Question 1

Efficiency in a market is achieved when

Accepted Answer

A)  a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs. 
B)  the sum of producer surplus and consumer surplus is maximized. 
C)  all firms are producing the good at the same low cost per unit. 
D)  no buyer is willing to pay more than the equilibrium price for any unit of the good. 
A)  a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs. 
B)  the sum of producer surplus and consumer surplus is maximized. 
C)  all firms are producing the good at the same low cost per unit. 
D)  no buyer is willing to pay more than the equilibrium price for any unit of the good.

Question 2

Suppose that the equilibrium price in the market for widgets is $5.If a law increased the minimum legal price for widgets to $6,producer surplus

Accepted Answer

A)  would necessarily increase even if the higher price resulted in a surplus of widgets. 
B)  would necessarily decrease because the higher price would create a surplus of widgets. 
C)  might increase or decrease. 
D)  would be unaffected. 
A)  would necessarily increase even if the higher price resulted in a surplus of widgets. 
B)  would necessarily decrease because the higher price would create a surplus of widgets. 
C)  might increase or decrease. 
D)  would be unaffected.

Question 3

Moving production from a high-cost producer to a low-cost producer will

Accepted Answer

A)  lower total surplus. 
B)  raise total surplus. 
C)  lower producer surplus. 
D)  raise producer surplus but lower consumer surplus. 
A)  lower total surplus. 
B)  raise total surplus. 
C)  lower producer surplus. 
D)  raise producer surplus but lower consumer surplus.

Question 4

Suppose your own demand curve for tomatoes slopes downward.Suppose also that,for the last tomato you bought this week,you paid a price exactly equal to your willingness to pay.Then

Accepted Answer

A)  you should buy more tomatoes before the end of the week. 
B)  you already have bought too many tomatoes this week. 
C)  your consumer surplus on the last tomato you bought is zero. 
D)  your consumer surplus on all of the tomatoes you have bought this week is zero. 
A)  you should buy more tomatoes before the end of the week. 
B)  you already have bought too many tomatoes this week. 
C)  your consumer surplus on the last tomato you bought is zero. 
D)  your consumer surplus on all of the tomatoes you have bought this week is zero.

Question 5

Ray buys a new tractor for $118,000.He receives consumer surplus of $13,000 on his purchase.Ray's willingness to pay is

Accepted Answer

A)  $13,000. 
B)  $105,000. 
C)  $118,000. 
D)  $131,000. 
A)  $13,000. 
B)  $105,000. 
C)  $118,000. 
D)  $131,000.

Question 6

Suppose there is an early freeze in California that reduces the size of the lemon crop.What happens to consumer surplus in the market for lemons?

Accepted Answer

A)  Consumer surplus increases. 
B)  Consumer surplus decreases. 
C)  Consumer surplus is not affected by this change in market forces. 
D)  We would have to know whether the demand for lemons is elastic or inelastic to make this determination. 
A)  Consumer surplus increases. 
B)  Consumer surplus decreases. 
C)  Consumer surplus is not affected by this change in market forces. 
D)  We would have to know whether the demand for lemons is elastic or inelastic to make this determination.

Question 7

Table 7-5
For each of three potential buyers of oranges,the table displays the willingness to pay for the first three oranges of the day.Assume Alex,Barb,and Carlos are the only three buyers of oranges,and only three oranges can be supplied per day.
  
-Refer to Table 7-5.If the market price of an orange is $0.70,the market quantity of oranges demanded per day is

Accepted Answer

A)  5 
B)  6 
C)  7 
D)  9 
A)  5 
B)  6 
C)  7 
D)  9

Question 8

Jeff decides that he would pay as much as $3,000 for a new laptop computer.He buys the computer and realizes consumer surplus of $700.How much did Jeff pay for his computer?

Accepted Answer

A)  $700 
B)  $2,300 
C)  $3,000 
D)  $3,700 
A)  $700 
B)  $2,300 
C)  $3,000 
D)  $3,700

Question 9

Ronnie operates a lawn-care service.On each day,the cost of mowing the first lawn is $10,the cost of mowing the second lawn is $12,and the cost of mowing the third lawn is $15.His producer surplus on the first three lawns of the day is $53.If Ronnie charges all customers the same price for lawn mowing,that price is

Accepted Answer

A)  $25. 
B)  $30. 
C)  $36. 
D)  $45. 
A)  $25. 
B)  $30. 
C)  $36. 
D)  $45.

