Question 1

When markets fail,public policy can potentially remedy the problem and increase economic efficiency.

Accepted Answer

A) True 
 B)False

Question 2

Unless markets are perfectly competitive,they may fail to maximize the total benefits to buyers and sellers.

Accepted Answer

A) True 
 B)False

Question 3

Producer surplus is

Accepted Answer

A)  represented on a graph by the area below the demand curve and above the supply curve. 
B)  the amount a seller is paid minus the cost of production. 
C)  also referred to as excess supply. 
D)  All of the above are correct. 
A)  represented on a graph by the area below the demand curve and above the supply curve. 
B)  the amount a seller is paid minus the cost of production. 
C)  also referred to as excess supply. 
D)  All of the above are correct.

Question 4

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

Accepted Answer

A)  $24. 
B)  $32. 
C)  $48. 
D)  $64. 
A)  $24. 
B)  $32. 
C)  $48. 
D)  $64.

Question 5

Figure 7-1  
-Refer to Figure 7-1.When the price is 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 6

Table 7-3
The only four consumers in a market have the following willingness to pay for a good:
  
-Refer to Table 7-3.If the market price for the good is $30,who will purchase the good?

Accepted Answer

A)  Carlos only 
B)  Carlos and Quilana only 
C)  Carlos,Quilana,and Wilbur only 
D)  Wilbur and Ming-la only 
A)  Carlos only 
B)  Carlos and Quilana only 
C)  Carlos,Quilana,and Wilbur only 
D)  Wilbur and Ming-la only

Question 7

Figure 7-1  
-Refer to Figure 7-1.Area C represents the

Accepted Answer

A)  decrease in consumer surplus that results from a downward-sloping demand curve. 
B)  consumer surplus to new consumers who enter the market when the price falls from P2 to P1. 
C)  increase in producer surplus when quantity sold increases from Q2 to Q1. 
D)  decrease in consumer surplus to each consumer in the market when the price increases from P1 to P2. 
A)  decrease in consumer surplus that results from a downward-sloping demand curve. 
B)  consumer surplus to new consumers who enter the market when the price falls from P2 to P1. 
C)  increase in producer surplus when quantity sold increases from Q2 to Q1. 
D)  decrease in consumer surplus to each consumer in the market when the price increases from P1 to P2.

Question 8

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 9

The area below the price and above the supply curve measures the producer surplus in a market.

Accepted Answer

A) True 
 B)False

Question 10

Figure 7-17  
-Refer to Figure 7-17.At equilibrium,consumer surplus is

Accepted Answer

A)  $36. 
B)  $72. 
C)  $108. 
D)  $144. 
A)  $36. 
B)  $72. 
C)  $108. 
D)  $144.

Question 11

Figure 7-15  
-Refer to Figure 7-15.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 12

Tammy loves donuts.The table shown reflects the value Tammy places on each donut she eats:
   
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.b.
At a price of $0.20,Tammy would buy

Question 13

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.
  
-Refer to Table 7-4.If tickets sell for $20 each,then what is the total consumer surplus in the market?

Accepted Answer

A)  $5 
B)  $30 
C)  $40 
D)  $75 
A)  $5 
B)  $30 
C)  $40 
D)  $75

Question 14

Figure 7-9  
-Refer to Figure 7-9.If the equilibrium price rises from $50 to $200,what is the producer surplus to new 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 15

Figure 7-14  
-Refer to Figure 7-14.Which area represents producer surplus when the price is P1?

Accepted Answer

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

Question 16

Table 7-1
  
-Refer to Table 7-1.If the price of the product is $15,then who would be willing to purchase the product?

Accepted Answer

A)  Mike 
B)  Mike and Sandy 
C)  Mike,Sandy,and Jonathan 
D)  Mike,Sandy,Jonathan,and Haley 
A)  Mike 
B)  Mike and Sandy 
C)  Mike,Sandy,and Jonathan 
D)  Mike,Sandy,Jonathan,and Haley

Question 17

Noah drinks Dr.Pepper.He can buy as many cans of Dr.Pepper as he wishes at a price of $0.50 per can.On a particular day,he is willing to pay $0.95 for the first can,$0.80 for the second can,$0.60 for the third can,and $0.40 for the fourth can.Assume Noah is rational in deciding how many cans to buy.His consumer surplus is

Accepted Answer

A)  $0.50. 
B)  $0.85. 
C)  $1.05. 
D)  $1.20. 
A)  $0.50. 
B)  $0.85. 
C)  $1.05. 
D)  $1.20.

Question 18

Table 7-3
The only four consumers in a market have the following willingness to pay for a good:
  
-Refer to Table 7-3.If there is only one unit of the good and if the buyers bid against each other for the right to purchase it,then the consumer surplus will be

Accepted Answer

A)  $0 or slightly more. 
B)  $10 or slightly less. 
C)  $30 or slightly more. 
D)  $45 or slightly less. 
A)  $0 or slightly more. 
B)  $10 or slightly less. 
C)  $30 or slightly more. 
D)  $45 or slightly less.

Question 19

Table 7-1
  
-Refer to Table 7-1.If the price of the product is $18,then the total consumer surplus is

Accepted Answer

A)  $38. 
B)  $42. 
C)  $46. 
D)  $72. 
A)  $38. 
B)  $42. 
C)  $46. 
D)  $72.

Question 20

David tunes pianos in his spare time for extra income.Buyers of his service are willing to pay $150 per tuning.One particular week,David is willing to tune the first piano for $115,the second piano for $125,the third piano for $140,and the fourth piano for $175.Assume David is rational in deciding how many pianos to tune.His producer surplus is

Accepted Answer

A)  $25. 
B)  $35. 
C)  $70. 
D)  $95. 
A)  $25. 
B)  $35. 
C)  $70. 
D)  $95.

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

When markets fail,public policy can potentially remedy the problem and increase economic efficiency.

Unless markets are perfectly competitive,they may fail to maximize the total benefits to buyers and sellers.

Producer surplus is

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

Figure 7-1 -Refer to Figure 7-1.When the price is P2,consumer surplus is

Table 7-3 The only four consumers in a market have the following willingness to pay for a good: -Refer to Table 7-3.If the market price for the good is $30,who will purchase the good?

Figure 7-1 -Refer to Figure 7-1.Area C represents the

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

The area below the price and above the supply curve measures the producer surplus in a market.

Figure 7-17 -Refer to Figure 7-17.At equilibrium,consumer surplus is

Figure 7-15 -Refer to Figure 7-15.If 110 units of the good are being bought and sold,then

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. -Refer to Table 7-4.If tickets sell for $20 each,then what is the total consumer surplus in the market?

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

Figure 7-14 -Refer to Figure 7-14.Which area represents producer surplus when the price is P1?

Table 7-1 -Refer to Table 7-1.If the price of the product is $15,then who would be willing to purchase the product?

Table 7-3 The only four consumers in a market have the following willingness to pay for a good: -Refer to Table 7-3.If there is only one unit of the good and if the buyers bid against each other for the right to purchase it,then the consumer surplus will be

Table 7-1 -Refer to Table 7-1.If the price of the product is $18,then the total consumer 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

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

Filters