Question 1

Gains from trade are measured by:

Accepted Answer

A)  consumer surplus. 
B)  producer surplus. 
C)  the sum of consumer and producer surplus. 
D)  producer surplus minus consumer surplus. 
A)  consumer surplus. 
B)  producer surplus. 
C)  the sum of consumer and producer surplus. 
D)  producer surplus minus consumer surplus.

Question 2

Exhibit 7-13   Refer to Exhibit 7-13.Under this program,the producers will sell all they can at ____.

Accepted Answer

A)  P2 
B)  P1 
C)  PM 
D)  none of the above 
A)  P2 
B)  P1 
C)  PM 
D)  none of the above

Question 3

Exhibit 7-6   Refer to Exhibit 7-6.If the market is in equilibrium and then the government imposes a price ceiling equal to P3,society suffers a deadweight loss equal to area:

Accepted Answer

A) C + D + F. 
B) A + B + E. 
C) E + F. 
D) E only. 
A) C + D + F. 
B) A + B + E. 
C) E + F. 
D) E only.

Question 4

Exhibit 7-6   Refer to Exhibit 7-6.If the market is in equilibrium and then the government imposes a price floor equal to P1,buyers lose consumer surplus equal to area:

Accepted Answer

A) C + D + F. 
B) B + C + E + F. 
C) E + F. 
D) B + E. 
A) C + D + F. 
B) B + C + E + F. 
C) E + F. 
D) B + E.

Question 5

Exhibit 7-9   Refer to Exhibit 7-9.Deadweight loss occurs because:

Accepted Answer

A)  the price to buyers is lower than before the tax. 
B)  quantity exchanged increases to Q1. 
C)  the tax reduces the quantity exchanged below the original output level. 
D)  the size of the total surplus realized from trade increases. 
A)  the price to buyers is lower than before the tax. 
B)  quantity exchanged increases to Q1. 
C)  the tax reduces the quantity exchanged below the original output level. 
D)  the size of the total surplus realized from trade increases.

Question 6

Exhibit 7-10   Refer to Exhibit 7-10.The consumer surplus after the subsidy is area

Accepted Answer

A)  a + b + c 
B)  a + b + c + g 
C)  a + b + c + d 
D)  c + g 
A)  a + b + c 
B)  a + b + c + g 
C)  a + b + c + d 
D)  c + g

Question 7

Which of the following is true?

Accepted Answer

A)  A lower price will increase your consumer surplus by the amount you were buying originally, times the reduction in the price. 
B)  A lower price will leave unchanged your consumer surplus for each of the units you were already consuming, but will increase consumer surplus from increased purchases at the lower price. 
C)  A lower price will decrease your producer surplus for each of the units you were producing, but will not change producer surplus by changing the quantity sold. 
D)  None of the above is true. 
A)  A lower price will increase your consumer surplus by the amount you were buying originally, times the reduction in the price. 
B)  A lower price will leave unchanged your consumer surplus for each of the units you were already consuming, but will increase consumer surplus from increased purchases at the lower price. 
C)  A lower price will decrease your producer surplus for each of the units you were producing, but will not change producer surplus by changing the quantity sold. 
D)  None of the above is true.

Question 8

Other things equal,a price ceiling will increase consumer surplus by allowing customers to buy more at the lower price.

Accepted Answer

A) True 
 B)False

Question 9

Consumer surplus measures:

Accepted Answer

A)  the total benefits received from consuming a given quantity of a good. 
B)  the marginal benefit received from consuming the last unit of a good. 
C)  the net benefits received by consumers after deducting the cost of purchasing a good. 
D)  the dollar amount spent on units of a particular good. 
A)  the total benefits received from consuming a given quantity of a good. 
B)  the marginal benefit received from consuming the last unit of a good. 
C)  the net benefits received by consumers after deducting the cost of purchasing a good. 
D)  the dollar amount spent on units of a particular good.

Question 10

Producer surplus is always the total area below the price and above the supply curve.

Accepted Answer

A) True 
 B)False

Question 11

Exhibit 7-6   Refer to Exhibit 7-6.If the market price equals P2,producer surplus can be identified in the diagram as area:

Accepted Answer

A) A + B + E. 
B) B + E. 
C) D. 
D) C + D+ F. 
A) A + B + E. 
B) B + E. 
C) D. 
D) C + D+ F.

Question 12

Consumer surplus is always the total area below the demand curve and above the price.

Accepted Answer

A) True 
 B)False

Question 13

Exhibit 7-9   Refer to Exhibit 7-9.The deadweight loss of a tax is area:

Accepted Answer

A)  a + b + c 
B)  d + e + f 
C)  c + e 
D)  a + b + d + f 
A)  a + b + c 
B)  d + e + f 
C)  c + e 
D)  a + b + d + f

Question 14

Exhibit 7-10   Refer to Exhibit 7-10.The cost to government (tax payers)after the subsidy is area

Accepted Answer

A)  b + e 
B)  b + e + f 
C)  b + e + f + c + g 
D)  zero 
A)  b + e 
B)  b + e + f 
C)  b + e + f + c + g 
D)  zero

Question 15

Exhibit 7-14
   Refer to Exhibit 7-14.Identify the areas of consumer and producer surplus when a price floor equal to $30 is imposed.

