Question 1

Total surplus is represented by the area

Accepted Answer

A)  under the demand curve and above the price. 
B)  above the supply curve and up to the price. 
C)  under the supply curve and up to the price. 
D)  between the demand and supply curves up to the point of equilibrium. 
A)  under the demand curve and above the price. 
B)  above the supply curve and up to the price. 
C)  under the supply curve and up to the price. 
D)  between the demand and supply curves up to the point of equilibrium.

Question 2

Figure 7-13  
-Refer to Figure 7-13. If the equilibrium price rises from $60 to $120, what is the producer surplus to new producer s in the market?

Accepted Answer

A)  $1,200 
B)  $2,400 
C)  $3,600 
D)  $4,800 
A)  $1,200 
B)  $2,400 
C)  $3,600 
D)  $4,800

Question 3

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 4

The area below the demand curve and above the supply curve measures the producer surplus in a market.

Accepted Answer

A) True 
 B)False

Question 5

Suppose consumer income increases. If grass seed is a normal good, the equilibrium price of grass seed will

Accepted Answer

A)  decrease, and producer surplus in the industry will decrease. 
B)  increase, and producer surplus in the industry will increase. 
C)  decrease, and producer surplus in the industry will increase. 
D)  increase, and producer surplus in the industry will decrease. 
A)  decrease, and producer surplus in the industry will decrease. 
B)  increase, and producer surplus in the industry will increase. 
C)  decrease, and producer surplus in the industry will increase. 
D)  increase, and producer surplus in the industry will decrease.

Question 6

When markets fail, public policy can

Accepted Answer

A)  do nothing to improve the situation. 
B)  potentially remedy the problem and increase economic efficiency. 
C)  always remedy the problem and increase economic efficiency. 
D)  in theory, remedy the problem, but in practice, public policy has proven to be ineffective. 
A)  do nothing to improve the situation. 
B)  potentially remedy the problem and increase economic efficiency. 
C)  always remedy the problem and increase economic efficiency. 
D)  in theory, remedy the problem, but in practice, public policy has proven to be ineffective.

Question 7

Table 7-10
The only four consumers in a market have the following willingness to pay for a good:
Buyer Willingness to Pay
  
-Refer to Table 7-10. If there is only one unit of the good available for purchase, and if the buyers bid against each other for the right to purchase it, then the good will sell for

Accepted Answer

A)  $12 or slightly less 
B)  $15 or slightly more 
C)  $19 or slightly more 
D)  $27 or slightly less 
A)  $12 or slightly less 
B)  $15 or slightly more 
C)  $19 or slightly more 
D)  $27 or slightly less

Question 8

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

Question 9

The welfare of sellers is measured by

Accepted Answer

A)  consumer surplus. 
B)  producer surplus. 
C)  total surplus. 
D)  price. 
A)  consumer surplus. 
B)  producer surplus. 
C)  total surplus. 
D)  price.

Question 10

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 11

Figure 7-16  
-Refer to Figure 7-16. Suppose the price of the good is $450. Then, on the first unit of the good that is sold, producer surplus is

Accepted Answer

A)  $250, and on the second unit of the good that is sold, producer surplus is $100. 
B)  $250, and on the second unit of the good that is sold, producer surplus is $150. 
C)  $350, and on the second unit of the good that is sold, producer surplus is $100. 
D)  $350, and on the second unit of the good that is sold, producer surplus is $150. 
A)  $250, and on the second unit of the good that is sold, producer surplus is $100. 
B)  $250, and on the second unit of the good that is sold, producer surplus is $150. 
C)  $350, and on the second unit of the good that is sold, producer surplus is $100. 
D)  $350, and on the second unit of the good that is sold, producer surplus is $150.

Question 12

Which of the following equations is valid?

Accepted Answer

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

Question 13

Figure 7-20  
-Refer to Figure 7-20. For quantities greater than M, the value to the marginal buyer is

Accepted Answer

A)  greater than the cost to the marginal seller, so increasing the quantity increases total surplus. 
B)  less than the cost to the marginal seller, so increasing the quantity increases total surplus. 
C)  greater than the cost to the marginal seller, so decreasing the quantity increases total surplus. 
D)  less than the cost to the marginal seller, so decreasing the quantity increases total surplus. 
A)  greater than the cost to the marginal seller, so increasing the quantity increases total surplus. 
B)  less than the cost to the marginal seller, so increasing the quantity increases total surplus. 
C)  greater than the cost to the marginal seller, so decreasing the quantity increases total surplus. 
D)  less than the cost to the marginal seller, so decreasing the quantity increases total surplus.

