Question 1

The producer surplus in a market is the area above the price plus the area below the demand curve.

Accepted Answer

A) True 
 B)False

Question 2

The cost of producing digital cameras decreases. As a result, the consumer surplus associated with digital cameras:

Accepted Answer

A)  decreases 
B)  increases 
C)  doesn't change 
D)  could increase or decrease but the overall effect is ambiguous 
A)  decreases 
B)  increases 
C)  doesn't change 
D)  could increase or decrease but the overall effect is ambiguous

Question 3

The height of the demand curve measures the value buyers place on the good, as measured by their willingness to pay for it.

Accepted Answer

A) True 
 B)False

Question 4

We can say that the allocation of resources is efficient if:

Accepted Answer

A)  producer surplus is maximised 
B)  consumer surplus is maximised 
C)  total surplus is maximised 
D)  none of the above is correct 
A)  producer surplus is maximised 
B)  consumer surplus is maximised 
C)  total surplus is maximised 
D)  none of the above is correct

Question 5

Table 7-2
The costs of five possible sellers
  
-Refer to Table 7-2. If the price is $900 who will be willing to supply the product?

Accepted Answer

A)  Kyle and Nathan 
B)  Kyle, Nathan and Cheslea 
C)  Cheslea, Hillary and Landon 
D)  Hillary and Landon 
A)  Kyle and Nathan 
B)  Kyle, Nathan and Cheslea 
C)  Cheslea, Hillary and Landon 
D)  Hillary and Landon

Question 6

When markets fail, public policy can:

Accepted Answer

A)  do nothing to improve the situation 
B)  potentially remedy the problem and increase economic efficiency 
C)  always remedy the problem and increase economic efficiency 
D)  in theory, remedy the problem, but in practice, has proven to be ineffective 
A)  do nothing to improve the situation 
B)  potentially remedy the problem and increase economic efficiency 
C)  always remedy the problem and increase economic efficiency 
D)  in theory, remedy the problem, but in practice, has proven to be ineffective

Question 7

Graph 7-2
  
-Refer to Graph 7-2. At the higher price P2, consumer surplus is:

Accepted Answer

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

Question 8

The opportunity cost for a seller should only include their cash expenses on inputs.

Accepted Answer

A) True 
 B)False

Question 9

Efficiency refers to whether a market outcome is fair, while equity refers to whether the maximum amount of output was produced from a given number of inputs.

Accepted Answer

A) True 
 B)False

Question 10

Australian parrots are smuggled to overseas markets where they can command very high prices. An important innovation for smugglers was the egg vest. This meant that more parrots could be smuggled with higher survival rates and less risk of detection. If this lowered the price of black market Australian parrots, does the increase in consumer surplus necessarily represent a welfare improvement to society?

Accepted Answer

While consumers of parrots may benefit,

Question 11

Gene earns $15,000 for shooting alligators under permit in Louisiana. His producer surplus is $5,000. His willingness to sell is:

Accepted Answer

A)  0 
B)  $5000 
C)  $10 000 
D)  $15 000 
A)  0 
B)  $5000 
C)  $10 000 
D)  $15 000

Question 12

Gene buys a new medium-format camera for $20 000. He receives consumer surplus of $6000 on his purchase. Gene's willingness to pay is:

Accepted Answer

A)  $6000 
B)  $14 000 
C)  $20 000 
D)  $26 000 
A)  $6000 
B)  $14 000 
C)  $20 000 
D)  $26 000

Question 13

Each seller of a product is willing to sell as long as the price he or she can receive is greater than the opportunity cost of producing the product.

Accepted Answer

A) True 
 B)False

Question 14

Producer surplus measures the cost to sellers of participating in a market.

Accepted Answer

A) True 
 B)False

Question 15

What is the relationship between the willingness to sell and the supply curve?

Accepted Answer

Because the supply curve shows

Question 16

Table 7-2
The costs of five possible sellers
  
-Refer to Table 7-2. If the market price is $1000, the producer surplus in the market will be:

Accepted Answer

A)  $700 
B)  $750 
C)  $2250 
D)  $3700 
A)  $700 
B)  $750 
C)  $2250 
D)  $3700

Question 17

Peter owns a sawmill and produces timber for construction. He sells the timber for $300 per cubic metre. His production costs are $140 per cubic metre. His producer surplus is:

Accepted Answer

A)  $140 per cubic metre 
B)  $300 per cubic metre 
C)  $160 per cubic metre 
D)  none of the above 
A)  $140 per cubic metre 
B)  $300 per cubic metre 
C)  $160 per cubic metre 
D)  none of the above

Exam 7: Consumers, Producers and the Efficiency of Markets

The producer surplus in a market is the area above the price plus the area below the demand curve.

The cost of producing digital cameras decreases. As a result, the consumer surplus associated with digital cameras:

The height of the demand curve measures the value buyers place on the good, as measured by their willingness to pay for it.

We can say that the allocation of resources is efficient if:

Table 7-2 The costs of five possible sellers -Refer to Table 7-2. If the price is $900 who will be willing to supply the product?

When markets fail, public policy can:

Graph 7-2 -Refer to Graph 7-2. At the higher price P2, consumer surplus is:

The opportunity cost for a seller should only include their cash expenses on inputs.

Efficiency refers to whether a market outcome is fair, while equity refers to whether the maximum amount of output was produced from a given number of inputs.

Gene earns $15,000 for shooting alligators under permit in Louisiana. His producer surplus is $5,000. His willingness to sell is:

Gene buys a new medium-format camera for $20 000. He receives consumer surplus of $6000 on his purchase. Gene's willingness to pay is:

Each seller of a product is willing to sell as long as the price he or she can receive is greater than the opportunity cost of producing the product.

Producer surplus measures the cost to sellers of participating in a market.

What is the relationship between the willingness to sell and the supply curve?

Table 7-2 The costs of five possible sellers -Refer to Table 7-2. If the market price is $1000, the producer surplus in the market will be:

Peter owns a sawmill and produces timber for construction. He sells the timber for $300 per cubic metre. His production costs are $140 per cubic metre. His producer surplus is:

Ten Lessons From 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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Business Strategy

Competition Policy

Monopolistic Competition

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

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

Five Debates Over Macroeconomic Policy

Filters

Graph 7-2 -Refer to Graph 7-2. At the higher price P₂, consumer surplus is: