Question 1

The "invisible hand" is

Accepted Answer

A)  used to describe the welfare system in the United States. 
B)  a concept developed by Adam Smith to describe the virtues of free markets. 
C)  a concept used by J.M. Keynes to describe the role of government in guiding the allocation of resources in the economy. 
D)  a term used by some economists to characterize the role of government in an economy - inevitable but invisible. 
A)  used to describe the welfare system in the United States. 
B)  a concept developed by Adam Smith to describe the virtues of free markets. 
C)  a concept used by J.M. Keynes to describe the role of government in guiding the allocation of resources in the economy. 
D)  a term used by some economists to characterize the role of government in an economy - inevitable but invisible.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

As a result of a decrease in price,

Accepted Answer

A)  new buyers enter the market, increasing consumer surplus. 
B)  new buyers enter the market, decreasing consumer surplus. 
C)  existing buyers exit the market, increasing consumer surplus. 
D)  existing buyers exit the market, decreasing consumer surplus. 
A)  new buyers enter the market, increasing consumer surplus. 
B)  new buyers enter the market, decreasing consumer surplus. 
C)  existing buyers exit the market, increasing consumer surplus. 
D)  existing buyers exit the market, decreasing consumer surplus.

Question 4

Table 7-15
  
-Refer to Table 7-15. You want to hire a professional photographer to take pictures of your family. The table shows the costs of the four potential sellers in the local photography market. You hire Kevin for a price of $500. What is his producer surplus?

Accepted Answer

Question 5

Figure 7-23  
-Refer to Figure 7-23. If the price were P3, consumer surplus would be represented by the area

Accepted Answer

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

Question 6

Figure 7-23  
-Refer to Figure 7-23. If the price were P1, producer surplus would be 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.

Question 7

Which of the following is correct?

Accepted Answer

A)  Consumer surplus refers to a situation in which there are more buyers than sellers in a market. 
B)  Producer surplus refers to a situation in which there are more sellers than buyers in a market. 
C)  Total surplus is measured as the area below the demand curve and above the supply curve, up to the equilibrium quantity. 
D)  All of the above are correct. 
A)  Consumer surplus refers to a situation in which there are more buyers than sellers in a market. 
B)  Producer surplus refers to a situation in which there are more sellers than buyers in a market. 
C)  Total surplus is measured as the area below the demand curve and above the supply curve, up to the equilibrium quantity. 
D)  All of the above are correct.

Question 8

Figure 7-4  
-Refer to Figure 7-4. Which area represents consumer surplus at a price of P2?

Accepted Answer

A)  BDF 
B)  AFG 
C)  ABDG 
D)  ABC 
A)  BDF 
B)  AFG 
C)  ABDG 
D)  ABC

Question 9

Table 7-17
  
-Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, consumer surplus will be

Accepted Answer

A)  $21. 
B)  $28. 
C)  $36. 
D)  $42. 
A)  $21. 
B)  $28. 
C)  $36. 
D)  $42.

Question 10

Donald produces nails at a cost of $350 per ton. If he sells the nails for $500 per ton, his producer surplus is

Accepted Answer

A)  $150. 
B)  $350. 
C)  $500. 
D)  $850. 
A)  $150. 
B)  $350. 
C)  $500. 
D)  $850.

Question 11

Scenario 7-2
Suppose market demand and market supply are given by the equations:  
-Refer to Scenario 7-2. Suppose a reduction in input prices shifts the market supply curve to   How much total consumer surplus goes to new consumers who enter the market after the supply curve shifts?

Accepted Answer

Total consumer surplus increas

Question 12

A simultaneous decrease in both the demand for MP3 players and the supply of MP3 players would imply that

Accepted Answer

A)  both the value of MP3 players to consumers and the cost of producing MP3 players has increased. 
B)  both the value of MP3 players to consumers and the cost of producing MP3 players has decreased. 
C)  the value of MP3 players to consumers has decreased, and the cost of producing MP3 players has increased. 
D)  the value of MP3 players to consumers has increased, and the cost of producing MP3 players has decreased. 
A)  both the value of MP3 players to consumers and the cost of producing MP3 players has increased. 
B)  both the value of MP3 players to consumers and the cost of producing MP3 players has decreased. 
C)  the value of MP3 players to consumers has decreased, and the cost of producing MP3 players has increased. 
D)  the value of MP3 players to consumers has increased, and the cost of producing MP3 players has decreased.