Question 10

The French expression used by free-market advocates,which literally translates as "allow them to do," is

Accepted Answer

A)  laissez-faire. 
B)  je ne sais pas. 
C)  si'l vous plait. 
D)  tête-à-tête. 
A)  laissez-faire. 
B)  je ne sais pas. 
C)  si'l vous plait. 
D)  tête-à-tête.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Figure 7-12  
-Refer to Figure 7-12.If the government imposes a price ceiling of $120 in this market,then total surplus will be

Accepted Answer

A)  $0. 
B)  $125. 
C)  $375. 
D)  $500. 
A)  $0. 
B)  $125. 
C)  $375. 
D)  $500.

Question 13

Figure 7-16  
-Refer to Figure 7-16.The efficient price-quantity combination is

Accepted Answer

A)  P1 and Q1. 
B)  P2 and Q2. 
C)  P3 and Q1. 
D)  P4 and 0. 
A)  P1 and Q1. 
B)  P2 and Q2. 
C)  P3 and Q1. 
D)  P4 and 0.

Question 14

Table 7-9
  
-Refer to Table 7-9.Both the demand curve and the supply curve are straight lines.At equilibrium,total surplus is

Accepted Answer

A)  $32. 
B)  $48. 
C)  $64. 
D)  $96. 
A)  $32. 
B)  $48. 
C)  $64. 
D)  $96.

Question 15

For any given quantity,the price on a demand curve represents the marginal buyer's willingness to pay.

Accepted Answer

A) True 
 B)False

Question 16

Table 7-9
  
-Refer to Table 7-9.The equilibrium price is

Accepted Answer

A)  $10.00. 
B)  $8.00. 
C)  $6.00. 
D)  $4.00. 
A)  $10.00. 
B)  $8.00. 
C)  $6.00. 
D)  $4.00.

Question 17

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 18

Figure 7-2  
-Refer to Figure 7-2.Which area represents consumer surplus at a price of P1?

Accepted Answer

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

Question 19

Producer surplus is the area

Accepted Answer

A)  under the supply curve. 
B)  between the supply and demand curves. 
C)  below the price and above the supply curve. 
D)  under the demand curve and above the price. 
A)  under the supply curve. 
B)  between the supply and demand curves. 
C)  below the price and above the supply curve. 
D)  under the demand curve and above the price.

Question 20

Figure 7-16  
-Refer to Figure 7-16.At equilibrium,producer surplus is represented by the area

Accepted Answer

A)  F. 
B)  F+G. 
C)  D+H+F. 
D)  D+H+F+G+I. 
A)  F. 
B)  F+G. 
C)  D+H+F. 
D)  D+H+F+G+I.

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

Efficiency in a market is achieved when

Suppose that the equilibrium price in the market for widgets is $5.If a law increased the minimum legal price for widgets to $6,producer surplus

Moving production from a high-cost producer to a low-cost producer will

Suppose your own demand curve for tomatoes slopes downward.Suppose also that,for the last tomato you bought this week,you paid a price exactly equal to your willingness to pay.Then

Ray buys a new tractor for $118,000.He receives consumer surplus of $13,000 on his purchase.Ray's willingness to pay is

Suppose there is an early freeze in California that reduces the size of the lemon crop.What happens to consumer surplus in the market for lemons?

Jeff decides that he would pay as much as $3,000 for a new laptop computer.He buys the computer and realizes consumer surplus of $700.How much did Jeff pay for his computer?

The French expression used by free-market advocates,which literally translates as "allow them to do," is

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

Figure 7-12 -Refer to Figure 7-12.If the government imposes a price ceiling of $120 in this market,then total surplus will be

Figure 7-16 -Refer to Figure 7-16.The efficient price-quantity combination is

Table 7-9 -Refer to Table 7-9.Both the demand curve and the supply curve are straight lines.At equilibrium,total surplus is

For any given quantity,the price on a demand curve represents the marginal buyer's willingness to pay.

Table 7-9 -Refer to Table 7-9.The equilibrium price is

Producer surplus equals

Figure 7-2 -Refer to Figure 7-2.Which area represents consumer surplus at a price of P1?

Producer surplus is the area

Figure 7-16 -Refer to Figure 7-16.At equilibrium,producer surplus is represented by the area

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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