Question 1

The lower the price, the lower the consumer surplus, all else equal.

Accepted Answer

A) True 
 B)False

Question 2

When a buyer's willingness to pay for a good is equal to the price of the good, the

Accepted Answer

A)  buyer's consumer surplus for that good is maximized. 
B)  buyer will buy as much of the good as the buyer's budget allows. 
C)  price of the good exceeds the value that the buyer places on the good. 
D)  buyer is indifferent between buying the good and not buying it. 
A)  buyer's consumer surplus for that good is maximized. 
B)  buyer will buy as much of the good as the buyer's budget allows. 
C)  price of the good exceeds the value that the buyer places on the good. 
D)  buyer is indifferent between buying the good and not buying it.

Question 3

Market power and externalities are examples of

Accepted Answer

A)  laissez-faire economics. 
B)  public policy. 
C)  market failure. 
D)  welfare economics. 
A)  laissez-faire economics. 
B)  public policy. 
C)  market failure. 
D)  welfare economics.

Question 4

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. If the market price of an orange is $0.70, then the market quantity of oranges demanded per day is

Accepted Answer

A)  5. 
B)  6. 
C)  4. 
D)  7. 
A)  5. 
B)  6. 
C)  4. 
D)  7.

Question 5

Figure 7-23  
-Refer to Figure 7-23. At equilibrium, total surplus is represented by the area

Accepted Answer

A)  A+B+C. 
B)  A+B+D+F. 
C)  A+B+C+D+H+F. 
D)  A+B+C+D+H+F+G+I. 
A)  A+B+C. 
B)  A+B+D+F. 
C)  A+B+C+D+H+F. 
D)  A+B+C+D+H+F+G+I.

Question 6

Figure 7-4  
-Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers?

Accepted Answer

A)  BDF 
B)  AFG 
C)  BCGD 
D)  ABC 
A)  BDF 
B)  AFG 
C)  BCGD 
D)  ABC

Question 7

An example of normative analysis is studying

Accepted Answer

A)  how market forces produce equilibrium. 
B)  surpluses and shortages. 
C)  whether equilibrium outcomes are socially desirable. 
D)  income distributions. 
A)  how market forces produce equilibrium. 
B)  surpluses and shortages. 
C)  whether equilibrium outcomes are socially desirable. 
D)  income distributions.

Question 8

Producer surplus is the cost of production minus the amount a seller is paid.

Accepted Answer

A) True 
 B)False

Question 9

The maximum price that a buyer will pay for a good is called

Accepted Answer

A)  consumer surplus. 
B)  willingness to pay. 
C)  equilibrium. 
D)  efficiency. 
A)  consumer surplus. 
B)  willingness to pay. 
C)  equilibrium. 
D)  efficiency.

Question 10

Figure 7-6  
-Refer to Figure 7-6. If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by

Accepted Answer

A)  $200. 
B)  $400. 
C)  $600. 
D)  $800. 
A)  $200. 
B)  $400. 
C)  $600. 
D)  $800.

Question 11

The "invisible hand" refers to

Accepted Answer

A)  the marketplace guiding the self-interests of market participants into promoting general economic well-being. 
B)  the fact that social planners sometimes have to intervene, even in perfectly competitive markets, to make those markets more efficient. 
C)  the equality that results from market forces allocating the goods produced in the market. 
D)  the automatic maximization of consumer surplus in free markets. 
A)  the marketplace guiding the self-interests of market participants into promoting general economic well-being. 
B)  the fact that social planners sometimes have to intervene, even in perfectly competitive markets, to make those markets more efficient. 
C)  the equality that results from market forces allocating the goods produced in the market. 
D)  the automatic maximization of consumer surplus in free markets.

Question 12

Figure 7-18  
-Refer to Figure 7-18. If total surplus is $240 and consumer surplus is

Accepted Answer

A)  $100, then the price of the good is $130. 
B)  $130, then the price of the good is $120. 
C)  $160, then the price of the good is $100. 
D)  $120, then the price of the good is $90. 
A)  $100, then the price of the good is $130. 
B)  $130, then the price of the good is $120. 
C)  $160, then the price of the good is $100. 
D)  $120, then the price of the good is $90.

Question 13

Figure 7-10  
-Refer to Figure 7-10. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?

Accepted Answer

A)  BCG 
B)  ACH 
C)  DGH 
D)  ABGD 
A)  BCG 
B)  ACH 
C)  DGH 
D)  ABGD

Question 14

Figure 7-24  
-Refer to Figure 7-24. At equilibrium, producer surplus is measured by the area

Accepted Answer

A)  ABD. 
B)  ABF. 
C)  CDI. 
D)  BDF. 
A)  ABD. 
B)  ABF. 
C)  CDI. 
D)  BDF.