Question 13

Figure 7-32  
-Refer to Figure 7-32. How much are consumer surplus, producer surplus, and total surplus at the market equilibrium price?

Accepted Answer

.Consumer surplus is

Question 14

Figure 7-31  
-Refer to Figure 7-31. If the market equilibrium price is $35, how much is total producer surplus in this market?

Accepted Answer

Total prod

Question 15

Scenario 7-1
Suppose market demand is given by the equation  
-Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, how much consumer surplus do consumers entering the market after the price drop receive?

Accepted Answer

The consumers enteri

Question 16

Figure 7-34  
-Refer to Figure 7-34. Suppose the government imposes a price floor at $10 per unit in this market. With the price floor, how much is total producer surplus assuming those producers with the lowest cost are the ones who supply the market?

Accepted Answer

Total producer surpl

Question 17

Table 7-19
The following table shows the cost of producing a good for the only four producers in a market.
  
-Refer to Table 7-19. If the market price is $28, which producers will supply units in the market?

Accepted Answer

The answer of Table 7-19
The following table shows the cost...

Question 18

Producer surplus is the amount a seller is paid minus the cost of production.

Accepted Answer

A) True 
 B)False

Question 19

Table 7-3
The only four consumers in a market have the following willingness to pay for a good:
  
-Refer to Table 7-3. Who experiences the largest loss of consumer surplus when the price of the good increases from $20 to $22?

Accepted Answer

A)  Quilana 
B)  Wilbur 
C)  Ming-la 
D)  All three buyers experience the same loss of consumer surplus. 
A)  Quilana 
B)  Wilbur 
C)  Ming-la 
D)  All three buyers experience the same loss of consumer surplus.

Question 20

Figure 7-24  
-Refer to Figure 7-24. If 6 units of the good are produced and sold, then

Accepted Answer

A)  consumer surplus is greater than producer surplus. 
B)  producer surplus is maximized. 
C)  the sum of consumer surplus and producer surplus is maximized. 
D)  consumer surplus equals producer surplus. 
A)  consumer surplus is greater than producer surplus. 
B)  producer surplus is maximized. 
C)  the sum of consumer surplus and producer surplus is maximized. 
D)  consumer surplus equals producer surplus.

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

The "invisible hand" is

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

As a result of a decrease in price,

Table 7-15 -Refer to Table 7-15. You want to hire a professional photographer to take pictures of your family. The table shows the costs of the four potential sellers in the local photography market. You hire Kevin for a price of $500. What is his producer surplus?

Figure 7-23 -Refer to Figure 7-23. If the price were P3, consumer surplus would be represented by the area

Figure 7-23 -Refer to Figure 7-23. If the price were P1, producer surplus would be represented by the area

Which of the following is correct?

Figure 7-4 -Refer to Figure 7-4. Which area represents consumer surplus at a price of P2?

Table 7-17 -Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, consumer surplus will be

Donald produces nails at a cost of $350 per ton. If he sells the nails for $500 per ton, his producer surplus is

Scenario 7-2 Suppose market demand and market supply are given by the equations: -Refer to Scenario 7-2. Suppose a reduction in input prices shifts the market supply curve to How much total consumer surplus goes to new consumers who enter the market after the supply curve shifts?

A simultaneous decrease in both the demand for MP3 players and the supply of MP3 players would imply that

Figure 7-32 -Refer to Figure 7-32. How much are consumer surplus, producer surplus, and total surplus at the market equilibrium price?

Figure 7-31 -Refer to Figure 7-31. If the market equilibrium price is $35, how much is total producer surplus in this market?

Scenario 7-1 Suppose market demand is given by the equation -Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, how much consumer surplus do consumers entering the market after the price drop receive?

Figure 7-34 -Refer to Figure 7-34. Suppose the government imposes a price floor at $10 per unit in this market. With the price floor, how much is total producer surplus assuming those producers with the lowest cost are the ones who supply the market?

Table 7-19 The following table shows the cost of producing a good for the only four producers in a market. -Refer to Table 7-19. If the market price is $28, which producers will supply units in the market?

Producer surplus is the amount a seller is paid minus the cost of production.

Table 7-3 The only four consumers in a market have the following willingness to pay for a good: -Refer to Table 7-3. Who experiences the largest loss of consumer surplus when the price of the good increases from $20 to $22?

Figure 7-24 -Refer to Figure 7-24. If 6 units of the good are produced and sold, then

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

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