Question 1

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 2

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. Who experiences the largest loss of consumer surplus when the price of an orange increases from $0.70 to $1.40?

Accepted Answer

A)  Allison 
B)  Bob 
C)  Charisse 
D)  All three individuals experience the same loss of consumer surplus. 
A)  Allison 
B)  Bob 
C)  Charisse 
D)  All three individuals experience the same loss of consumer surplus.

Question 3

Figure 7-21  
-Refer to Figure 7-21. When the price is P1, area A represents

Accepted Answer

A)  total benefit. 
B)  producer surplus. 
C)  consumer surplus. 
D)  None of the above is correct. 
A)  total benefit. 
B)  producer surplus. 
C)  consumer surplus. 
D)  None of the above is correct.

Question 4

Table 7-9
During the last two days, Chad purchased a latte from two different stores. The table below shows Chad's willingness to pay on each day and his consumer surplus from each purchase.
  
-Refer to Table 7-9. The price that Chad paid for a latte on the first day is

Accepted Answer

A)  $3.75. 
B)  $6.25. 
C)  $5.00. 
D)  $5.50. 
A)  $3.75. 
B)  $6.25. 
C)  $5.00. 
D)  $5.50.

Question 5

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

Accepted Answer

A)  $44. 
B)  $56. 
C)  $72. 
D)  $96. 
A)  $44. 
B)  $56. 
C)  $72. 
D)  $96.

Question 6

If the United States legally allowed for a market in transplant organs, it is estimated that one kidney would sell for at least $100,000.

Accepted Answer

A) True 
 B)False

Question 7

Unless markets are perfectly competitive, they may fail to maximize the total benefits to buyers and sellers.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not correct?

Accepted Answer

A)  Market power can cause markets to be inefficient. 
B)  When the decisions of buyers and sellers affect nonparticipants, markets may be inefficient. 
C)  The tools of welfare economics cannot help economists when markets are inefficient. 
D)  Externalities can cause markets to be inefficient. 
A)  Market power can cause markets to be inefficient. 
B)  When the decisions of buyers and sellers affect nonparticipants, markets may be inefficient. 
C)  The tools of welfare economics cannot help economists when markets are inefficient. 
D)  Externalities can cause markets to be inefficient.

Question 9

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 10

Table 7-17
  
-Refer to Table 7-17. At a price of $2.00, total surplus is

Accepted Answer

A)  larger than it would be at the equilibrium price. 
B)  smaller than it would be at the equilibrium price. 
C)  the same as it would be at the equilibrium price. 
D)  There is insufficient information to make this determination. 
A)  larger than it would be at the equilibrium price. 
B)  smaller than it would be at the equilibrium price. 
C)  the same as it would be at the equilibrium price. 
D)  There is insufficient information to make this determination.

Question 11

Tom tunes pianos in his spare time for extra income. Buyers of his service are willing to pay $155 per tuning. One particular week, Tom is willing to tune the first piano for $120, the second piano for $125, the third piano for $140, and the fourth piano for $160. Assume Tom is rational in deciding how many pianos to tune. His producer surplus is

Accepted Answer

A)  $95. 
B)  $80. 
C)  $75. 
D)  $60. 
A)  $95. 
B)  $80. 
C)  $75. 
D)  $60.

Question 12

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

Accepted Answer

A)  the imposition of a binding price ceiling in the market 
B)  buyers expect the price of the good to be lower next month 
C)  the price of a substitute increases 
D)  income increases and buyers consider the good to be inferior 
A)  the imposition of a binding price ceiling in the market 
B)  buyers expect the price of the good to be lower next month 
C)  the price of a substitute increases 
D)  income increases and buyers consider the good to be inferior

Question 13

Figure 7-22  
-Refer to Figure 7-22. At the equilibrium price, producer surplus is

Accepted Answer

A)  $5,000. 
B)  $2,500. 
C)  $3,500. 
D)  $1,750. 
A)  $5,000. 
B)  $2,500. 
C)  $3,500. 
D)  $1,750.

