Question 1

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.

Question 2

Producer surplus is the area

Accepted Answer

A)  under the supply curve. 
B)  between the supply and demand curves. 
C)  below the price and above the supply curve. 
D)  under the demand curve and above the price. 
A)  under the supply curve. 
B)  between the supply and demand curves. 
C)  below the price and above the supply curve. 
D)  under the demand curve and above the price.

Question 3

Consumer surplus can be measured as the area between the demand curve and the supply curve.

Accepted Answer

A) True 
 B)False

Question 4

Table 7-17
  
-Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. At equilibrium, consumer surplus is

Accepted Answer

A)  $24. 
B)  $36. 
C)  $42. 
D)  $48. 
A)  $24. 
B)  $36. 
C)  $42. 
D)  $48.

Question 5

Table 7-1
  
-Refer to Table 7-1. If the price of the product is $90, then who would be willing to purchase the product?

Accepted Answer

A)  Calvin 
B)  Calvin and Sam 
C)  Calvin, Sam, and Andrew 
D)  Calvin, Sam, Andrew, and Lori 
A)  Calvin 
B)  Calvin and Sam 
C)  Calvin, Sam, and Andrew 
D)  Calvin, Sam, Andrew, and Lori

Question 6

All else equal, an increase in demand will always increase consumer surplus.

Accepted Answer

A) True 
 B)False

Question 7

Figure 7-24  
-Refer to Figure 7-24. If 6 units of the good are produced and sold, then

Accepted Answer

A)  consumer surplus is greater than producer surplus. 
B)  producer surplus is maximized. 
C)  the sum of consumer surplus and producer surplus is maximized. 
D)  consumer surplus equals producer surplus. 
A)  consumer surplus is greater than producer surplus. 
B)  producer surplus is maximized. 
C)  the sum of consumer surplus and producer surplus is maximized. 
D)  consumer surplus equals producer surplus.

Question 8

Figure 7-22  
-Refer to Figure 7-22. Assume demand increases, which causes the equilibrium price to increase from $50 to $70. The increase in producer surplus due to new producers entering the market would be

Accepted Answer

A)  $400. 
B)  $800. 
C)  $1,200. 
D)  $900. 
A)  $400. 
B)  $800. 
C)  $1,200. 
D)  $900.

Question 9

Corn chips and potato chips are substitutes. Good weather that sharply increases the corn harvest would

Accepted Answer

A)  increase consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips. 
B)  increase consumer surplus in the market for corn chips and increase producer surplus in the market for potato chips. 
C)  decrease consumer surplus in the market for corn chips and increase producer surplus in the market for potato chips. 
D)  decrease consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips. 
A)  increase consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips. 
B)  increase consumer surplus in the market for corn chips and increase producer surplus in the market for potato chips. 
C)  decrease consumer surplus in the market for corn chips and increase producer surplus in the market for potato chips. 
D)  decrease consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips.

Question 10

Figure 7-9  
-Refer to Figure 7-9. If producer surplus is $19, then the price of the good is

Accepted Answer

A)  $11.50. 
B)  $14.50. 
C)  $13.50. 
D)  $9.75. 
A)  $11.50. 
B)  $14.50. 
C)  $13.50. 
D)  $9.75.

Question 11

Figure 7-16  
-Refer to Figure 7-16. If the price of the good is $500, then producer surplus amounts to

Accepted Answer

A)  $450. 
B)  $575. 
C)  $700. 
D)  $800. 
A)  $450. 
B)  $575. 
C)  $700. 
D)  $800.

Question 12

Figure 7-5  
-Refer to Figure 7-5. If the price of the good is $12, then consumer surplus is

Accepted Answer

A)  $9. 
B)  $11. 
C)  $13. 
D)  $16. 
A)  $9. 
B)  $11. 
C)  $13. 
D)  $16.

Question 13

Joel has a 1966 Mustang, which he sells to Susie, an avid car collector. Susie is pleased since she paid $8,000 for the car but would have been willing to pay $11,000 for the car. Susie's consumer surplus is $2,000.

Accepted Answer

A) True 
 B)False

Question 14

Table 7-17
  
-Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, total surplus will be

Accepted Answer

A)  $42. 
B)  $48. 
C)  $54. 
D)  $60. 
A)  $42. 
B)  $48. 
C)  $54. 
D)  $60.

