Question 1

Which of the following will cause an increase in producer surplus?

Accepted Answer

A)  the imposition of a binding price ceiling in the market 
B)  buyers expect the price of the good to be lower next month 
C)  the price of a substitute increases 
D)  income increases and buyers consider the good to be inferior 
A)  the imposition of a binding price ceiling in the market 
B)  buyers expect the price of the good to be lower next month 
C)  the price of a substitute increases 
D)  income increases and buyers consider the good to be inferior

Question 2

Table 7-7
  
-Refer to Table 7-7. You have two essentially identical extra tickets to the Midwest Regional Sweet 16 game in the men's NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You hold an auction to sell the two tickets. Who makes the winning bids, and what do they offer to pay for the tickets?

Accepted Answer

A)  Michael and Earvin; more than $350 but less than or equal to $400 
B)  Michael and Earvin; more than $400 but less than or equal to $500 
C)  Earvin and Larry; more than $300 but less than or equal to $350 
D)  Larry and Charles; less than $300 
A)  Michael and Earvin; more than $350 but less than or equal to $400 
B)  Michael and Earvin; more than $400 but less than or equal to $500 
C)  Earvin and Larry; more than $300 but less than or equal to $350 
D)  Larry and Charles; less than $300

Question 3

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 Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day.
  
-Refer to Table 7-5. Who experiences the largest loss of consumer surplus when the price of an orange increases from $0.70 to $1.40?

Accepted Answer

A)  Allison 
B)  Bob 
C)  Charisse 
D)  All three individuals experience the same loss of consumer surplus. 
A)  Allison 
B)  Bob 
C)  Charisse 
D)  All three individuals experience the same loss of consumer surplus.

Question 4

If the United States changed its laws to allow for the legal sale of a kidney, which of the following is least likely to occur?

Accepted Answer

A)  The supply of kidneys would increase. 
B)  The shortage of kidneys would decrease. 
C)  Many lives would be saved. 
D)  The allocation of kidneys would be fair. 
A)  The supply of kidneys would increase. 
B)  The shortage of kidneys would decrease. 
C)  Many lives would be saved. 
D)  The allocation of kidneys would be fair.

Question 5

Figure 7-23  
-Refer to Figure 7-23. At equilibrium, consumer surplus is 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

In order to conclude that markets are efficient, we assume that they are perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 7

Figure 7-16  
-Refer to Figure 7-16. Suppose the price of the good is $400. Then, on the first unit of the good that is sold, producer surplus amounts to

Accepted Answer

A)  $200. 
B)  $300. 
C)  $400. 
D)  $450. 
A)  $200. 
B)  $300. 
C)  $400. 
D)  $450.

Question 8

If the government allowed a free market for transplant organs such as kidneys to exist, the

Accepted Answer

A)  shortage of organs would be eliminated, and there would be no surplus of organs. 
B)  shortage of organs would be eliminated, but a surplus of organs would develop. 
C)  shortage of organs would persist. 
D)  overall well-being of society would remain unchanged. 
A)  shortage of organs would be eliminated, and there would be no surplus of organs. 
B)  shortage of organs would be eliminated, but a surplus of organs would develop. 
C)  shortage of organs would persist. 
D)  overall well-being of society would remain unchanged.

Question 9

Denise values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $350. Denise's consumer surplus is

Accepted Answer

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

Question 10

If the United States changed its laws to allow for the legal sale of a kidney, which of the following is likely to occur?

Accepted Answer

A)  The price of kidneys would rise to balance supply and demand. 
B)  The gains from trade would make both buyers and sellers better off. 
C)  Thousands of lives would be saved. 
D)  All of the above are correct. 
A)  The price of kidneys would rise to balance supply and demand. 
B)  The gains from trade would make both buyers and sellers better off. 
C)  Thousands of lives would be saved. 
D)  All of the above are correct.

Question 11

Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is
   If 90 units of the good are produced and sold, then producer surplus amounts to $1,350.

Accepted Answer

A) True 
 B)False

Question 12

If a market is allowed to move freely to its equilibrium price and quantity, then an increase in supply will

Accepted Answer

A)  increase consumer surplus. 
B)  reduce consumer surplus. 
C)  not affect consumer surplus. 
D)  Any of the above are possible. 
A)  increase consumer surplus. 
B)  reduce consumer surplus. 
C)  not affect consumer surplus. 
D)  Any of the above are possible.

Question 13

Figure 7-4  
-Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers?

Accepted Answer

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

Question 14

Figure 7-15  
-Refer to Figure 7-15. Area B represents

Accepted Answer

A)  the combined profits of all producers when the price is P2. 
B)  the increase in producer surplus to all producers as the result of an increase in the price from P1 to P2. 
C)  producer surplus to new producers entering the market as the result of an increase in the price from P1 to P2. 
D)  that portion of the increase in producer surplus that is offset by a loss in consumer surplus when the price increases from P1 to P2. 
A)  the combined profits of all producers when the price is P2. 
B)  the increase in producer surplus to all producers as the result of an increase in the price from P1 to P2. 
C)  producer surplus to new producers entering the market as the result of an increase in the price from P1 to P2. 
D)  that portion of the increase in producer surplus that is offset by a loss in consumer surplus when the price increases from P1 to P2.