Question 14

Kristi and Rebecca sell lemonade on the corner for $0.50 per cup. It costs them $0.10 to make each cup. On a certain day, their producer surplus is $20. How many cups did Kristi and Rebecca sell?

Accepted Answer

A)  40. 
B)  200. 
C)  8. 
D)  50. 
A)  40. 
B)  200. 
C)  8. 
D)  50.

Question 15

Figure 7-33  
-Refer to Figure 7-33. Suppose demand shifts such that consumers wish to purchase 12 fewer units at every price.
How much is total producer surplus in this market at the new equilibrium price?

Accepted Answer

Total producer surpl

Question 16

Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $250. His consumer surplus is

Accepted Answer

A)  $650. 
B)  $150. 
C)  $250. 
D)  $400. 
A)  $650. 
B)  $150. 
C)  $250. 
D)  $400.

Question 17

Willingness to pay

Accepted Answer

A)  measures the value that a buyer places on a good. 
B)  is the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept. 
C)  is the maximum amount a buyer is willing to pay minus the minimum amount a seller is willing to accept. 
D)  is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. 
A)  measures the value that a buyer places on a good. 
B)  is the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept. 
C)  is the maximum amount a buyer is willing to pay minus the minimum amount a seller is willing to accept. 
D)  is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

Question 18

Figure 7-3  
-Refer to Figure 7-3. When the price is P2, consumer surplus is

Accepted Answer

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

Question 19

Table 7-7
  
-Refer to Table 7-7. You have an extra ticket 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 hold an auction to sell the ticket. Michael bids $410 for the ticket, and you sell him the ticket. What is his consumer surplus?

Accepted Answer

A)  $410 
B)  $90 
C)  $10 
D)  0 
A)  $410 
B)  $90 
C)  $10 
D)  0

Question 20

If the government allowed a free market for transplant organs such as kidneys to exist, the

Accepted Answer

A)  shortage of organs would be eliminated, and there would be no surplus of organs. 
B)  shortage of organs would be eliminated, but a surplus of organs would develop. 
C)  shortage of organs would persist. 
D)  overall well-being of society would remain unchanged. 
A)  shortage of organs would be eliminated, and there would be no surplus of organs. 
B)  shortage of organs would be eliminated, but a surplus of organs would develop. 
C)  shortage of organs would persist. 
D)  overall well-being of society would remain unchanged.

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

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

Figure 7-21 -Refer to Figure 7-21. When the price is P1, area A represents

Table 7-9 During the last two days, Chad purchased a latte from two different stores. The table below shows Chad's willingness to pay on each day and his consumer surplus from each purchase. -Refer to Table 7-9. The price that Chad paid for a latte on the first day is

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

If the United States legally allowed for a market in transplant organs, it is estimated that one kidney would sell for at least $100,000.

Unless markets are perfectly competitive, they may fail to maximize the total benefits to buyers and sellers.

Which of the following is not correct?

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

Table 7-17 -Refer to Table 7-17. At a price of $2.00, total surplus is

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

Figure 7-22 -Refer to Figure 7-22. At the equilibrium price, producer surplus is

Kristi and Rebecca sell lemonade on the corner for $0.50 per cup. It costs them $0.10 to make each cup. On a certain day, their producer surplus is $20. How many cups did Kristi and Rebecca sell?

Figure 7-33 -Refer to Figure 7-33. Suppose demand shifts such that consumers wish to purchase 12 fewer units at every price. How much is total producer surplus in this market at the new equilibrium price?

Brock is willing to pay $400 for a new suit, but he is able to buy the suit for $250. His consumer surplus is

Willingness to pay

Figure 7-3 -Refer to Figure 7-3. When the price is P2, consumer surplus is

If the government allowed a free market for transplant organs such as kidneys to exist, the

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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