Question 15

Figure 7-22  
-Refer to Figure 7-22. Assume demand increases, which causes the equilibrium price to increase from $50 to $70. The increase in producer surplus would be

Accepted Answer

A)  $2,500. 
B)  $900. 
C)  $800. 
D)  $1,600. 
A)  $2,500. 
B)  $900. 
C)  $800. 
D)  $1,600.

Question 16

Even though participants in the economy are motivated by self-interest, the "invisible hand" of the marketplace guides this self-interest into promoting general economic well-being.

Accepted Answer

A) True 
 B)False

Question 17

Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?

Accepted Answer

A)  profits and costs to firms 
B)  consumer and producer surplus 
C)  the equilibrium price and quantity 
D)  incomes of and prices paid by buyers 
A)  profits and costs to firms 
B)  consumer and producer surplus 
C)  the equilibrium price and quantity 
D)  incomes of and prices paid by buyers

Question 18

Laissez-faire is a French expression which literally means

Accepted Answer

A)  to make do. 
B)  to get involved. 
C)  whatever works. 
D)  allow them to do. 
A)  to make do. 
B)  to get involved. 
C)  whatever works. 
D)  allow them to do.

Question 19

Table 7-3
The only four consumers in a market have the following willingness to pay for a good:
  
-Refer to Table 7-3. If there is only one unit of the good and if the buyers bid against each other for the right to purchase it, then the consumer surplus will be

Accepted Answer

A)  $0 or slightly more. 
B)  $10 or slightly less. 
C)  $30 or slightly more. 
D)  $45 or slightly less. 
A)  $0 or slightly more. 
B)  $10 or slightly less. 
C)  $30 or slightly more. 
D)  $45 or slightly less.

Question 20

Table 7-13
The numbers reveal the opportunity costs of providing 10 piano lessons of equal quality.
  
-Refer to Table 7-13. The equilibrium market price for 10 piano lessons is $300. What is the total producer surplus in the market?

Accepted Answer

A)  $50 
B)  $150 
C)  $1,050 
D)  $1,500 
A)  $50 
B)  $150 
C)  $1,050 
D)  $1,500

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

We can say that the allocation of resources is efficient if

Producer surplus is the area

Consumer surplus can be measured as the area between the demand curve and the supply curve.

Table 7-17 -Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. At equilibrium, consumer surplus is

Table 7-1 -Refer to Table 7-1. If the price of the product is $90, then who would be willing to purchase the product?

All else equal, an increase in demand will always increase consumer surplus.

Figure 7-24 -Refer to Figure 7-24. If 6 units of the good are produced and sold, then

Figure 7-22 -Refer to Figure 7-22. Assume demand increases, which causes the equilibrium price to increase from $50 to $70. The increase in producer surplus due to new producers entering the market would be

Corn chips and potato chips are substitutes. Good weather that sharply increases the corn harvest would

Figure 7-9 -Refer to Figure 7-9. If producer surplus is $19, then the price of the good is

Figure 7-16 -Refer to Figure 7-16. If the price of the good is $500, then producer surplus amounts to

Figure 7-5 -Refer to Figure 7-5. If the price of the good is $12, then consumer surplus is

Joel has a 1966 Mustang, which he sells to Susie, an avid car collector. Susie is pleased since she paid $8,000 for the car but would have been willing to pay $11,000 for the car. Susie's consumer surplus is $2,000.

Table 7-17 -Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, total surplus will be

Figure 7-22 -Refer to Figure 7-22. Assume demand increases, which causes the equilibrium price to increase from $50 to $70. The increase in producer surplus would be

Even though participants in the economy are motivated by self-interest, the "invisible hand" of the marketplace guides this self-interest into promoting general economic well-being.

Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?

Laissez-faire is a French expression which literally means

Table 7-3 The only four consumers in a market have the following willingness to pay for a good: -Refer to Table 7-3. If there is only one unit of the good and if the buyers bid against each other for the right to purchase it, then the consumer surplus will be

Table 7-13 The numbers reveal the opportunity costs of providing 10 piano lessons of equal quality. -Refer to Table 7-13. The equilibrium market price for 10 piano lessons is $300. What is the total producer surplus in the market?

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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