Question 1

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

Accepted Answer

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

Question 2

Figure 7-24  
-Refer to Figure 7-24.At equilibrium,producer surplus is measured by the area

Accepted Answer

A) ABD. 
B) ABF. 
C) CDI. 
D) BDF. 
A) ABD. 
B) ABF. 
C) CDI. 
D) BDF.

Question 3

Figure 7-19  
-Refer to Figure 7-19.If the government imposes a price floor of $55 in this market,then total surplus will be

Accepted Answer

A) $137.50. 
B) $125.00. 
C) $187.50. 
D) $275.00. 
A) $137.50. 
B) $125.00. 
C) $187.50. 
D) $275.00.

Question 4

Figure 7-18  
-Refer to Figure 7-18.Suppose the willingness to pay of the marginal buyer of the 3rd unit is $125.Then total surplus is maximized if

Accepted Answer

A) 1 unit of the good is produced and sold. 
B) 2 units of the good are produced and sold. 
C) 3 units of the good are produced and sold. 
D) 4 units of the good are produced and sold. 
A) 1 unit of the good is produced and sold. 
B) 2 units of the good are produced and sold. 
C) 3 units of the good are produced and sold. 
D) 4 units of the good are produced and sold.

Question 5

Figure 7-22  
-Refer to Figure 7-22.If 40 units of the good are bought and sold,then

Accepted Answer

A) the marginal cost to sellers is equal to the marginal value to buyers. 
B) the marginal value to buyers is greater than the marginal cost to sellers. 
C) the marginal cost to sellers is greater than the marginal value to buyers. 
D) producer surplus would be greater than consumer surplus. 
A) the marginal cost to sellers is equal to the marginal value to buyers. 
B) the marginal value to buyers is greater than the marginal cost to sellers. 
C) the marginal cost to sellers is greater than the marginal value to buyers. 
D) producer surplus would be greater than consumer surplus.

Question 6

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

Accepted Answer

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

Question 7

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 8

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 9

Figure 7-23  
-Refer to Figure 7-23.The efficient price-quantity combination is

Accepted Answer

A) P1 and Q1. 
B) P2 and Q2. 
C) P3 and Q1. 
D) P4 and 0. 
A) P1 and Q1. 
B) P2 and Q2. 
C) P3 and Q1. 
D) P4 and 0.

Question 10

The "invisible hand" refers to

Accepted Answer

A) the marketplace guiding the self-interests of market participants into promoting general economic well-being. 
B) the fact that social planners sometimes have to intervene,even in perfectly competitive markets,to make those markets more efficient. 
C) the equality that results from market forces allocating the goods produced in the market. 
D) the automatic maximization of consumer surplus in free markets. 
A) the marketplace guiding the self-interests of market participants into promoting general economic well-being. 
B) the fact that social planners sometimes have to intervene,even in perfectly competitive markets,to make those markets more efficient. 
C) the equality that results from market forces allocating the goods produced in the market. 
D) the automatic maximization of consumer surplus in free markets.

Question 11

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 12

Figure 7-26  
-Refer to Figure 7-26.At the equilibrium price,producer surplus is

Accepted Answer

A) $600. 
B) $900. 
C) $1,200. 
D) $1,800. 
A) $600. 
B) $900. 
C) $1,200. 
D) $1,800.

Question 13

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 14

Figure 7-21  
-Refer to Figure 7-21.Which area represents consumer surplus when the price is P1?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 15

PlayStations and PlayStation games are complementary goods.A technological advance in the production of PlayStations will

Accepted Answer

A) increase consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games. 
B) increase consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. 
C) decrease consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. 
D) decrease consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games. 
A) increase consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games. 
B) increase consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. 
C) decrease consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. 
D) decrease consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games.

Question 16

If the current allocation of resources in the market for wallpaper is efficient,then it must be the case that

Accepted Answer

A) producer surplus equals consumer surplus in the market for wallpaper. 
B) the market for wallpaper is in equilibrium. 
C) on the last unit of wallpaper that was produced and sold,the value to buyers exceeded the cost to sellers. 
D) All of the above are correct. 
A) producer surplus equals consumer surplus in the market for wallpaper. 
B) the market for wallpaper is in equilibrium. 
C) on the last unit of wallpaper that was produced and sold,the value to buyers exceeded the cost to sellers. 
D) All of the above are correct.

Question 17

Figure 7-22  
-Refer to Figure 7-22.If the price decreases from $80 to $70 due to a shift in the supply curve,consumer surplus increases by

Accepted Answer

A) $250. 
B) $750. 
C) $1000. 
D) $500. 
A) $250. 
B) $750. 
C) $1000. 
D) $500.

Question 18

Total surplus in a market is equal to

Accepted Answer

A) consumer surplus + producer surplus. 
B) value to buyers - amount paid by buyers. 
C) amount received by sellers - costs of sellers. 
D) producer surplus - consumer surplus. 
A) consumer surplus + producer surplus. 
B) value to buyers - amount paid by buyers. 
C) amount received by sellers - costs of sellers. 
D) producer surplus - consumer surplus.

Question 19

Figure 7-24  
-Refer to Figure 7-24.At equilibrium,total surplus is measured by the area

Accepted Answer

A) ABD. 
B) ABF. 
C) FBD. 
D) HGCI. 
A) ABD. 
B) ABF. 
C) FBD. 
D) HGCI.

Question 20

We can say that the allocation of resources is efficient if

Accepted Answer

A) producer surplus is maximized. 
B) consumer surplus is maximized. 
C) total surplus is maximized. 
D) sellers' costs are minimized. 
A) producer surplus is maximized. 
B) consumer surplus is maximized. 
C) total surplus is maximized. 
D) sellers' costs are minimized.

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

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

Figure 7-24 -Refer to Figure 7-24.At equilibrium,producer surplus is measured by the area

Figure 7-19 -Refer to Figure 7-19.If the government imposes a price floor of $55 in this market,then total surplus will be

Figure 7-18 -Refer to Figure 7-18.Suppose the willingness to pay of the marginal buyer of the 3rd unit is $125.Then total surplus is maximized if

Figure 7-22 -Refer to Figure 7-22.If 40 units of the good are bought and sold,then

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

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

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,

Figure 7-23 -Refer to Figure 7-23.The efficient price-quantity combination is

The "invisible hand" refers to

Total surplus is equal to

Figure 7-26 -Refer to Figure 7-26.At the equilibrium price,producer 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?

Figure 7-21 -Refer to Figure 7-21.Which area represents consumer surplus when the price is P1?

PlayStations and PlayStation games are complementary goods.A technological advance in the production of PlayStations will

If the current allocation of resources in the market for wallpaper is efficient,then it must be the case that

Figure 7-22 -Refer to Figure 7-22.If the price decreases from $80 to $70 due to a shift in the supply curve,consumer surplus increases by

Total surplus in a market is equal to

Figure 7-24 -Refer to Figure 7-24.At equilibrium,total surplus is measured by the area

We can say that the allocation of resources is efficient if

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

Application International Trade: Part A

Figure 7-18 -Refer to Figure 7-18.Suppose the willingness to pay of the marginal buyer of the 3^rd unit is $125.Then total surplus is maximized if