Question 1

Figure 7-19  
-Refer to Figure 7-19. At the equilibrium price, producer surplus is

Accepted Answer

A)  $300. 
B)  $150. 
C)  $450. 
D)  $125. 
A)  $300. 
B)  $150. 
C)  $450. 
D)  $125.

Question 2

Figure 7-16  
-Refer to Figure 7-16. If the price of the good is $300, then producer surplus amounts to

Accepted Answer

A)  $100. 
B)  $200. 
C)  $300. 
D)  $400. 
A)  $100. 
B)  $200. 
C)  $300. 
D)  $400.

Question 3

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   By how much does total producer surplus increase as a result of this supply shift?

Accepted Answer

Total producer surplus prior t

Question 4

Market power refers to the

Accepted Answer

A)  side effects that may occur in a market. 
B)  government regulations imposed on the sellers in a market. 
C)  ability of market participants to influence price. 
D)  forces of supply and demand in determining equilibrium price. 
A)  side effects that may occur in a market. 
B)  government regulations imposed on the sellers in a market. 
C)  ability of market participants to influence price. 
D)  forces of supply and demand in determining equilibrium price.

Question 5

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 take bids from the sellers. Who offers the winning bid, and what does he offer to charge for the photography session?

Accepted Answer

A)  Steve; more than $400 but less than $450 
B)  Steve; $399 
C)  LeBron; more than $700 
D)  LeBron; more than $600 but less than $700 
A)  Steve; more than $400 but less than $450 
B)  Steve; $399 
C)  LeBron; more than $700 
D)  LeBron; more than $600 but less than $700

Question 6

Which of the following equations is not valid?

Accepted Answer

A)  Consumer surplus = Value to buyers - Amount paid by buyers 
B)  Producer surplus = Amount received by sellers - Cost to sellers 
C)  Total surplus = Value to buyers - Amount paid by buyers + Amount received by sellers - Costs of sellers 
D)  Total surplus = Value to sellers - Cost to sellers 
A)  Consumer surplus = Value to buyers - Amount paid by buyers 
B)  Producer surplus = Amount received by sellers - Cost to sellers 
C)  Total surplus = Value to buyers - Amount paid by buyers + Amount received by sellers - Costs of sellers 
D)  Total surplus = Value to sellers - Cost to sellers

Question 7

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 8

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 9

Table 7-16
The following table represents the costs of five possible sellers.
Seller Cost $)
  
-Refer to Table 7-16. If each producer has one unit available for sale, and if the market equilibrium price is $70, how much is the combined total cost of all participating sellers in the market?

Accepted Answer

A)  $100 
B)  $150 
C)  $250 
D)  $350 
A)  $100 
B)  $150 
C)  $250 
D)  $350

Question 10

Ray buys a new tractor for $118,000. He receives consumer surplus of $13,000 on his purchase. Ray's willingness to pay is

Accepted Answer

A)  $13,000. 
B)  $105,000. 
C)  $118,000. 
D)  $131,000. 
A)  $13,000. 
B)  $105,000. 
C)  $118,000. 
D)  $131,000.

Question 11

Which of the following statements is not correct?

Accepted Answer

A)  An invisible hand leads buyers and sellers to an equilibrium that maximizes total surplus. 
B)  Market power can cause markets to be inefficient. 
C)  Externalities can cause markets to be inefficient. 
D)  The invisible hand can remedy all types of market failures. 
A)  An invisible hand leads buyers and sellers to an equilibrium that maximizes total surplus. 
B)  Market power can cause markets to be inefficient. 
C)  Externalities can cause markets to be inefficient. 
D)  The invisible hand can remedy all types of market failures.

Question 12

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 13

Figure 7-17  
-Refer to Figure 7-17. If the demand curve is D and the supply curve shifts left from S to S', what is the change in producer surplus when comparing the new equilibrium with the original equilibrium?

Accepted Answer

A)  Producer surplus increases by $225. 
B)  Producer surplus increases by $675. 
C)  Producer surplus decreases by $225. 
D)  Producer surplus decreases by $675. 
A)  Producer surplus increases by $225. 
B)  Producer surplus increases by $675. 
C)  Producer surplus decreases by $225. 
D)  Producer surplus decreases by $675.

