Question 1

Figure 7-1  
-Refer to Figure 7-1. If the price of the good is $150, then consumer surplus amounts to

Accepted Answer

A)  $150. 
B)  $200. 
C)  $250. 
D)  $300. 
A)  $150. 
B)  $200. 
C)  $250. 
D)  $300.

Question 2

Table 7-13
The numbers reveal the opportunity costs of providing 10 piano lessons of equal quality.
  
-Refer to Table 7-13. You wish to purchase 10 piano lessons, so you take bids from each of the sellers. The bids are required to be rounded to the nearest dollar. You will not accept a bid below a seller's cost because you are concerned that the seller will not provide all 10 lessons. Your parents have given you $450 to spend on piano lessons. You believe that the sellers with higher opportunity costs offer higher quality lessons. You want the highest quality lessons that you can afford, but you can spend any remaining money on dinner with friends. From whom will you take lessons, and how much money will you spend?

Accepted Answer

A)  Peter; $450 
B)  Cindy; $450 
C)  Greg; $401 
D)  Cindy; $401 
A)  Peter; $450 
B)  Cindy; $450 
C)  Greg; $401 
D)  Cindy; $401

Question 3

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 4

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

Accepted Answer

A)  an increase in the production cost of the good 
B)  a technological improvement in the production of the good 
C)  a decrease in the number of sellers of the good 
D)  the imposition of a binding price floor in the market 
A)  an increase in the production cost of the good 
B)  a technological improvement in the production of the good 
C)  a decrease in the number of sellers of the good 
D)  the imposition of a binding price floor in the market

Question 5

A supply curve can be used to measure producer surplus because it reflects

Accepted Answer

A)  the actions of sellers. 
B)  quantity supplied. 
C)  sellers' costs. 
D)  the amount that will be purchased by consumers in the market. 
A)  the actions of sellers. 
B)  quantity supplied. 
C)  sellers' costs. 
D)  the amount that will be purchased by consumers in the market.

Question 6

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. The market quantity of oranges demanded per day is exactly 7 if the price of an orange, P, satisfies

Accepted Answer

A)  $0.60 < P < $0.75. 
B)  $0.60 < P < $2.00. 
C)  $0.25 < P < $0.75. 
D)  $0.25 < P < $0.60. 
A)  $0.60 < P < $0.75. 
B)  $0.60 < P < $2.00. 
C)  $0.25 < P < $0.75. 
D)  $0.25 < P < $0.60.

Question 7

Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for $3,000. Michael's willingness to pay is

Accepted Answer

A)  $500. 
B)  $3,000. 
C)  $3,500. 
D)  $6,500. 
A)  $500. 
B)  $3,000. 
C)  $3,500. 
D)  $6,500.

Question 8

Which of the following events would increase producer surplus?

Accepted Answer

A)  Sellers' costs stay the same and the price of the good increases. 
B)  Sellers' costs increase and the price of the good stays the same. 
C)  Sellers' costs increase and the price of the good decreases. 
D)  All of the above are correct. 
A)  Sellers' costs stay the same and the price of the good increases. 
B)  Sellers' costs increase and the price of the good stays the same. 
C)  Sellers' costs increase and the price of the good decreases. 
D)  All of the above are correct.

Question 9

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is

Accepted Answer

A)  zero. 
B)  negative, and the consumer would not purchase the product. 
C)  positive, and the consumer would purchase the product. 
D)  There is not enough information given to answer this question. 
A)  zero. 
B)  negative, and the consumer would not purchase the product. 
C)  positive, and the consumer would purchase the product. 
D)  There is not enough information given to answer this question.

Question 10

Figure 7-16  
-Refer to Figure 7-16. If the price of the good is $600, then

Accepted Answer

A)  consumer surplus is $800. 
B)  consumer surplus is $900. 
C)  producer surplus is $900. 
D)  producer surplus is $1,000. 
A)  consumer surplus is $800. 
B)  consumer surplus is $900. 
C)  producer surplus is $900. 
D)  producer surplus is $1,000.

Question 11

Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market

Accepted Answer

A)  decreases. 
B)  is unchanged. 
C)  increases. 
D)  may increase, decrease, or remain unchanged. 
A)  decreases. 
B)  is unchanged. 
C)  increases. 
D)  may increase, decrease, or remain unchanged.

Question 12

Figure 7-34  
-Refer to Figure 7-34. Suppose the government imposes a price floor at $10 per unit in this market. With the price floor, how much is total consumer surplus?

Accepted Answer

Total consumer surpl

Question 13

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 14

Which of the following statements is correct?

