Question 1

Figure 7-15  
-Refer to Figure 7-15. Area A represents

Accepted Answer

A)  producer surplus to new producers entering the market as the result of an increase in price from P1 to P2. 
B)  the increase in consumer surplus that results from an upward-sloping supply curve. 
C)  the increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2. 
D)  the increase in producer surplus to those producers already in the market when the price increases from P1 to P2. 
A)  producer surplus to new producers entering the market as the result of an increase in price from P1 to P2. 
B)  the increase in consumer surplus that results from an upward-sloping supply curve. 
C)  the increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2. 
D)  the increase in producer surplus to those producers already in the market when the price increases from P1 to P2.

Question 2

Producer surplus equals the

Accepted Answer

A)  value to buyers minus the amount paid by buyers. 
B)  value to buyers minus the cost to sellers. 
C)  amount received by sellers minus the cost to sellers. 
D)  amount received by sellers minus the amount paid by buyers. 
A)  value to buyers minus the amount paid by buyers. 
B)  value to buyers minus the cost to sellers. 
C)  amount received by sellers minus the cost to sellers. 
D)  amount received by sellers minus the amount paid by buyers.

Question 3

Table 7-6
For each of three potential buyers of apples, the table displays the willingness to pay for the first three apples of the day. Assume Xavier, Yadier, and Zavi are the only three buyers of apples, and only three apples can be supplied per day.
  
-Refer to Table 7-6. If the market price of an apple is $1.40, then the market quantity of apples demanded per day is

Accepted Answer

A)  1. 
B)  2. 
C)  3. 
D)  4. 
A)  1. 
B)  2. 
C)  3. 
D)  4.

Question 4

Bob purchases a book, and his consumer surplus is $3. If Bob is willing to pay $8 for the book, then the price of the book must be

Accepted Answer

A)  $3. 
B)  $8. 
C)  $5. 
D)  $11. 
A)  $3. 
B)  $8. 
C)  $5. 
D)  $11.

Question 5

Figure 7-17  
-Refer to Figure 7-17. If the supply curve is S and the demand curve is D, what is total producer surplus at the equilibrium price?

Accepted Answer

A)  $202.50 
B)  $405 
C)  $810 
D)  $1,215 
A)  $202.50 
B)  $405 
C)  $810 
D)  $1,215

Question 6

Table 7-6
For each of three potential buyers of apples, the table displays the willingness to pay for the first three apples of the day. Assume Xavier, Yadier, and Zavi are the only three buyers of apples, and only three apples can be supplied per day.
  
-Refer to Table 7-6. If the market price of an apple increases from $1.40 to $1.60, then consumer surplus

Accepted Answer

A)  decreases by $0.15. 
B)  decreases by $0.30. 
C)  decreases by $0.45. 
D)  increases by $0.15. 
A)  decreases by $0.15. 
B)  decreases by $0.30. 
C)  decreases by $0.45. 
D)  increases by $0.15.

Question 7

Total surplus is represented by the area below the

Accepted Answer

A)  demand curve and above the price. 
B)  price and up to the point of equilibrium. 
C)  demand curve and above the supply curve, up to the equilibrium quantity. 
D)  demand curve and above the horizontal axis, up to the equilibrium quantity. 
A)  demand curve and above the price. 
B)  price and up to the point of equilibrium. 
C)  demand curve and above the supply curve, up to the equilibrium quantity. 
D)  demand curve and above the horizontal axis, up to the equilibrium quantity.

Question 8

Producer surplus directly measures

Accepted Answer

A)  the well-being of sellers. 
B)  production costs. 
C)  excess demand. 
D)  unsold inventories. 
A)  the well-being of sellers. 
B)  production costs. 
C)  excess demand. 
D)  unsold inventories.

Question 9

Table 7-6
For each of three potential buyers of apples, the table displays the willingness to pay for the first three apples of the day. Assume Xavier, Yadier, and Zavi are the only three buyers of apples, and only three apples can be supplied per day.
  
-Refer to Table 7-6. If the market price of an apple is $1.40, then consumer surplus amounts to

Accepted Answer

A)  $0.60. 
B)  $1.20. 
C) $1.40. 
D)  $3.40 
A)  $0.60. 
B)  $1.20. 
C) $1.40. 
D)  $3.40

Question 10

Figure 7-20  
-Refer to Figure 7-20. For quantities less 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 11

Suppose that Firms A and B each produce high-resolution computer monitors, but Firm A can do so at a lower cost. Cassie and David each want to purchase a high-resolution computer monitor, but David is willing to pay more than Cassie. If Firm A produces a monitor that Cassie buys but David does not, then the market outcome illustrates which of the following principles?
i. Free markets allocate the supply of goods to the buyers who value them most highly, as measured by their willingness to pay.
ii. Free markets allocate the demand for goods to the sellers who can produce them at the least cost.

Accepted Answer

A)  i) only 
B)  ii) only 
C)  both i) and ii) 
D)  neither i) nor ii) 
A)  i) only 
B)  ii) only 
C)  both i) and ii) 
D)  neither i) nor ii)

Question 12

If the government imposes a binding price ceiling in a market, then the producer surplus in that market will increase.