Question 14

Figure 7-30  
-Refer to Figure 7-30. If the market equilibrium price falls from $120 to $80, how much is the increase in consumer surplus to the consumers who were initially in the market at the $120 price?

Accepted Answer

Consumer surplus inc

Question 15

Table 7-7
  
-Refer to Table 7-7. You have four essentially identical extra tickets to the Midwest Regional Sweet 16 game in the men's NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You offer to sell the tickets for $400. How many tickets do you sell, and what is the total consumer surplus in the market?

Accepted Answer

A)  one ticket; $100 
B)  two tickets; $100 
C)  two tickets; $0 
D)  three tickets; $0 
A)  one ticket; $100 
B)  two tickets; $100 
C)  two tickets; $0 
D)  three tickets; $0

Question 16

Figure 7-25  
-Refer to Figure 7-25. Suppose the government imposes a price ceiling of $16 in this market. If the buyers with the highest willingness to pay purchase the good, then total surplus will be

Accepted Answer

A)  $256. 
B)  $768. 
C)  $1,024. 
D)  $1,280. 
A)  $256. 
B)  $768. 
C)  $1,024. 
D)  $1,280.

Question 17

Figure 7-33  
-Refer to Figure 7-33. How much is total consumer surplus in this market at the equilibrium price?

Accepted Answer

Total consumer surpl

Question 18

Scenario 7-1
Suppose market demand is given by the equation  
-Refer to Scenario 7-1. If the market equilibrium price rises from $10 to $15, what is the change in total consumer surplus in the market?

Accepted Answer

Consumer s

Question 19

Figure 7-22  
-Refer to Figure 7-22. The efficient price is

Accepted Answer

A)  $80, and the efficient quantity is 50. 
B)  $70, and the efficient quantity is 60. 
C)  $70, and the efficient quantity is 100. 
D)  $50, and the efficient quantity is 60. 
A)  $80, and the efficient quantity is 50. 
B)  $70, and the efficient quantity is 60. 
C)  $70, and the efficient quantity is 100. 
D)  $50, and the efficient quantity is 60.

Question 20

Connie can clean windows in large office buildings at a cost of $1 per window. The market price for window- cleaning services is $3 per window. If Connie cleans 100 windows, her producer surplus is $100.

Accepted Answer

A) True 
 B)False

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

Total surplus is represented by the area

Figure 7-13 -Refer to Figure 7-13. If the equilibrium price rises from $60 to $120, what is the producer surplus to new producer s in the market?

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

The area below the demand curve and above the supply curve measures the producer surplus in a market.

Suppose consumer income increases. If grass seed is a normal good, the equilibrium price of grass seed will

When markets fail, public policy can

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

The welfare of sellers is measured by

Total surplus in a market is equal to

Figure 7-16 -Refer to Figure 7-16. Suppose the price of the good is $450. Then, on the first unit of the good that is sold, producer surplus is

Which of the following equations is valid?

Figure 7-20 -Refer to Figure 7-20. For quantities greater than M, the value to the marginal buyer is

Figure 7-30 -Refer to Figure 7-30. If the market equilibrium price falls from $120 to $80, how much is the increase in consumer surplus to the consumers who were initially in the market at the $120 price?

Figure 7-25 -Refer to Figure 7-25. Suppose the government imposes a price ceiling of $16 in this market. If the buyers with the highest willingness to pay purchase the good, then total surplus will be

Figure 7-33 -Refer to Figure 7-33. How much is total consumer surplus in this market at the equilibrium price?

Scenario 7-1 Suppose market demand is given by the equation -Refer to Scenario 7-1. If the market equilibrium price rises from $10 to $15, what is the change in total consumer surplus in the market?

Figure 7-22 -Refer to Figure 7-22. The efficient price is

Connie can clean windows in large office buildings at a cost of $1 per window. The market price for window- cleaning services is $3 per window. If Connie cleans 100 windows, her producer surplus is $100.

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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