Accepted Answer

A)  Buyers always want to pay less and sellers always want to be paid more. 
B)  Buyers always want to pay less and sellers always want to be paid less. 
C)  Buyers always want to pay more and sellers always want to be paid more. 
D)  Buyers always want to pay more and sellers always want to be paid less. 
A)  Buyers always want to pay less and sellers always want to be paid more. 
B)  Buyers always want to pay less and sellers always want to be paid less. 
C)  Buyers always want to pay more and sellers always want to be paid more. 
D)  Buyers always want to pay more and sellers always want to be paid less.

Question 15

Producer surplus is the

Accepted Answer

A)  area under the supply curve to the left of the amount sold. 
B)  amount a seller is paid minus the cost of production. 
C)  area between the supply and demand curves, above the equilibrium price. 
D)  cost to sellers of participating in a market. 
A)  area under the supply curve to the left of the amount sold. 
B)  amount a seller is paid minus the cost of production. 
C)  area between the supply and demand curves, above the equilibrium price. 
D)  cost to sellers of participating in a market.

Question 16

Figure 7-3  
-Refer to Figure 7-3. When the price is P1, consumer surplus is

Accepted Answer

A)  A. 
B)  A+B. 
C)  A+B+C. 
D)  A+B+D. 
A)  A. 
B)  A+B. 
C)  A+B+C. 
D)  A+B+D.

Question 17

Figure 7-3  
-Refer to Figure 7-3. When the price rises from P1 to P2, which of the following statements is not true?

Accepted Answer

A)  The buyers who still buy the good are worse off because they now pay more. 
B)  Some buyers leave the market because they are not willing to buy the good at the higher price. 
C)  Buyers place a higher value on the good after the price increase. 
D)  Consumer surplus in the market falls. 
A)  The buyers who still buy the good are worse off because they now pay more. 
B)  Some buyers leave the market because they are not willing to buy the good at the higher price. 
C)  Buyers place a higher value on the good after the price increase. 
D)  Consumer surplus in the market falls.

Question 18

Five hundred units of good x are currently bought and sold. The marginal buyer is willing to pay $40 for the 500th unit, and the cost to the marginal seller is $35 for the 500th unit . We know that

Accepted Answer

A)  the equilibrium price of good x is somewhere between $35 and $40. 
B)  the equilibrium quantity of good x exceeds 500 units. 
C)  500 units is not an efficient quantity of good x. 
D)  All of the above are correct. 
A)  the equilibrium price of good x is somewhere between $35 and $40. 
B)  the equilibrium quantity of good x exceeds 500 units. 
C)  500 units is not an efficient quantity of good x. 
D)  All of the above are correct.

Question 19

Figure 7-34  
-Refer to Figure 7-34. Suppose there is initially a price ceiling set at $4 in this market. If the government removed the price ceiling, by how much would total producer surplus change?

Accepted Answer

Total producer surplus with th

Question 20

Figure 7-34  
-Refer to Figure 7-34. Suppose there is initially a price floor set at $10 in this market. If the government removed the price floor, by how much would total consumer surplus increase for those consumers who were purchasing the good when the price floor was in place?

Accepted Answer

Those consumers who were alrea

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

Figure 7-1 -Refer to Figure 7-1. If the price of the good is $150, then consumer surplus amounts to

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

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

A supply curve can be used to measure producer surplus because it reflects

Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for $3,000. Michael's willingness to pay is

Which of the following events would increase producer surplus?

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is

Figure 7-16 -Refer to Figure 7-16. If the price of the good is $600, then

Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market

Figure 7-34 -Refer to Figure 7-34. Suppose the government imposes a price floor at $10 per unit in this market. With the price floor, how much is total consumer surplus?

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

Which of the following statements is correct?

Producer surplus is the

Figure 7-3 -Refer to Figure 7-3. When the price is P1, consumer surplus is

Figure 7-3 -Refer to Figure 7-3. When the price rises from P1 to P2, which of the following statements is not true?

Five hundred units of good x are currently bought and sold. The marginal buyer is willing to pay $40 for the 500th unit, and the cost to the marginal seller is $35 for the 500th unit . We know that

Figure 7-34 -Refer to Figure 7-34. Suppose there is initially a price ceiling set at $4 in this market. If the government removed the price ceiling, by how much would total producer surplus change?

Figure 7-34 -Refer to Figure 7-34. Suppose there is initially a price floor set at $10 in this market. If the government removed the price floor, by how much would total consumer surplus increase for those consumers who were purchasing the good when the price floor was in place?

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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