Accepted Answer

A) True 
 B)False

Question 13

Caroline sharpens knives in her spare time for extra income. Buyers of her service are willing to pay $2.95 per knife for as many knives as Caroline is willing to sharpen. On a particular day, she is willing to sharpen the first knife for $2.00, the second knife for $2.25, the third knife for $2.75, and the fourth knife for $3.50. Assume Caroline is rational in deciding how many knives to sharpen. Her producer surplus is

Accepted Answer

A)  $0.95. 
B)  $1.15. 
C)  $1.30. 
D)  $1.85. 
A)  $0.95. 
B)  $1.15. 
C)  $1.30. 
D)  $1.85.

Question 14

One of the basic principles of economics is that markets are usually a good way to organize economic activity. This principle is explained by the study of

Accepted Answer

A)  factor markets. 
B)  energy markets. 
C)  welfare economics. 
D)  labor economics. 
A)  factor markets. 
B)  energy markets. 
C)  welfare economics. 
D)  labor economics.

Question 15

Figure 7-3  
-Refer to Figure 7-3. When the price rises from P1 to P2, consumer surplus

Accepted Answer

A)  increases by an amount equal to A. 
B)  decreases by an amount equal to B+C. 
C)  increases by an amount equal to B+C. 
D)  decreases by an amount equal to C. 
A)  increases by an amount equal to A. 
B)  decreases by an amount equal to B+C. 
C)  increases by an amount equal to B+C. 
D)  decreases by an amount equal to C.

Question 16

Tomato sauce and spaghetti noodles are complementary goods. A decrease in the price of tomatoes will

Accepted Answer

A)  increase consumer surplus in the market for tomato sauce and decrease producer surplus in the market for spaghetti noodles. 
B)  increase consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles. 
C)  decrease consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles. 
D)  decrease consumer surplus in the market for tomato sauce and decrease producer surplus in the market for spaghetti noodles. 
A)  increase consumer surplus in the market for tomato sauce and decrease producer surplus in the market for spaghetti noodles. 
B)  increase consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles. 
C)  decrease consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles. 
D)  decrease consumer surplus in the market for tomato sauce and decrease producer surplus in the market for spaghetti noodles.

Question 17

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. Which of the following statements is correct?

Accepted Answer

A)  Neither Bob's consumer surplus nor Charisse's consumer surplus can exceed Allison's consumer surplus, for any price of an orange. 
B)  All three individuals will buy at least one orange only if the price of an orange is less than $0.25. 
C)  If the price of an orange is $0.60, then consumer surplus is $4.90. 
D)  All of the above are correct. 
A)  Neither Bob's consumer surplus nor Charisse's consumer surplus can exceed Allison's consumer surplus, for any price of an orange. 
B)  All three individuals will buy at least one orange only if the price of an orange is less than $0.25. 
C)  If the price of an orange is $0.60, then consumer surplus is $4.90. 
D)  All of the above are correct.

Question 18

Figure 7-4  
-Refer to Figure 7-4. Which area represents consumer surplus at a price of P1?

Accepted Answer

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

Question 19

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 new buyers entering the market?

Accepted Answer

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

Question 20

If the government removes a binding price ceiling in a market, then the producer surplus in that market will increase.

Accepted Answer

A) True 
 B)False

Figure 7-15 -Refer to Figure 7-15. Area A represents

Producer surplus equals the

Bob purchases a book, and his consumer surplus is $3. If Bob is willing to pay $8 for the book, then the price of the book must be

Figure 7-17 -Refer to Figure 7-17. If the supply curve is S and the demand curve is D, what is total producer surplus at the equilibrium price?

Total surplus is represented by the area below the

Producer surplus directly measures

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

If the government imposes a binding price ceiling in a market, then the producer surplus in that market will increase.

One of the basic principles of economics is that markets are usually a good way to organize economic activity. This principle is explained by the study of

Figure 7-3 -Refer to Figure 7-3. When the price rises from P1 to P2, consumer surplus

Tomato sauce and spaghetti noodles are complementary goods. A decrease in the price of tomatoes will

Figure 7-4 -Refer to Figure 7-4. Which area represents consumer surplus at a price of P1?

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 new buyers entering the market?

If the government removes a binding price ceiling in a market, then the producer surplus in that market will increase.

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

Filters

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

Figure 7-15 -Refer to Figure 7-15. Area A represents

Producer surplus equals the

Bob purchases a book, and his consumer surplus is $3. If Bob is willing to pay $8 for the book, then the price of the book must be

Figure 7-17 -Refer to Figure 7-17. If the supply curve is S and the demand curve is D, what is total producer surplus at the equilibrium price?

Total surplus is represented by the area below the

Producer surplus directly measures

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

If the government imposes a binding price ceiling in a market, then the producer surplus in that market will increase.

One of the basic principles of economics is that markets are usually a good way to organize economic activity. This principle is explained by the study of

Figure 7-3 -Refer to Figure 7-3. When the price rises from P1 to P2, consumer surplus

Tomato sauce and spaghetti noodles are complementary goods. A decrease in the price of tomatoes will

Figure 7-4 -Refer to Figure 7-4. Which area represents consumer surplus at a price of P1?

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 new buyers entering the market?

If the government removes a binding price ceiling in a market, then the producer surplus in that market will increase.

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

Filters