Question 1

Hot dogs and hot dog buns are complements. An increase in the price of flour used to make hot dogs buns will

Accepted Answer

A)  increase consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs. 
B)  increase consumer surplus in the market for hot dogs and increase producer surplus in the market for hot dog buns. 
C)  decrease consumer surplus in the market for hot dog buns and increase producer surplus in the market for hot dogs. 
D)  decrease consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs. 
A)  increase consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs. 
B)  increase consumer surplus in the market for hot dogs and increase producer surplus in the market for hot dog buns. 
C)  decrease consumer surplus in the market for hot dog buns and increase producer surplus in the market for hot dogs. 
D)  decrease consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs.

Question 2

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 3

Figure 7-27  
-Refer to Figure 7-27. Buyers who value this good more than the equilibrium price are represented by which line segment?

Accepted Answer

A)  AC. 
B)  CK. 
C)  BC. 
D)  CH. 
A)  AC. 
B)  CK. 
C)  BC. 
D)  CH.

Question 4

If the current allocation of resources in the market for hammers is inefficient, then it must be the case that

Accepted Answer

A)  producer surplus exceeds consumer surplus in the market for hammers. 
B)  consumer surplus exceeds producer surplus in the market for hammers. 
C)  the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources. 
D)  the costs that sellers of hammers are incurring could be reduced by moving to a different allocation of resources. 
A)  producer surplus exceeds consumer surplus in the market for hammers. 
B)  consumer surplus exceeds producer surplus in the market for hammers. 
C)  the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources. 
D)  the costs that sellers of hammers are incurring could be reduced by moving to a different allocation of resources.

Question 5

Efficiency in a market is achieved when

Accepted Answer

A)  a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs. 
B)  the sum of producer surplus and consumer surplus is maximized. 
C)  all firms are producing the good at the same low cost per unit. 
D)  no buyer is willing to pay more than the equilibrium price for any unit of the good. 
A)  a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs. 
B)  the sum of producer surplus and consumer surplus is maximized. 
C)  all firms are producing the good at the same low cost per unit. 
D)  no buyer is willing to pay more than the equilibrium price for any unit of the good.

Question 6

Figure 7-21  
-Refer to Figure 7-21. Which area represents consumer surplus when the price is P1?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 7

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

Accepted Answer

A)  increase producer surplus. 
B)  reduce producer surplus. 
C)  not affect producer surplus. 
D)  Any of the above are possible. 
A)  increase producer surplus. 
B)  reduce producer surplus. 
C)  not affect producer surplus. 
D)  Any of the above are possible.

Question 8

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

Accepted Answer

A)  $100. 
B)  $200. 
C)  $50. 
D)  $450. 
A)  $100. 
B)  $200. 
C)  $50. 
D)  $450.

Question 9

Table 7-1
  
-Refer to Table 7-1. If the market price is $105,

Accepted Answer

A)  Calvin's consumer surplus is $45 and total consumer surplus is $85. 
B)  Sam's consumer surplus is $30 and total consumer surplus is $90. 
C)  Andrew's consumer surplus is $15 and total consumer surplus is $67.50. 
D)  Lori's consumer surplus is ­$2 and total consumer surplus is $100. 
A)  Calvin's consumer surplus is $45 and total consumer surplus is $85. 
B)  Sam's consumer surplus is $30 and total consumer surplus is $90. 
C)  Andrew's consumer surplus is $15 and total consumer surplus is $67.50. 
D)  Lori's consumer surplus is ­$2 and total consumer surplus is $100.

Question 10

Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for $3,000. Michael's willingness to pay is

Accepted Answer

A)  $500. 
B)  $3,000. 
C)  $3,500. 
D)  $6,500. 
A)  $500. 
B)  $3,000. 
C)  $3,500. 
D)  $6,500.

Question 11

Chuck would be willing to pay $20 to attend a dog show, but he buys a ticket for $15. Chuck values the dog show at

Accepted Answer

A)  $5. 
B)  $15. 
C)  $20. 
D)  $35. 
A)  $5. 
B)  $15. 
C)  $20. 
D)  $35.

