Question 1

Figure 7-18  
-Refer to Figure 7-18.If the government mandated a price increase from P1 to a higher price,then

Accepted Answer

A)  total surplus would decrease. 
B)  consumer surplus would increase. 
C)  total surplus would increase,since producer surplus would increase. 
D)  total surplus would remain unchanged. 
A)  total surplus would decrease. 
B)  consumer surplus would increase. 
C)  total surplus would increase,since producer surplus would increase. 
D)  total surplus would remain unchanged.

Question 2

Answer each of the following questions about supply and producer surplus.
a.
What is producer surplus,and how is it measured?
b.
What is the relationship between the cost to sellers and the supply curve?
c.
Other things equal,what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve.

Accepted Answer

a.
Producer surplus measures the benefit

Question 3

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 4

When there is a technological advance in the ice cream industry,consumer surplus in that market will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  not change,since technology affects producers and not consumers. 
D)  not change,since consumers' willingness to pay is unaffected by the technological advance. 
A)  increase. 
B)  decrease. 
C)  not change,since technology affects producers and not consumers. 
D)  not change,since consumers' willingness to pay is unaffected by the technological advance.

Question 5

Table 7-7
The only four producers in a market have the following cost:
  
-Refer to Table 7-7.If the sellers bid against each other for the right to sell the good to a consumer,then the good will sell for

Accepted Answer

A)  $50 or slightly more. 
B)  $100 or slightly less. 
C)  $150 or slightly less. 
D)  $200 or slightly more. 
A)  $50 or slightly more. 
B)  $100 or slightly less. 
C)  $150 or slightly less. 
D)  $200 or slightly more.

Question 6

The decisions of buyers and sellers that affect people who are not participants in the market create

Accepted Answer

A)  market power. 
B)  externalities. 
C)  profiteering. 
D)  market equilibrium. 
A)  market power. 
B)  externalities. 
C)  profiteering. 
D)  market equilibrium.

Question 7

Producer surplus measures the

Accepted Answer

A)  benefits to sellers of participating in a market. 
B)  costs to sellers of participating in a market. 
C)  price that buyers are willing to pay for sellers' output of a good or service. 
D)  benefit to sellers of producing a greater quantity of a good or service than buyers demand. 
A)  benefits to sellers of participating in a market. 
B)  costs to sellers of participating in a market. 
C)  price that buyers are willing to pay for sellers' output of a good or service. 
D)  benefit to sellers of producing a greater quantity of a good or service than buyers demand.

Question 8

Suppose Lauren,Leslie and Lydia all purchase bulletin boards for their rooms for $15 each.Lauren's willingness to pay was $35,Leslie's willingness to pay was $25,and Lydia's willingness to pay was $30.Total consumer surplus for these three would be

Accepted Answer

A)  $15. 
B)  $30. 
C)  $45. 
D)  $90. 
A)  $15. 
B)  $30. 
C)  $45. 
D)  $90.

Question 9

If the government allowed a free market for transplant organs such as kidneys to exist,critics argue that such a market would

Accepted Answer

A)  not reduce the shortage of organs. 
B)  benefit rich people but not poor people. 
C)  be inefficient because markets are not good at allocating scarce resources. 
D)  be inferior to a plan imposed by a benevolent dictator. 
A)  not reduce the shortage of organs. 
B)  benefit rich people but not poor people. 
C)  be inefficient because markets are not good at allocating scarce resources. 
D)  be inferior to a plan imposed by a benevolent dictator.

Question 10

The maximum price that a buyer will pay for a good is called the

Accepted Answer

A)  cost. 
B)  willingness to pay. 
C)  equity. 
D)  efficiency. 
A)  cost. 
B)  willingness to pay. 
C)  equity. 
D)  efficiency.

Question 11

Suppose there is an increase in supply that reduces market price.Consumer surplus increases because (1)consumer surplus received by existing buyers increases and (2)new buyers enter the market.

Accepted Answer

A) True 
 B)False

Question 12

At any quantity,the price given by the supply curve shows the cost of the lowest-cost seller.

Accepted Answer

A) True 
 B)False

Question 13

Figure 7-9  
-Refer to Figure 7-9.If the equilibrium price rises from $50 to $200,what is the additional producer surplus to initial producers?

