Question 1

Figure 7-11  
-Refer to Figure 7-11.Area A represents

Accepted Answer

A)  producer surplus to new producers entering the market as the result of an increase in price from P1 to P2. 
B)  the increase in consumer surplus that results from an upward-sloping supply curve. 
C)  the increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2. 
D)  the increase in producer surplus to those producers already in the market when the price increases from P1 to P2. 
A)  producer surplus to new producers entering the market as the result of an increase in price from P1 to P2. 
B)  the increase in consumer surplus that results from an upward-sloping supply curve. 
C)  the increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2. 
D)  the increase in producer surplus to those producers already in the market when the price increases from P1 to P2.

Question 2

If a consumer places a value of $15 on a particular good and if the price of the good is $17,then the

Accepted Answer

A)  consumer has consumer surplus of $2 if he or she buys the good. 
B)  consumer does not purchase the good. 
C)  market is not a competitive market. 
D)  price of the good will fall due to market forces. 
A)  consumer has consumer surplus of $2 if he or she buys the good. 
B)  consumer does not purchase the good. 
C)  market is not a competitive market. 
D)  price of the good will fall due to market forces.

Question 3

Figure 7-14  
-Refer to Figure 7-14.When the price is P1,area A represents

Accepted Answer

A)  total benefit. 
B)  producer surplus. 
C)  consumer surplus. 
D)  None of the above is correct. 
A)  total benefit. 
B)  producer surplus. 
C)  consumer surplus. 
D)  None of the above is correct.

Question 4

Inefficiency exists in an economy when a good is

Accepted Answer

A)  being produced with less than all available resources. 
B)  not distributed fairly among buyers. 
C)  not being produced by the lowest-cost producers. 
D)  being consumed by buyers who value it most highly. 
A)  being produced with less than all available resources. 
B)  not distributed fairly among buyers. 
C)  not being produced by the lowest-cost producers. 
D)  being consumed by buyers who value it most highly.

Question 5

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 6

Anita sharpens knives in her spare time for extra income.Buyers of her service are willing to pay $3.50 per knife for as many knives as Anita is willing to sharpen.On a particular day,she is willing to sharpen the first knife for $2.00,the second knife for $2.50,the third knife for $3.00,and the fourth knife for $3.50.Assume Anita is rational in deciding how many knives to sharpen.Her producer surplus is

Accepted Answer

A)  $3.50. 
B)  $3.00. 
C)  $2.00. 
D)  $0.50. 
A)  $3.50. 
B)  $3.00. 
C)  $2.00. 
D)  $0.50.

Question 7

Figure 7-7  
-Refer to Figure 7-7.Which area represents the increase in producer surplus when the price rises from P1 to P2 due to new producers entering the market?

Accepted Answer

A)  BCG 
B)  ACH 
C)  DGH 
D)  AHGB 
A)  BCG 
B)  ACH 
C)  DGH 
D)  AHGB

Question 8

Kelly is willing to pay $68 for a pair of shoes for a wedding.She finds a pair at her favorite outlet shoe store for $48.Kelly's consumer surplus is

Accepted Answer

A)  $10. 
B)  $20. 
C)  $48. 
D)  $68. 
A)  $10. 
B)  $20. 
C)  $48. 
D)  $68.

Question 9

Producer surplus directly measures

Accepted Answer

A)  the well-being of sellers. 
B)  production costs. 
C)  excess demand. 
D)  unsold inventories. 
A)  the well-being of sellers. 
B)  production costs. 
C)  excess demand. 
D)  unsold inventories.

Question 10

Total surplus in a market will increase when the government

Accepted Answer

A)  imposes a tax on that market. 
B)  imposes a binding price floor on that market. 
C)  removes a binding price ceiling from that market. 
D)  None of the above is correct. 
A)  imposes a tax on that market. 
B)  imposes a binding price floor on that market. 
C)  removes a binding price ceiling from that market. 
D)  None of the above is correct.

Question 11

Suppose the market demand curve for a good passes through the point (quantity demanded = 100,price = $25).If there are five buyers in the market,then

Accepted Answer

A)  the marginal buyer's willingness to pay for the 100th unit of the good is $25. 
B)  the sum of the five buyers' willingness to pay for the 100th unit of the good is $25. 
C)  the average of the five buyers' willingness to pay for the 100th unit of the good is $25. 
D)  all of the five buyers are willing to pay at least $25 for the 100th unit of the good. 
A)  the marginal buyer's willingness to pay for the 100th unit of the good is $25. 
B)  the sum of the five buyers' willingness to pay for the 100th unit of the good is $25. 
C)  the average of the five buyers' willingness to pay for the 100th unit of the good is $25. 
D)  all of the five buyers are willing to pay at least $25 for the 100th unit of the good.

