Question 1

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 2

Total surplus is

Accepted Answer

A)  equal to consumer surplus minus producer surplus. 
B)  equal to the total value to buyers minus the total cost to sellers. 
C)  equal to consumers' willingness to pay plus producers' cost. 
D)  greater than the sum of consumer surplus plus producer surplus. 
A)  equal to consumer surplus minus producer surplus. 
B)  equal to the total value to buyers minus the total cost to sellers. 
C)  equal to consumers' willingness to pay plus producers' cost. 
D)  greater than the sum of consumer surplus plus producer surplus.

Question 3

Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

Accepted Answer

A) True 
 B)False

Question 4

Table 7-1
  
-Refer to Table 7-1. If the price of the product is $130, 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 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

Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,

Accepted Answer

A)  Henry experiences an increase in consumer surplus, but Janine does not. 
B)  Janine experiences an increase in consumer surplus, but Henry does not. 
C)  both Janine and Henry experience an increase in consumer surplus. 
D)  neither Janine nor Henry experiences an increase in consumer surplus. 
A)  Henry experiences an increase in consumer surplus, but Janine does not. 
B)  Janine experiences an increase in consumer surplus, but Henry does not. 
C)  both Janine and Henry experience an increase in consumer surplus. 
D)  neither Janine nor Henry experiences an increase in consumer surplus.

Question 7

The 2005 Boston Globe article discussing ticket scalping points out that the price people will pay for tickets will rise when

Accepted Answer

A)  supply and demand are both limited. 
B)  supply is limited and demand is not limited. 
C)  supply is limited and demand is not limited 
D)  supply and demand are both not limited 
A)  supply and demand are both limited. 
B)  supply is limited and demand is not limited. 
C)  supply is limited and demand is not limited 
D)  supply and demand are both not limited

Question 8

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 9

Figure 7-19  
-Refer to Figure 7-19. At the equilibrium price, producer surplus is

Accepted Answer

A)  $300. 
B)  $150. 
C)  $450. 
D)  $125. 
A)  $300. 
B)  $150. 
C)  $450. 
D)  $125.

Question 10

Economists tend to see ticket scalping as

Accepted Answer

A)  a way for a few to profit without producing anything of value. 
B)  an inequitable interference in the orderly process of ticket distribution. 
C)  a way of increasing the efficiency of ticket distribution. 
D)  an unproductive activity which should be made illegal everywhere. 
A)  a way for a few to profit without producing anything of value. 
B)  an inequitable interference in the orderly process of ticket distribution. 
C)  a way of increasing the efficiency of ticket distribution. 
D)  an unproductive activity which should be made illegal everywhere.

Question 11

Figure 7-10  
-Refer to Figure 7-10. Which area represents the increase in producer surplus when the price rises from P1 to P2 due to new producers entering the market?

Accepted Answer

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

Question 12

Table 7-11
The following table represents the costs of five possible sellers.
-Refer to Table 7-11. If the market price is $1,000, the producer surplus in the market is

Accepted Answer

A)  $1000. 
B)  $300. 
C)  $1,700. 
D)  $700. 
A)  $1000. 
B)  $300. 
C)  $1,700. 
D)  $700.

Question 13

Market failure is the inability of

Accepted Answer

A)  buyers to interact harmoniously with sellers in the market. 
B)  a market to establish an equilibrium price. 
C)  buyers to place a value on the good or service. 
D)  some unregulated markets to allocate resources efficiently. 
A)  buyers to interact harmoniously with sellers in the market. 
B)  a market to establish an equilibrium price. 
C)  buyers to place a value on the good or service. 
D)  some unregulated markets to allocate resources efficiently.

Question 14

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 15

Figure 7-9  
-Refer to Figure 7-9. If the price of the good is $9.50, then producer surplus is

Accepted Answer

A)  $3.00. 
B)  $6.50. 
C)  $10.50. 
D)  $8.50. 
A)  $3.00. 
B)  $6.50. 
C)  $10.50. 
D)  $8.50.

Question 16

If the demand for leather decreases, producer surplus in the leather market

Accepted Answer

A)  increases. 
B)  decreases. 
C)  remains the same. 
D)  may increase, decrease, or remain the same. 
A)  increases. 
B)  decreases. 
C)  remains the same. 
D)  may increase, decrease, or remain the same.

Question 17

Table 7-19
The following table shows the cost of producing a good for the only four producers in a market.
  
-Refer to Table 7-19. If the market equilibrium price is $28, what is total producer surplus in the market?

Accepted Answer

Total prod

Question 18

Welfare economics is the study of

Accepted Answer

A)  the well-being of less fortunate people. 
B)  welfare programs in the United States. 
C)  how the allocation of resources affects economic well-being. 
D)  the effect of income redistribution on work effort. 
A)  the well-being of less fortunate people. 
B)  welfare programs in the United States. 
C)  how the allocation of resources affects economic well-being. 
D)  the effect of income redistribution on work effort.

Question 19

Producer surplus is the

Accepted Answer

A)  area under the supply curve to the left of the amount sold. 
B)  amount a seller is paid minus the cost of production. 
C)  area between the supply and demand curves, above the equilibrium price. 
D)  cost to sellers of participating in a market. 
A)  area under the supply curve to the left of the amount sold. 
B)  amount a seller is paid minus the cost of production. 
C)  area between the supply and demand curves, above the equilibrium price. 
D)  cost to sellers of participating in a market.

Question 20

When policymakers are considering a particular action, they can use consumer surplus as an)

Accepted Answer

A)  objective measure of the benefits to buyers as determined by policymakers. 
B)  measure of the benefits to buyers as the buyers perceive them. 
C)  potentially flawed measure of the benefits to buyers if the buyers are not rational. 
D)  Both b) and c) are correct. 
A)  objective measure of the benefits to buyers as determined by policymakers. 
B)  measure of the benefits to buyers as the buyers perceive them. 
C)  potentially flawed measure of the benefits to buyers if the buyers are not rational. 
D)  Both b) and c) are correct.

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

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

Total surplus is

Consumer surplus is the amount a buyer actually has to pay for a good minus the amount the buyer is willing to pay for it.

Table 7-1 -Refer to Table 7-1. If the price of the product is $130, then who would be willing to purchase the product?

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

Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,

The 2005 Boston Globe article discussing ticket scalping points out that the price people will pay for tickets will rise when

A seller's willingness to sell is

Figure 7-19 -Refer to Figure 7-19. At the equilibrium price, producer surplus is

Economists tend to see ticket scalping as

Figure 7-10 -Refer to Figure 7-10. Which area represents the increase in producer surplus when the price rises from P1 to P2 due to new producers entering the market?

Table 7-11 The following table represents the costs of five possible sellers. -Refer to Table 7-11. If the market price is $1,000, the producer surplus in the market is

Market failure is the inability of

Figure 7-9 -Refer to Figure 7-9. If the price of the good is $9.50, then producer surplus is

If the demand for leather decreases, producer surplus in the leather market

Table 7-19 The following table shows the cost of producing a good for the only four producers in a market. -Refer to Table 7-19. If the market equilibrium price is $28, what is total producer surplus in the market?

Welfare economics is the study of

Producer surplus is the

When policymakers are considering a particular action, they can use consumer surplus as an)

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

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

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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