Question 1

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 2

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.

Question 3

Dawn's bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit of the lower prices to

Accepted Answer

A)  only existing customers who now get lower prices on the gowns they were already planning to purchase. 
B)  only new customers who enter the market because of the lower prices. 
C)  both existing customers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices. 
D)  Consumer surplus does not increase; it decreases. 
A)  only existing customers who now get lower prices on the gowns they were already planning to purchase. 
B)  only new customers who enter the market because of the lower prices. 
C)  both existing customers who now get lower prices on the gowns they were already planning to purchase and new customers who enter the market because of the lower prices. 
D)  Consumer surplus does not increase; it decreases.

Question 4

A buyer is willing to buy a product at a price greater than or equal to his willingness to pay, but would refuse to buy a product at a price less than his willingness to pay.

Accepted Answer

A) True 
 B)False

Question 5

Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts?

Accepted Answer

A)  It increases. 
B)  It decreases. 
C)  It remains unchanged. 
D)  It may increase, decrease, or remain unchanged. 
A)  It increases. 
B)  It decreases. 
C)  It remains unchanged. 
D)  It may increase, decrease, or remain unchanged.

Question 6

Ray buys a new tractor for $118,000. He receives consumer surplus of $13,000 on his purchase. Ray's willingness to pay is

Accepted Answer

A)  $13,000. 
B)  $105,000. 
C)  $118,000. 
D)  $131,000. 
A)  $13,000. 
B)  $105,000. 
C)  $118,000. 
D)  $131,000.

Question 7

Figure 7-15  
-Refer to Figure 7-15. When the price falls from P2 to P1, which of the following would not be true?

Accepted Answer

A)  The sellers who still sell the good are worse off because they now receive less. 
B)  Some sellers leave the market because they are not willing to sell the good at the lower price. 
C)  The total cost of what is now sold by sellers is actually higher than it was before the decrease in the price. 
D)  Producer surplus would fall by area A + B. 
A)  The sellers who still sell the good are worse off because they now receive less. 
B)  Some sellers leave the market because they are not willing to sell the good at the lower price. 
C)  The total cost of what is now sold by sellers is actually higher than it was before the decrease in the price. 
D)  Producer surplus would fall by area A + B.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Figure 7-4  
-Refer to Figure 7-4. Which area represents the increase in consumer surplus when the price falls from P1 to P2?

Accepted Answer

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

Question 10

Figure 7-29  
-Refer to Figure 7-29. Which of the following statements is correct?

Accepted Answer

A)  The market is in equilibrium at Q1. 
B)  At Q2, the cost to sellers exceeds the value to buyers. 
C)  At Q4, the value to buyers is less than the cost to sellers. 
D)  At Q3, the market is producing too much output. 
A)  The market is in equilibrium at Q1. 
B)  At Q2, the cost to sellers exceeds the value to buyers. 
C)  At Q4, the value to buyers is less than the cost to sellers. 
D)  At Q3, the market is producing too much output.

Question 11

Table 7-4
The numbers in Table 7-1 reveal the maximum willingness to pay for a ticket to a Chicago Cubs vs. St. Louis Cardinal's baseball game at Wrigley Field.
  
-Refer to Table 7-4. If you have a ticket that you sell to the group in an auction, who will buy the ticket?

Accepted Answer

A)  Dan 
B)  David 
C)  Ken 
D)  Lisa 
A)  Dan 
B)  David 
C)  Ken 
D)  Lisa

Question 12

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 13

Kristi and Rebecca sell lemonade on the corner. It costs them 7 cents to make each cup. On a certain day, they sell 40 cups. Their producer surplus for that day amounts to $19.20. Kristi & Rebecca sold each cup for

Accepted Answer

A)  31 cents. 
B)  38 cents. 
C)  45 cents. 
D)  55 cents. 
A)  31 cents. 
B)  38 cents. 
C)  45 cents. 
D)  55 cents.

Question 14

If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the

Accepted Answer

A)  consumer has consumer surplus of $2 if he or she buys the good. 
B)  consumer does not purchase the good. 
C)  market is not a competitive market. 
D)  price of the good will fall due to market forces. 
A)  consumer has consumer surplus of $2 if he or she buys the good. 
B)  consumer does not purchase the good. 
C)  market is not a competitive market. 
D)  price of the good will fall due to market forces.