Question 15

Which of the following will cause a decrease in producer surplus?

Accepted Answer

A)  the imposition of a binding price ceiling in the market 
B)  an increase in the number of buyers of the good 
C)  income increases and buyers consider the good to be normal 
D)  the price of a complement decreases 
A)  the imposition of a binding price ceiling in the market 
B)  an increase in the number of buyers of the good 
C)  income increases and buyers consider the good to be normal 
D)  the price of a complement decreases

Question 16

A seller's willingness to sell is

Accepted Answer

A)  measured by the seller's cost of production. 
B)  related to her supply curve, just as a buyer's willingness to buy is related to his demand curve. 
C)  less than the price received if producer surplus is a positive number. 
D)  All of the above are correct. 
A)  measured by the seller's cost of production. 
B)  related to her supply curve, just as a buyer's willingness to buy is related to his demand curve. 
C)  less than the price received if producer surplus is a positive number. 
D)  All of the above are correct.

Question 17

Which of the following is correct?

Accepted Answer

A)  Consumer surplus refers to a situation in which there are more buyers than sellers in a market. 
B)  Producer surplus refers to a situation in which there are more sellers than buyers in a market. 
C)  Total surplus is measured as the area below the demand curve and above the supply curve, up to the equilibrium quantity. 
D)  All of the above are correct. 
A)  Consumer surplus refers to a situation in which there are more buyers than sellers in a market. 
B)  Producer surplus refers to a situation in which there are more sellers than buyers in a market. 
C)  Total surplus is measured as the area below the demand curve and above the supply curve, up to the equilibrium quantity. 
D)  All of the above are correct.

Question 18

If the United States changed its laws to allow for the legal sale of a kidney, which of the following is least likely to occur?

Accepted Answer

A)  The supply of kidneys would increase. 
B)  The shortage of kidneys would decrease. 
C)  Many lives would be saved. 
D)  The allocation of kidneys would be fair. 
A)  The supply of kidneys would increase. 
B)  The shortage of kidneys would decrease. 
C)  Many lives would be saved. 
D)  The allocation of kidneys would be fair.

Question 19

Consumer surplus is

Accepted Answer

A)  the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. 
B)  the amount a buyer is willing to pay for a good minus the cost of producing the good. 
C)  the amount by which the quantity supplied of a good exceeds the quantity demanded of the good. 
D)  a buyer's willingness to pay for a good plus the price of the good. 
A)  the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. 
B)  the amount a buyer is willing to pay for a good minus the cost of producing the good. 
C)  the amount by which the quantity supplied of a good exceeds the quantity demanded of the good. 
D)  a buyer's willingness to pay for a good plus the price of the good.

Question 20

Figure 7-24  
-Refer to Figure 7-24. If 10 units of the good are produced and sold, then

Accepted Answer

A)  the marginal cost to sellers exceeds the marginal value to buyers. 
B)  producer surplus is maximized. 
C)  total surplus is minimized. 
D)  the marginal value to buyers exceeds the marginal cost to sellers. 
A)  the marginal cost to sellers exceeds the marginal value to buyers. 
B)  producer surplus is maximized. 
C)  total surplus is minimized. 
D)  the marginal value to buyers exceeds the marginal cost to sellers.

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

The lower the price, the lower the consumer surplus, all else equal.

When a buyer's willingness to pay for a good is equal to the price of the good, the

Market power and externalities are examples of

Figure 7-23 -Refer to Figure 7-23. At equilibrium, total surplus is represented by the area

Figure 7-4 -Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers?

An example of normative analysis is studying

Producer surplus is the cost of production minus the amount a seller is paid.

The maximum price that a buyer will pay for a good is called

Figure 7-6 -Refer to Figure 7-6. If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by

The "invisible hand" refers to

Figure 7-18 -Refer to Figure 7-18. If total surplus is $240 and consumer surplus is

Figure 7-10 -Refer to Figure 7-10. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?

Figure 7-24 -Refer to Figure 7-24. At equilibrium, producer surplus is measured by the area

Which of the following will cause a decrease in producer surplus?

A seller's willingness to sell is

Which of the following is correct?

If the United States changed its laws to allow for the legal sale of a kidney, which of the following is least likely to occur?

Consumer surplus is

Figure 7-24 -Refer to Figure 7-24. If 10 units of the good are produced and sold, then

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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