Question 12

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 13

Which of the Ten Principles of Economics does welfare economics explain more fully?

Accepted Answer

A)  The cost of something is what you give up to get it. 
B)  Markets are usually a good way to organize economic activity. 
C)  Trade can make everyone better off. 
D)  A country's standard of living depends on its ability to produce goods and services. 
A)  The cost of something is what you give up to get it. 
B)  Markets are usually a good way to organize economic activity. 
C)  Trade can make everyone better off. 
D)  A country's standard of living depends on its ability to produce goods and services.

Question 14

Table 7-7
The only four producers in a market have the following cost:
  
-Refer to Table 7-7.If Charlie,Quinn,and Wrex sell the good,and the resulting producer surplus is $300,then the price must have been

Accepted Answer

A)  $200. 
B)  $300. 
C)  $450. 
D)  $600. 
A)  $200. 
B)  $300. 
C)  $450. 
D)  $600.

Question 15

Which of the following is not true when the price of a good or service falls?

Accepted Answer

A)  Buyers who were already buying the good or service are better off. 
B)  Some new buyers,who are now willing to buy,enter the market. 
C)  The total consumer surplus in the market increases. 
D)  The total value of purchases before and after the price change is the same. 
A)  Buyers who were already buying the good or service are better off. 
B)  Some new buyers,who are now willing to buy,enter the market. 
C)  The total consumer surplus in the market increases. 
D)  The total value of purchases before and after the price change is the same.

Question 16

Total surplus is equal to

Accepted Answer

A)  value to buyers - profit to sellers. 
B)  value to buyers - cost to sellers. 
C)  consumer surplus x producer surplus. 
D)  (consumer surplus + producer surplus)x equilibrium quantity. 
A)  value to buyers - profit to sellers. 
B)  value to buyers - cost to sellers. 
C)  consumer surplus x producer surplus. 
D)  (consumer surplus + producer surplus)x equilibrium quantity.

Question 17

Josh is willing to pay $40 for a haircut,but he is able to pay $25 at the local salon.His consumer surplus is

Accepted Answer

A)  $0 because the cost exceeds his maximum willingness to pay. 
B)  $15. 
C)  $25. 
D)  $65. 
A)  $0 because the cost exceeds his maximum willingness to pay. 
B)  $15. 
C)  $25. 
D)  $65.

Question 18

Free markets allocate (a)the supply of goods to the buyers who value them most highly and (b)the demand for goods to the sellers who can produce them at least cost.

Accepted Answer

A) True 
 B)False

Question 19

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 20

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

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

Figure 7-11 -Refer to Figure 7-11.Area A represents

If a consumer places a value of $15 on a particular good and if the price of the good is $17,then the

Figure 7-14 -Refer to Figure 7-14.When the price is P1,area A represents

Inefficiency exists in an economy when a good is

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.

Figure 7-7 -Refer to Figure 7-7.Which area represents the increase in producer surplus when the price rises from P1 to P2 due to new producers entering the market?

Kelly is willing to pay $68 for a pair of shoes for a wedding.She finds a pair at her favorite outlet shoe store for $48.Kelly's consumer surplus is

Producer surplus directly measures

Total surplus in a market will increase when the government

Suppose the market demand curve for a good passes through the point (quantity demanded = 100,price = $25).If there are five buyers in the market,then

On a graph,consumer surplus is represented by the area

Which of the Ten Principles of Economics does welfare economics explain more fully?

Table 7-7 The only four producers in a market have the following cost: -Refer to Table 7-7.If Charlie,Quinn,and Wrex sell the good,and the resulting producer surplus is $300,then the price must have been

Which of the following is not true when the price of a good or service falls?

Total surplus is equal to

Josh is willing to pay $40 for a haircut,but he is able to pay $25 at the local salon.His consumer surplus is

Free markets allocate (a)the supply of goods to the buyers who value them most highly and (b)the demand for goods to the sellers who can produce them at least cost.

If an allocation of resources is efficient,then

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

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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