller would be eager to sell her product at a price higher than her cost. 
B) A seller would refuse to sell her product at a price lower than her cost. 
C) A seller would be indifferent about selling her product at a price equal to her cost. 
D) Since sellers cannot set the price for their product, they must be willing to sell their product at any price.

Question 17

Table 7-2
This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. $$\begin{array} { | l | l | } 
\hline \text { Buyer } & \text { Willinenes Ta Raz } \
\hline \text { David } & \$ 8.50 \
\hline \text { Laura } & \$ 7.00 \
\hline \text { Mepan } & \$ 5.50 \
\hline \text { Mallary } & \$ 4.00 \
\hline \text { Audrey } & \$ 3.50 \
\hline
\end{array}$$
-Refer to Table 7-2. Which of the following is not true?

Accepted Answer

A) At a price of $9.00, no buyer is willing to purchase Vanilla Coke. 
B) At a price of $5.50, Megan is indifferent between buying a case of Vanilla Coke and not buying one. 
C) At a price of $4.00, total consumer surplus in the market will be $9.00. 
D) All of the above are correct. 
A) At a price of $9.00, no buyer is willing to purchase Vanilla Coke. 
B) At a price of $5.50, Megan is indifferent between buying a case of Vanilla Coke and not buying one. 
C) At a price of $4.00, total consumer surplus in the market will be $9.00. 
D) All of the above are correct.

Question 18

Producer surplus is the

Accepted Answer

A) area under the supply curve to the left of the amount sold. 
B) amount a seller is paid minus the cost of production. 
C) area between the supply and demand curves, above the equilibrium price. 
D) cost to sellers of participating in a market. 
A) area under the supply curve to the left of the amount sold. 
B) amount a seller is paid minus the cost of production. 
C) area between the supply and demand curves, above the equilibrium price. 
D) cost to sellers of participating in a market.

Question 19

Cost is a measure of the

Accepted Answer

A) seller's willingness to sell. 
B) seller's producer surplus. 
C) producer shortage. 
D) seller's willingness to buy. 
A) seller's willingness to sell. 
B) seller's producer surplus. 
C) producer shortage. 
D) seller's willingness to buy.

Question 20

Figure 7-7  
-Refer to Figure 7-7. If the price of the good is $9.50, then producer surplus is

Accepted Answer

A) $2.50. 
B) $6.50. 
C) $8.00. 
D) $10.00. 
A) $2.50. 
B) $6.50. 
C) $8.00. 
D) $10.00.

If an allocation of resources is efficient, then

Welfare economics is the study of

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it

Market power refers to the

On a graph, consumer surplus is represented by the area

Figure 7-18 -Refer to Figure 7-18. Assume demand increases and as a result, equilibrium price increases to $22 and equilibrium quantity increases to 110. The increase in producer surplus due to new producers entering the market would be

If the government imposes a binding price ceiling in a market, then the producer surplus in that market will increase.

Suppose consumer income increases. If grass seed is a normal good, the equilibrium price of grass seed will

When demand increases so that market price increases, producer surplus increases because (1) producer surplus received by existing sellers increases, and (2) new sellers enter the market.

Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market

Dawn's bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit of the lower prices to

Which of the following statements is not correct?

Table 7-2 This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. Buyer Willinenes Ta Raz David \ 8.50 Laura \ 7.00 Mepan \ 5.50 Mallary \ 4.00 Audrey \ 3.50 -Refer to Table 7-2. Which of the following is not true?

Producer surplus is the

Cost is a measure of the

Figure 7-7 -Refer to Figure 7-7. If the price of the good is $9.50, then producer surplus 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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Exam 7: Consumers, Producers, and the Efficiency of Markets

If an allocation of resources is efficient, then

Welfare economics is the study of

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it

Market power refers to the

On a graph, consumer surplus is represented by the area

Figure 7-18 -Refer to Figure 7-18. Assume demand increases and as a result, equilibrium price increases to $22 and equilibrium quantity increases to 110. The increase in producer surplus due to new producers entering the market would be

If the government imposes a binding price ceiling in a market, then the producer surplus in that market will increase.

Suppose consumer income increases. If grass seed is a normal good, the equilibrium price of grass seed will

When demand increases so that market price increases, producer surplus increases because (1) producer surplus received by existing sellers increases, and (2) new sellers enter the market.

Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market

Dawn's bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit of the lower prices to

Which of the following statements is not correct?

Table 7-2 This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. Buyer Willinenes Ta Raz David \ 8.50 Laura \ 7.00 Mepan \ 5.50 Mallary \ 4.00 Audrey \ 3.50 -Refer to Table 7-2. Which of the following is not true?

Producer surplus is the

Cost is a measure of the

Figure 7-7 -Refer to Figure 7-7. If the price of the good is $9.50, then producer surplus 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

Filters