Accepted Answer

Consumer surplus equ

Question 16

Exhibit 7-12   Refer to Exhibit 7-12.Consumer surplus after the price floor is area

Accepted Answer

A)  a + b + c 
B)  b + c 
C)  a 
D)  a + b + e 
A)  a + b + c 
B)  b + c 
C)  a 
D)  a + b + e

Question 17

Exhibit 7-8   Refer to Exhibit 7-8.When the price rises from P1 to P2,producer surplus:

Accepted Answer

A)  increases by area A + B 
B)  increases by area B 
C)  increases by area A 
D)  decreases by area A + B + C 
A)  increases by area A + B 
B)  increases by area B 
C)  increases by area A 
D)  decreases by area A + B + C

Question 18

Exhibit 7-12   Refer to Exhibit 7-12.The deadweight loss when the government buys the surplus is:

Accepted Answer

A)  b + c 
B)  d 
C)  c + f + g + h + i + d 
D)  c + f + g + h + i 
A)  b + c 
B)  d 
C)  c + f + g + h + i + d 
D)  c + f + g + h + i

Question 19

Exhibit 7-3   Refer to Exhibit 7-3.What is the sum of consumer surplus and producer surplus for the 10th unit bought/sold?

Accepted Answer

A)  $3.50 
B)  $5.00 
C)  $6.25 
D)  $25.00 
A)  $3.50 
B)  $5.00 
C)  $6.25 
D)  $25.00

Question 20

A price ceiling imposed below equilibrium price causes a deadweight loss for society because:

Accepted Answer

A)  buyers benefit at the expense of sellers. 
B)  as a result of the ceiling, units of output are not produced despite the fact that the value to consumers exceeds the production cost. 
C)  sellers benefit at the expense of buyers. 
D)  the poor gain at the expense of the rich. 
A)  buyers benefit at the expense of sellers. 
B)  as a result of the ceiling, units of output are not produced despite the fact that the value to consumers exceeds the production cost. 
C)  sellers benefit at the expense of buyers. 
D)  the poor gain at the expense of the rich.

Exam 7: Market Efficiency and Welfare

Gains from trade are measured by:

Exhibit 7-13 Refer to Exhibit 7-13.Under this program,the producers will sell all they can at ____.

Exhibit 7-6 Refer to Exhibit 7-6.If the market is in equilibrium and then the government imposes a price ceiling equal to P3,society suffers a deadweight loss equal to area:

Exhibit 7-6 Refer to Exhibit 7-6.If the market is in equilibrium and then the government imposes a price floor equal to P1,buyers lose consumer surplus equal to area:

Exhibit 7-9 Refer to Exhibit 7-9.Deadweight loss occurs because:

Exhibit 7-10 Refer to Exhibit 7-10.The consumer surplus after the subsidy is area

Which of the following is true?

Other things equal,a price ceiling will increase consumer surplus by allowing customers to buy more at the lower price.

Consumer surplus measures:

Producer surplus is always the total area below the price and above the supply curve.

Exhibit 7-6 Refer to Exhibit 7-6.If the market price equals P2,producer surplus can be identified in the diagram as area:

Consumer surplus is always the total area below the demand curve and above the price.

Exhibit 7-9 Refer to Exhibit 7-9.The deadweight loss of a tax is area:

Exhibit 7-10 Refer to Exhibit 7-10.The cost to government (tax payers)after the subsidy is area

Exhibit 7-14 Refer to Exhibit 7-14.Identify the areas of consumer and producer surplus when a price floor equal to $30 is imposed.

Exhibit 7-12 Refer to Exhibit 7-12.Consumer surplus after the price floor is area

Exhibit 7-8 Refer to Exhibit 7-8.When the price rises from P1 to P2,producer surplus:

Exhibit 7-12 Refer to Exhibit 7-12.The deadweight loss when the government buys the surplus is:

Exhibit 7-3 Refer to Exhibit 7-3.What is the sum of consumer surplus and producer surplus for the 10th unit bought/sold?

A price ceiling imposed below equilibrium price causes a deadweight loss for society because:

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

Filters

Exhibit 7-6 Refer to Exhibit 7-6.If the market is in equilibrium and then the government imposes a price ceiling equal to P₃,society suffers a deadweight loss equal to area:

Exhibit 7-6 Refer to Exhibit 7-6.If the market is in equilibrium and then the government imposes a price floor equal to P₁,buyers lose consumer surplus equal to area:

Exhibit 7-6 Refer to Exhibit 7-6.If the market price equals P₂,producer surplus can be identified in the diagram as area:

Exhibit 7-8 Refer to Exhibit 7-8.When the price rises from P₁ to P₂,producer surplus:

Exhibit 7-3 Refer to Exhibit 7-3.What is the sum of consumer surplus and producer surplus for the 10^th unit bought/sold?