Question 1

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 2

Figure 7-28  
-Refer to Figure 7-28.At the quantity Q3,

Accepted Answer

A) the market is in equilibrium. 
B) consumer surplus is maximized. 
C) the sum of consumer surplus and producer surplus is maximized. 
D) the marginal value to buyers is less than the marginal cost to sellers. 
A) the market is in equilibrium. 
B) consumer surplus is maximized. 
C) the sum of consumer surplus and producer surplus is maximized. 
D) the marginal value to buyers is less than the marginal cost to sellers.

Question 3

Figure 7-27  
-Refer to Figure 7-27.Buyers who value this good less than the equilibrium price are represented by which line segment?

Accepted Answer

A) AC. 
B) CK. 
C) BC. 
D) CH. 
A) AC. 
B) CK. 
C) BC. 
D) CH.

Question 4

Total surplus in a market is equal to

Accepted Answer

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

Question 5

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 6

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 7

Figure 7-24  
-Refer to Figure 7-24.At equilibrium,consumer surplus is

Accepted Answer

A) $18. 
B) $36. 
C) $54. 
D) $72. 
A) $18. 
B) $36. 
C) $54. 
D) $72.

Question 8

Inefficiency exists in an economy when a good is

Accepted Answer

A) being produced with less than all available resources. 
B) not distributed fairly among buyers. 
C) not being produced by the lowest-cost producers. 
D) being consumed by buyers who value it most highly. 
A) being produced with less than all available resources. 
B) not distributed fairly among buyers. 
C) not being produced by the lowest-cost producers. 
D) being consumed by buyers who value it most highly.

Question 9

Tomato sauce and spaghetti noodles are complementary goods.A decrease in the price of tomatoes will

Accepted Answer

A) increase consumer surplus in the market for tomato sauce and decrease producer surplus in the market for spaghetti noodles. 
B) increase consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles. 
C) decrease consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles. 
D) decrease consumer surplus in the market for tomato sauce and decrease producer surplus in the market for spaghetti noodles. 
A) increase consumer surplus in the market for tomato sauce and decrease producer surplus in the market for spaghetti noodles. 
B) increase consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles. 
C) decrease consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles. 
D) decrease consumer surplus in the market for tomato sauce and decrease producer surplus in the market for spaghetti noodles.

Question 10

A simultaneous increase 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 11

Total surplus is

Accepted Answer

A) equal to consumer surplus minus producer surplus. 
B) equal to the total value to buyers minus the total cost to sellers. 
C) equal to consumers' willingness to pay plus producers' cost. 
D) greater than the sum of consumer surplus plus producer surplus. 
A) equal to consumer surplus minus producer surplus. 
B) equal to the total value to buyers minus the total cost to sellers. 
C) equal to consumers' willingness to pay plus producers' cost. 
D) greater than the sum of consumer surplus plus producer surplus.

Question 12

Figure 7-23  
-Refer to Figure 7-23.At equilibrium,producer surplus is 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 13

Suppose that Firms A and B each produce high-resolution computer monitors,but Firm A can do so at a lower cost.Cassie and David each want to purchase a high-resolution computer monitor,but David is willing to pay more than Cassie.If Firm B produces a monitor that David buys,then the market outcome illustrates which of the following principles?
(i)
Free markets allocate the supply of goods to the buyers who value them most highly,as measured by their willingness to pay.
(ii)
Free markets allocate the demand for goods to the sellers who can produce them at the least cost.

Accepted Answer

A) (i)only 
B) (ii)only 
C) both (i)and (ii) 
D) neither (i)nor (ii) 
A) (i)only 
B) (ii)only 
C) both (i)and (ii) 
D) neither (i)nor (ii)

Question 14

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

Accepted Answer

A) $600. 
B) $900. 
C) $1,500. 
D) $1,800. 
A) $600. 
B) $900. 
C) $1,500. 
D) $1,800.

Question 15

Hot dogs and hot dog buns are complements.An increase in the price of flour used to make hot dogs buns will

Accepted Answer

A) increase consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs. 
B) increase consumer surplus in the market for hot dogs and increase producer surplus in the market for hot dog buns. 
C) decrease consumer surplus in the market for hot dog buns and increase producer surplus in the market for hot dogs. 
D) decrease consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs. 
A) increase consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs. 
B) increase consumer surplus in the market for hot dogs and increase producer surplus in the market for hot dog buns. 
C) decrease consumer surplus in the market for hot dog buns and increase producer surplus in the market for hot dogs. 
D) decrease consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs.

Question 16

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

Accepted Answer

A) producer surplus exceeds consumer surplus in the market for hammers. 
B) consumer surplus exceeds producer surplus in the market for hammers. 
C) the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources. 
D) the costs that sellers of hammers are incurring could be reduced by moving to a different allocation of resources. 
A) producer surplus exceeds consumer surplus in the market for hammers. 
B) consumer surplus exceeds producer surplus in the market for hammers. 
C) the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources. 
D) the costs that sellers of hammers are incurring could be reduced by moving to a different allocation of resources.

Question 17

The distinction between efficiency and equality can be described as follows:

Accepted Answer

A) Efficiency refers to maximizing the number of trades among buyers and sellers;equality refers to maximizing the gains from trade among buyers and sellers. 
B) Efficiency refers to minimizing the price paid by buyers;equality refers to maximizing the gains from trade among buyers and sellers. 
C) Efficiency refers to maximizing the size of the pie;equality refers to producing a pie of a given size at the least possible cost. 
D) Efficiency refers to maximizing the size of the pie;equality refers to distributing the pie fairly among members of society. 
A) Efficiency refers to maximizing the number of trades among buyers and sellers;equality refers to maximizing the gains from trade among buyers and sellers. 
B) Efficiency refers to minimizing the price paid by buyers;equality refers to maximizing the gains from trade among buyers and sellers. 
C) Efficiency refers to maximizing the size of the pie;equality refers to producing a pie of a given size at the least possible cost. 
D) Efficiency refers to maximizing the size of the pie;equality refers to distributing the pie fairly among members of society.

Question 18

Figure 7-27  
-Refer to Figure 7-27.Buyers who value this good more than the equilibrium price are represented by which line segment?

Accepted Answer

A) AC. 
B) CK. 
C) BC. 
D) CH. 
A) AC. 
B) CK. 
C) BC. 
D) CH.

Question 19

Efficiency is attained when

Accepted Answer

A) total surplus is maximized. 
B) producer surplus is maximized. 
C) all resources are being used. 
D) consumer surplus is maximized and producer surplus is minimized. 
A) total surplus is maximized. 
B) producer surplus is maximized. 
C) all resources are being used. 
D) consumer surplus is maximized and producer surplus is minimized.

Question 20

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

Accepted Answer

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

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

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

Figure 7-28 -Refer to Figure 7-28.At the quantity Q3,

Figure 7-27 -Refer to Figure 7-27.Buyers who value this good less than the equilibrium price are represented by which line segment?

Total surplus in a market is equal to

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

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

Figure 7-24 -Refer to Figure 7-24.At equilibrium,consumer surplus is

Inefficiency exists in an economy when a good is

Tomato sauce and spaghetti noodles are complementary goods.A decrease in the price of tomatoes will

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

Total surplus is

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

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

Hot dogs and hot dog buns are complements.An increase in the price of flour used to make hot dogs buns will

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

The distinction between efficiency and equality can be described as follows:

Figure 7-27 -Refer to Figure 7-27.Buyers who value this good more than the equilibrium price are represented by which line segment?

Efficiency is attained when

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

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

Application International Trade: Part B