Question 12

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is

Accepted Answer

A)  $175. 
B)  $575. 
C)  $750. 
D) $1,325. 
A)  $175. 
B)  $575. 
C)  $750. 
D) $1,325.

Question 13

The study of how the allocation of resources affects economic well-being is called

Accepted Answer

A)  consumer economics. 
B)  macroeconomics. 
C)  willingness-to-pay economics. 
D)  welfare economics. 
A)  consumer economics. 
B)  macroeconomics. 
C)  willingness-to-pay economics. 
D)  welfare economics.

Question 14

Suppose you buy an iPod for $100. If your consumer surplus is $30, your willingness to pay is $70.

Accepted Answer

A) True 
 B)False

Question 15

Pat bought a new car for $15,500 but was willing to pay $24,000. The consumer surplus is

Accepted Answer

A)  $8,500. 
B)  $15,500. 
C)  $24,000. 
D)  $39,500. 
A)  $8,500. 
B)  $15,500. 
C)  $24,000. 
D)  $39,500.

Question 16

Refer to Table 7-12. If Evan, Selena, Angie, and Kris sell the good, and the resulting producer surplus is $700, then the price must have been

Accepted Answer

A)  $200. 
B)  $300. 
C)  $500. 
D)  $700. 
A)  $200. 
B)  $300. 
C)  $500. 
D)  $700.

Question 17

The "invisible hand" is

Accepted Answer

A)  used to describe the welfare system in the United States. 
B)  a concept developed by Adam Smith to describe the virtues of free markets. 
C)  a concept used by J.M. Keynes to describe the role of government in guiding the allocation of resources in the economy. 
D)  a term used by some economists to characterize the role of government in an economy - inevitable but invisible. 
A)  used to describe the welfare system in the United States. 
B)  a concept developed by Adam Smith to describe the virtues of free markets. 
C)  a concept used by J.M. Keynes to describe the role of government in guiding the allocation of resources in the economy. 
D)  a term used by some economists to characterize the role of government in an economy - inevitable but invisible.

Question 18

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is

Accepted Answer

A)  zero. 
B)  negative, and the consumer would not purchase the product. 
C)  positive, and the consumer would purchase the product. 
D)  There is not enough information given to answer this question. 
A)  zero. 
B)  negative, and the consumer would not purchase the product. 
C)  positive, and the consumer would purchase the product. 
D)  There is not enough information given to answer this question.

Question 19

Table 7-15
  
-Refer to Table 7-15. You want to hire a professional photographer to take pictures of your family. The table shows the costs of the four potential sellers in the local photography market. You take bids from the sellers. Who offers the winning bid, and what does he offer to charge for the photography session?

Accepted Answer

A)  Steve; more than $400 but less than $450 
B)  Steve; $399 
C)  LeBron; more than $700 
D)  LeBron; more than $600 but less than $700 
A)  Steve; more than $400 but less than $450 
B)  Steve; $399 
C)  LeBron; more than $700 
D)  LeBron; more than $600 but less than $700

Question 20

All else equal, an increase in demand will always increase consumer surplus.

Accepted Answer

A) True 
 B)False

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

Hot dogs and hot dog buns are complements. An increase in the price of flour used to make hot dogs buns will

Total surplus is represented by the area below the

Figure 7-27 -Refer to Figure 7-27. Buyers who value this good more than the equilibrium price are represented by which line segment?

If the current allocation of resources in the market for hammers is inefficient, then it must be the case that

Efficiency in a market is achieved when

Figure 7-21 -Refer to Figure 7-21. Which area represents consumer surplus when the price is P1?

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

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

Table 7-1 -Refer to Table 7-1. If the market price is $105,

Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for $3,000. Michael's willingness to pay is

Chuck would be willing to pay $20 to attend a dog show, but he buys a ticket for $15. Chuck values the dog show at

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is

The study of how the allocation of resources affects economic well-being is called

Suppose you buy an iPod for $100. If your consumer surplus is $30, your willingness to pay is $70.

Pat bought a new car for $15,500 but was willing to pay $24,000. The consumer surplus is

Refer to Table 7-12. If Evan, Selena, Angie, and Kris sell the good, and the resulting producer surplus is $700, then the price must have been

The "invisible hand" is

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is

All else equal, an increase in demand will always increase 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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