Question 15

Table 7-7
  
-Refer to Table 7-7. You have two essentially identical extra tickets to the Midwest Regional Sweet 16 game in the men's NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You hold an auction to sell the two tickets. Michael and Earvin each offer to pay $360 for a ticket, and you sell them the two tickets. What is the total consumer surplus in the market?

Accepted Answer

A)  $720 
B)  $180 
C)  $140 
D)  $40 
A)  $720 
B)  $180 
C)  $140 
D)  $40

Question 16

Figure 7-24  
-Refer to Figure 7-24. If the government imposes a price floor at $18, then consumer surplus is

Accepted Answer

A)  ABF. 
B)  AGH. 
C)  HGCD. 
D)  HGBF. 
A)  ABF. 
B)  AGH. 
C)  HGCD. 
D)  HGBF.

Question 17

Figure 7-4  
-Refer to Figure 7-4. Which area represents consumer surplus at a price of P1?

Accepted Answer

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

Question 18

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 19

Consumer surplus

Accepted Answer

A)  is the amount a buyer pays for a good minus the amount the buyer is willing to pay for it. 
B)  is represented on a supply-demand graph by the area below the price and above the demand curve. 
C)  measures the benefit sellers receive from participating in a market. 
D)  measures the benefit buyers receive from participating in a market. 
A)  is the amount a buyer pays for a good minus the amount the buyer is willing to pay for it. 
B)  is represented on a supply-demand graph by the area below the price and above the demand curve. 
C)  measures the benefit sellers receive from participating in a market. 
D)  measures the benefit buyers receive from participating in a market.

Question 20

Figure 7-20  
-Refer to Figure 7-20. For quantities greater than M, the value to the marginal buyer is

Accepted Answer

A)  greater than the cost to the marginal seller, so increasing the quantity increases total surplus. 
B)  less than the cost to the marginal seller, so increasing the quantity increases total surplus. 
C)  greater than the cost to the marginal seller, so decreasing the quantity increases total surplus. 
D)  less than the cost to the marginal seller, so decreasing the quantity increases total surplus. 
A)  greater than the cost to the marginal seller, so increasing the quantity increases total surplus. 
B)  less than the cost to the marginal seller, so increasing the quantity increases total surplus. 
C)  greater than the cost to the marginal seller, so decreasing the quantity increases total surplus. 
D)  less than the cost to the marginal seller, so decreasing the quantity increases total surplus.

Which of the following will cause an increase in producer surplus?

If the United States changed its laws to allow for the legal sale of a kidney, which of the following is least likely to occur?

Figure 7-23 -Refer to Figure 7-23. At equilibrium, consumer surplus is represented by the area

In order to conclude that markets are efficient, we assume that they are perfectly competitive.

Figure 7-16 -Refer to Figure 7-16. Suppose the price of the good is $400. Then, on the first unit of the good that is sold, producer surplus amounts to

If the government allowed a free market for transplant organs such as kidneys to exist, the

Denise values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $350. Denise's consumer surplus is

If the United States changed its laws to allow for the legal sale of a kidney, which of the following is likely to occur?

Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is If 90 units of the good are produced and sold, then producer surplus amounts to $1,350.

If a market is allowed to move freely to its equilibrium price and quantity, then an increase in supply will

Figure 7-4 -Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers?

Figure 7-15 -Refer to Figure 7-15. Area B represents

Figure 7-24 -Refer to Figure 7-24. If the government imposes a price floor at $18, then consumer surplus is

Figure 7-4 -Refer to Figure 7-4. Which area represents consumer surplus at a price of P1?

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?

Consumer surplus

Figure 7-20 -Refer to Figure 7-20. For quantities greater than M, the value to the marginal buyer 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

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

Which of the following will cause an increase in producer surplus?

If the United States changed its laws to allow for the legal sale of a kidney, which of the following is least likely to occur?

Figure 7-23 -Refer to Figure 7-23. At equilibrium, consumer surplus is represented by the area

In order to conclude that markets are efficient, we assume that they are perfectly competitive.

Figure 7-16 -Refer to Figure 7-16. Suppose the price of the good is $400. Then, on the first unit of the good that is sold, producer surplus amounts to

If the government allowed a free market for transplant organs such as kidneys to exist, the

Denise values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $350. Denise's consumer surplus is

If the United States changed its laws to allow for the legal sale of a kidney, which of the following is likely to occur?

Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is If 90 units of the good are produced and sold, then producer surplus amounts to $1,350.

If a market is allowed to move freely to its equilibrium price and quantity, then an increase in supply will

Figure 7-4 -Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers?

Figure 7-15 -Refer to Figure 7-15. Area B represents

Figure 7-24 -Refer to Figure 7-24. If the government imposes a price floor at $18, then consumer surplus is

Figure 7-4 -Refer to Figure 7-4. Which area represents consumer surplus at a price of P1?

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?

Consumer surplus

Figure 7-20 -Refer to Figure 7-20. For quantities greater than M, the value to the marginal buyer 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

Filters