Question 15

Table 7-15
  
-Refer to Table 7-15. You and your best friend want to hire a professional photographer to take pictures of your two families. The table shows the costs of the four potential sellers in the local photography market. You and your friend agree to offer $500 for each session. Who accepts the offer, and what is the total producer surplus in the market?

Accepted Answer

A)  LeBron and Kobe; $500 
B)  Kevin and Steve; $500 
C)  LeBron and Kobe; $300 
D)  Kevin and Steve; $150 
A)  LeBron and Kobe; $500 
B)  Kevin and Steve; $500 
C)  LeBron and Kobe; $300 
D)  Kevin and Steve; $150

Question 16

Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, producer surplus

Accepted Answer

A)  would necessarily increase even if the higher price resulted in a surplus of widgets. 
B)  would necessarily decrease because the higher price would create a surplus of widgets. 
C)  might increase or decrease. 
D)  would be unaffected. 
A)  would necessarily increase even if the higher price resulted in a surplus of widgets. 
B)  would necessarily decrease because the higher price would create a surplus of widgets. 
C)  might increase or decrease. 
D)  would be unaffected.

Question 17

Consumer surplus is a good measure of economic welfare if policymakers want to

Accepted Answer

A)  maximize total benefit. 
B)  minimize deadweight loss. 
C)  respect the preferences of sellers. 
D)  respect the preferences of buyers. 
A)  maximize total benefit. 
B)  minimize deadweight loss. 
C)  respect the preferences of sellers. 
D)  respect the preferences of buyers.

Question 18

A simultaneous decrease in both the demand for MP3 players and the supply of MP3 players would imply that

Accepted Answer

A)  both the value of MP3 players to consumers and the cost of producing MP3 players has increased. 
B)  both the value of MP3 players to consumers and the cost of producing MP3 players has decreased. 
C)  the value of MP3 players to consumers has decreased, and the cost of producing MP3 players has increased. 
D)  the value of MP3 players to consumers has increased, and the cost of producing MP3 players has decreased. 
A)  both the value of MP3 players to consumers and the cost of producing MP3 players has increased. 
B)  both the value of MP3 players to consumers and the cost of producing MP3 players has decreased. 
C)  the value of MP3 players to consumers has decreased, and the cost of producing MP3 players has increased. 
D)  the value of MP3 players to consumers has increased, and the cost of producing MP3 players has decreased.

Question 19

Figure 7-3  
-Refer to Figure 7-3. When the price is P1, consumer surplus is

Accepted Answer

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

Question 20

An increase in price increases consumer surplus.

Accepted Answer

A) True 
 B)False

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

Consumer surplus is

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

Dawn's bridal boutique is having a sale on evening dresses. The increase in consumer surplus comes from the benefit of the lower prices to

A buyer is willing to buy a product at a price greater than or equal to his willingness to pay, but would refuse to buy a product at a price less than his willingness to pay.

Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts?

Ray buys a new tractor for $118,000. He receives consumer surplus of $13,000 on his purchase. Ray's willingness to pay is

Figure 7-15 -Refer to Figure 7-15. When the price falls from P2 to P1, which of the following would not be true?

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

Figure 7-4 -Refer to Figure 7-4. Which area represents the increase in consumer surplus when the price falls from P1 to P2?

Figure 7-29 -Refer to Figure 7-29. Which of the following statements is correct?

Table 7-4 The numbers in Table 7-1 reveal the maximum willingness to pay for a ticket to a Chicago Cubs vs. St. Louis Cardinal's baseball game at Wrigley Field. -Refer to Table 7-4. If you have a ticket that you sell to the group in an auction, who will buy the ticket?

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

Kristi and Rebecca sell lemonade on the corner. It costs them 7 cents to make each cup. On a certain day, they sell 40 cups. Their producer surplus for that day amounts to $19.20. Kristi & Rebecca sold each cup for

If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the

Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, producer surplus

Consumer surplus is a good measure of economic welfare if policymakers want to

A simultaneous decrease in both the demand for MP3 players and the supply of MP3 players would imply that

Figure 7-3 -Refer to Figure 7-3. When the price is P1, consumer surplus is

An increase in price increases consumer surplus.

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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