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

Efficiency is related to the size of the economic pie, whereas equality is related to how the pie gets sliced and distributed.

Accepted Answer

A) True 
 B)False

Question 16

ABC Company incurs a cost of 50 cents to produce a dozen eggs, while XYZ Company incurs a cost of 70 cents to produce a dozen eggs. Which of the following price increases would cause both companies to experience an increase in producer surplus?

Accepted Answer

A)  The price of a dozen eggs increases from 40 cents to 55 cents. 
B)  The price of a dozen eggs increases from 55 cents to 70 cents. 
C)  The price of a dozen eggs increases from 55 cents to 75 cents. 
D)  All of these price increases would cause both companies to experience a loss in producer surplus. 
A)  The price of a dozen eggs increases from 40 cents to 55 cents. 
B)  The price of a dozen eggs increases from 55 cents to 70 cents. 
C)  The price of a dozen eggs increases from 55 cents to 75 cents. 
D)  All of these price increases would cause both companies to experience a loss in producer surplus.

Question 17

Figure 7-22  
-Refer to Figure 7-22. If 110 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 buyers is greater than marginal value to sellers. 
D)  producer surplus is 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 buyers is greater than marginal value to sellers. 
D)  producer surplus is greater than consumer surplus.

Question 18

Figure 7-5  
-Refer to Figure 7-5. If the price of the good is $6, then consumer surplus is

Accepted Answer

A)  $16. 
B)  $24. 
C)  $30. 
D)  $36. 
A)  $16. 
B)  $24. 
C)  $30. 
D)  $36.

Question 19

Suppose there is an increase in supply that reduces market price. Consumer surplus increases because 1) consumer surplus received by existing buyers increases and 2) new buyers enter the market.

Accepted Answer

A) True 
 B)False

Question 20

At present, the maximum legal price for a human kidney is $0. The price of $0 maximizes

Accepted Answer

A)  consumer surplus but not producer surplus. 
B)  producer surplus but not consumer surplus. 
C)  both consumer and producer surplus. 
D)  neither consumer nor producer surplus. 
A)  consumer surplus but not producer surplus. 
B)  producer surplus but not consumer surplus. 
C)  both consumer and producer surplus. 
D)  neither consumer nor producer surplus.

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

Figure 7-19 -Refer to Figure 7-19. At the equilibrium price, producer surplus is

Figure 7-16 -Refer to Figure 7-16. If the price of the good is $300, then producer surplus amounts to

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 By how much does total producer surplus increase as a result of this supply shift?

Market power refers to the

Which of the following equations is not valid?

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

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

Table 7-16 The following table represents the costs of five possible sellers. Seller Cost $) -Refer to Table 7-16. If each producer has one unit available for sale, and if the market equilibrium price is $70, how much is the combined total cost of all participating sellers in the market?

Ray buys a new tractor for $118,000. He receives consumer surplus of $13,000 on his purchase. Ray's willingness to pay is

Which of the following statements is not correct?

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?

Figure 7-17 -Refer to Figure 7-17. If the demand curve is D and the supply curve shifts left from S to S', what is the change in producer surplus when comparing the new equilibrium with the original equilibrium?

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

Efficiency is related to the size of the economic pie, whereas equality is related to how the pie gets sliced and distributed.

ABC Company incurs a cost of 50 cents to produce a dozen eggs, while XYZ Company incurs a cost of 70 cents to produce a dozen eggs. Which of the following price increases would cause both companies to experience an increase in producer surplus?

Figure 7-22 -Refer to Figure 7-22. If 110 units of the good are bought and sold, then

Figure 7-5 -Refer to Figure 7-5. If the price of the good is $6, then consumer surplus is

Suppose there is an increase in supply that reduces market price. Consumer surplus increases because 1) consumer surplus received by existing buyers increases and 2) new buyers enter the market.

At present, the maximum legal price for a human kidney is $0. The price of $0 maximizes

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 Costs of Production

Firms in Competitive Markets

Monopoly

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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