Accepted Answer

A)  $625 
B)  $3,750 
C)  $5,625 
D)  $10,000 
A)  $625 
B)  $3,750 
C)  $5,625 
D)  $10,000

Question 14

Figure 7-2  
-Refer to Figure 7-2.Which area represents the increase in consumer surplus when the price falls from P1 to P2?

Accepted Answer

A)  ABD 
B)  ACG 
C)  DFG 
D)  BCGD 
A)  ABD 
B)  ACG 
C)  DFG 
D)  BCGD

Question 15

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 16

Brock is willing to pay $400 for a new suit,but he is able to buy the suit for $350.His consumer surplus is

Accepted Answer

A)  $50. 
B)  $150. 
C)  $350. 
D)  $400. 
A)  $50. 
B)  $150. 
C)  $350. 
D)  $400.

Question 17

Figure 7-6  
-Refer to Figure 7-6.If the price of the good is $14,then producer surplus is

Accepted Answer

A)  $17. 
B)  $22. 
C)  $25. 
D)  $28. 
A)  $17. 
B)  $22. 
C)  $25. 
D)  $28.

Question 18

Total surplus = Value to buyers - Costs to sellers.

Accepted Answer

A) True 
 B)False

Question 19

Table 7-8
The numbers reveal the opportunity costs of providing 10 piano lessons of equal quality.
  
-Refer to Table 7-8.You wish to purchase 10 piano lessons for yourself and for your brother,so you take bids from each of the sellers.You will take lessons at the same time,so one teacher cannot provide lessons to both of you.You must pay the same price for both sets of lessons,and you will not accept a bid below a seller's cost because you are concerned that the seller will not provide all 10 lessons.What bid will you accept?

Accepted Answer

A)  $351 
B)  $349 
C)  $201 
D)  $199 
A)  $351 
B)  $349 
C)  $201 
D)  $199

Question 20

Figure 7-5  
-Refer to Figure 7-5.What happens to the consumer surplus if the price rises from $100 to $150?

Accepted Answer

A)  The new consumer surplus is half of the original consumer surplus. 
B)  The new consumer surplus is 25 percent of the original consumer surplus. 
C)  The new consumer surplus is double the original consumer surplus. 
D)  The new consumer surplus is triple the original consumer surplus. 
A)  The new consumer surplus is half of the original consumer surplus. 
B)  The new consumer surplus is 25 percent of the original consumer surplus. 
C)  The new consumer surplus is double the original consumer surplus. 
D)  The new consumer surplus is triple the original consumer surplus.

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

Figure 7-18 -Refer to Figure 7-18.If the government mandated a price increase from P1 to a higher price,then

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 there is a technological advance in the ice cream industry,consumer surplus in that market will

Table 7-7 The only four producers in a market have the following cost: -Refer to Table 7-7.If the sellers bid against each other for the right to sell the good to a consumer,then the good will sell for

The decisions of buyers and sellers that affect people who are not participants in the market create

Producer surplus measures the

Suppose Lauren,Leslie and Lydia all purchase bulletin boards for their rooms for $15 each.Lauren's willingness to pay was $35,Leslie's willingness to pay was $25,and Lydia's willingness to pay was $30.Total consumer surplus for these three would be

If the government allowed a free market for transplant organs such as kidneys to exist,critics argue that such a market would

The maximum price that a buyer will pay for a good is called the

Suppose there is an increase in supply that reduces market price.Consumer surplus increases because (1)consumer surplus received by existing buyers increases and (2)new buyers enter the market.

At any quantity,the price given by the supply curve shows the cost of the lowest-cost seller.

Figure 7-9 -Refer to Figure 7-9.If the equilibrium price rises from $50 to $200,what is the additional producer surplus to initial producers?

Figure 7-2 -Refer to Figure 7-2.Which area represents the increase in consumer surplus when the price falls from P1 to P2?

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

Brock is willing to pay $400 for a new suit,but he is able to buy the suit for $350.His consumer surplus is

Figure 7-6 -Refer to Figure 7-6.If the price of the good is $14,then producer surplus is

Total surplus = Value to buyers - Costs to sellers.

Figure 7-5 -Refer to Figure 7-5.What happens to the consumer surplus if the price rises from $100 to $150?

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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality 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 Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

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

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