Question 1

Consumer surplus is

Accepted Answer

A)  a concept that helps us make normative statements about the desirability of market outcomes. 
B)  represented on a graph by the area below the demand curve and above the price. 
C)  a good measure of economic welfare if buyers' preferences are the primary concern. 
D)  All of the above are correct. 
A)  a concept that helps us make normative statements about the desirability of market outcomes. 
B)  represented on a graph by the area below the demand curve and above the price. 
C)  a good measure of economic welfare if buyers' preferences are the primary concern. 
D)  All of the above are correct.

Question 2

The consumption of water by local residents that may include pesticide runoff from local farmers' fields is an example of

Accepted Answer

A)  market equilibrium. 
B)  market power. 
C)  externalities. 
D)  laissez-faire. 
A)  market equilibrium. 
B)  market power. 
C)  externalities. 
D)  laissez-faire.

Question 3

Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

Accepted Answer

A) True 
 B)False

Question 4

Figure 7-21  
-Refer to Figure 7-21. When the price is P1, area B+C represents

Accepted Answer

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

Question 5

Suppose that the equilibrium price in the market for tomatoes is $3 per pound. If a law reduced the maximum legal price for tomatoes to $2 per pound,

Accepted Answer

A)  any possible increase in consumer surplus would be larger than the loss of producer surplus. 
B)  any possible increase in consumer surplus would be smaller than the loss of producer surplus. 
C)  the resulting increase in producer surplus would be larger than any possible loss of consumer surplus. 
D)  the resulting increase in producer surplus would be smaller than any possible loss of consumer surplus. 
A)  any possible increase in consumer surplus would be larger than the loss of producer surplus. 
B)  any possible increase in consumer surplus would be smaller than the loss of producer surplus. 
C)  the resulting increase in producer surplus would be larger than any possible loss of consumer surplus. 
D)  the resulting increase in producer surplus would be smaller than any possible loss of consumer surplus.

Question 6

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 7

Economists say that a market where goods are not consumed by those valuing the goods most highly is

Accepted Answer

A)  laissez-faire.. 
B)  unequal. 
C)  inefficient. 
D)  rational. 
A)  laissez-faire.. 
B)  unequal. 
C)  inefficient. 
D)  rational.

Question 8

Figure 7-32  
-Refer to Figure 7-32. At what price will total surplus be maximized in this market?

Accepted Answer

.Total surplus will

Question 9

The lower the price, the lower the producer surplus, all else equal.

Accepted Answer

A) True 
 B)False

Question 10

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)  Rational people think at the margin. 
C)  Markets are usually a good way to organize economic activity. 
D)  People respond to incentives. 
A)  The cost of something is what you give up to get it. 
B)  Rational people think at the margin. 
C)  Markets are usually a good way to organize economic activity. 
D)  People respond to incentives.

Question 11

Figure 7-30  
-Refer to Figure 7-30. If the market equilibrium price falls from $120 to $80, how much consumer surplus do consumers entering the market after the price drop receive?

Accepted Answer

Consumers entering t

Question 12

Figure 7-24  
-Refer to Figure 7-24. The equilibrium allocation of resources is

Accepted Answer

A)  efficient because total surplus is maximized at the equilibrium. 
B)  efficient because consumer surplus is maximized at the equilibrium. 
C)  inefficient because consumer surplus is larger than producer surplus at the equilibrium. 
D)  inefficient because producer surplus is not maximized. 
A)  efficient because total surplus is maximized at the equilibrium. 
B)  efficient because consumer surplus is maximized at the equilibrium. 
C)  inefficient because consumer surplus is larger than producer surplus at the equilibrium. 
D)  inefficient because producer surplus is not maximized.

Question 13

Market power and externalities are examples of

Accepted Answer

A)  laissez-faire economics. 
B)  public policy. 
C)  market failure. 
D)  welfare economics. 
A)  laissez-faire economics. 
B)  public policy. 
C)  market failure. 
D)  welfare economics.

Question 14

Table 7-9
During the last two days, Chad purchased a latte from two different stores. The table below shows Chad's willingness to pay on each day and his consumer surplus from each purchase.
  
-Refer to Table 7-9. The price that Chad paid for a latte on the first day is

Accepted Answer

A)  $3.75. 
B)  $6.25. 
C)  $5.00. 
D)  $5.50. 
A)  $3.75. 
B)  $6.25. 
C)  $5.00. 
D)  $5.50.

Question 15

Inefficiency can be caused in a market by the presence of

Accepted Answer

A)  market power. 
B)  externalities. 
C)  imperfectly competitive markets. 
D)  All of the above are correct. 
A)  market power. 
B)  externalities. 
C)  imperfectly competitive markets. 
D)  All of the above are correct.

Question 16

A drought in California destroys many red grapes. As a result of the drought, the consumer surplus in the market for red grapes

Accepted Answer

A)  increases, and the consumer surplus in the market for red wine increases. 
B)  increases, and the consumer surplus in the market for red wine decreases. 
C)  decreases, and the consumer surplus in the market for red wine increases. 
D)  decreases, and the consumer surplus in the market for red wine decreases. 
A)  increases, and the consumer surplus in the market for red wine increases. 
B)  increases, and the consumer surplus in the market for red wine decreases. 
C)  decreases, and the consumer surplus in the market for red wine increases. 
D)  decreases, and the consumer surplus in the market for red wine decreases.

Question 17

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

Accepted Answer

A)  efficiency is achieved in this market. 
B)  the marginal value to buyers equals the marginal cost to sellers. 
C)  the sum of consumer surplus and producer surplus is maximized. 
D)  All of the above are correct. 
A)  efficiency is achieved in this market. 
B)  the marginal value to buyers equals the marginal cost to sellers. 
C)  the sum of consumer surplus and producer surplus is maximized. 
D)  All of the above are correct.

Question 18

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. Which of the following statements is correct?

Accepted Answer

A)  Neither Bob's consumer surplus nor Charisse's consumer surplus can exceed Allison's consumer surplus, for any price of an orange. 
B)  All three individuals will buy at least one orange only if the price of an orange is less than $0.25. 
C)  If the price of an orange is $0.60, then consumer surplus is $4.90. 
D)  All of the above are correct. 
A)  Neither Bob's consumer surplus nor Charisse's consumer surplus can exceed Allison's consumer surplus, for any price of an orange. 
B)  All three individuals will buy at least one orange only if the price of an orange is less than $0.25. 
C)  If the price of an orange is $0.60, then consumer surplus is $4.90. 
D)  All of the above are correct.

Question 19

If John's willingness to pay for a good is $20 and the price of the good is $15, how much is John's consumer surplus
from purchasing the good?

Accepted Answer

Consumer s

Question 20

Figure 7-22  
-Refer to Figure 7-22. Assume demand increases, which causes the equilibrium price to increase from $50 to $70. The increase in producer surplus due to new producers entering the market would be

Accepted Answer

A)  $400. 
B)  $800. 
C)  $1,200. 
D)  $900. 
A)  $400. 
B)  $800. 
C)  $1,200. 
D)  $900.

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

Consumer surplus is

The consumption of water by local residents that may include pesticide runoff from local farmers' fields is an example of

Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

Figure 7-21 -Refer to Figure 7-21. When the price is P1, area B+C represents

Suppose that the equilibrium price in the market for tomatoes is $3 per pound. If a law reduced the maximum legal price for tomatoes to $2 per pound,

Producer surplus directly measures

Economists say that a market where goods are not consumed by those valuing the goods most highly is

Figure 7-32 -Refer to Figure 7-32. At what price will total surplus be maximized in this market?

The lower the price, the lower the producer surplus, all else equal.

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

Figure 7-30 -Refer to Figure 7-30. If the market equilibrium price falls from $120 to $80, how much consumer surplus do consumers entering the market after the price drop receive?

Figure 7-24 -Refer to Figure 7-24. The equilibrium allocation of resources is

Market power and externalities are examples of

Table 7-9 During the last two days, Chad purchased a latte from two different stores. The table below shows Chad's willingness to pay on each day and his consumer surplus from each purchase. -Refer to Table 7-9. The price that Chad paid for a latte on the first day is

Inefficiency can be caused in a market by the presence of

A drought in California destroys many red grapes. As a result of the drought, the consumer surplus in the market for red grapes

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

If John's willingness to pay for a good is $20 and the price of the good is $15, how much is John's consumer surplus from purchasing the good?

Figure 7-22 -Refer to Figure 7-22. Assume demand increases, which causes the equilibrium price to increase from $50 to $70. 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

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