Question 1

Which of the following is not true when the price of a good or service falls?

Accepted Answer

A)  Buyers who were already buying the good or service are better off. 
B)  Some new buyers, who are now willing to buy, enter the market. 
C)  The total consumer surplus in the market increases. 
D)  The total value of purchases before and after the price change is the same. 
A)  Buyers who were already buying the good or service are better off. 
B)  Some new buyers, who are now willing to buy, enter the market. 
C)  The total consumer surplus in the market increases. 
D)  The total value of purchases before and after the price change is the same.

Question 2

A seller's opportunity cost measures the

Accepted Answer

A)  value of everything she must give up to produce a good. 
B)  amount she is paid for a good minus her cost of providing it. 
C)  consumer surplus. 
D)  out of pocket expenses to produce a good but not the value of her time. 
A)  value of everything she must give up to produce a good. 
B)  amount she is paid for a good minus her cost of providing it. 
C)  consumer surplus. 
D)  out of pocket expenses to produce a good but not the value of her time.

Question 3

Connie can clean windows in large office buildings at a cost of $1 per window. The market price for window- cleaning services is $3 per window. If Connie cleans 100 windows, her producer surplus is $200.

Accepted Answer

A) True 
 B)False

Question 4

Suppose consumer income increases. If grass seed is a normal good, the equilibrium price of grass seed will

Accepted Answer

A)  decrease, and producer surplus in the industry will decrease. 
B)  increase, and producer surplus in the industry will increase. 
C)  decrease, and producer surplus in the industry will increase. 
D)  increase, and producer surplus in the industry will decrease. 
A)  decrease, and producer surplus in the industry will decrease. 
B)  increase, and producer surplus in the industry will increase. 
C)  decrease, and producer surplus in the industry will increase. 
D)  increase, and producer surplus in the industry will decrease.

Question 5

Scenario 7-1
Suppose market demand is given by the equation  
-Refer to Scenario 7-1. If the market equilibrium price rises from $10 to $15, what is the change in total consumer surplus in the market?

Accepted Answer

Consumer s

Question 6

Welfare economics is the study of

Accepted Answer

A)  taxes and subsidies. 
B)  how technology is best put to use in the production of goods and services. 
C)  government welfare programs for needy people. 
D)  how the allocation of resources affects economic well-being. 
A)  taxes and subsidies. 
B)  how technology is best put to use in the production of goods and services. 
C)  government welfare programs for needy people. 
D)  how the allocation of resources affects economic well-being.

Question 7

Figure 7-27  
-Refer to Figure 7-27. Sellers whose costs are greater than the equilibrium price are represented by segment

Accepted Answer

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

Question 8

Economists normally assume people's preferences should be

Accepted Answer

A)  respected. 
B)  adjusted. 
C)  overruled. 
D)  ignored. 
A)  respected. 
B)  adjusted. 
C)  overruled. 
D)  ignored.

Question 9

Table 7-7
  
-Refer to Table 7-7. You have two essentially identical extra tickets to the Midwest Regional Sweet 16 game in the men's NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You hold an auction to sell the two tickets. Who makes the winning bids, and what do they offer to pay for the tickets?

Accepted Answer

A)  Michael and Earvin; more than $350 but less than or equal to $400 
B)  Michael and Earvin; more than $400 but less than or equal to $500 
C)  Earvin and Larry; more than $300 but less than or equal to $350 
D)  Larry and Charles; less than $300 
A)  Michael and Earvin; more than $350 but less than or equal to $400 
B)  Michael and Earvin; more than $400 but less than or equal to $500 
C)  Earvin and Larry; more than $300 but less than or equal to $350 
D)  Larry and Charles; less than $300

Question 10

Figure 7-15  
-Refer to Figure 7-15. When the price falls from P2 to P1, producer surplus

Accepted Answer

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

Question 11

Economists argue that restrictions against ticket scalping actually drive up the cost of many tickets.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

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

Question 13

Figure 7-32  
-Refer to Figure 7-32. How much are consumer surplus, producer surplus, and total surplus at the market equilibrium price?

Accepted Answer

.Consumer surplus is

Question 14

If the cost of producing sofas decreases, then consumer surplus in the sofa market will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  increase for some buyers and decrease for other buyers. 
A)  increase. 
B)  decrease. 
C)  remain constant. 
D)  increase for some buyers and decrease for other buyers.

Question 15

Inefficiency can be caused in a market by the presence of

Accepted Answer

A)  market power. 
B)  externalities. 
C)  imperfectly competitive markets. 
D)  All of the above are correct. 
A)  market power. 
B)  externalities. 
C)  imperfectly competitive markets. 
D)  All of the above are correct.

Question 16

A simultaneous increase 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 17

Josh is willing to pay $500 for a set of tire, but he is able to pay $300 at the local tire store. His consumer surplus is

Accepted Answer

A)  $800. 
B)  $300. 
C)  $200. 
D)  $500. 
A)  $800. 
B)  $300. 
C)  $200. 
D)  $500.

Question 18

What do economists call the highest amount a consumer will pay to purchase a good?

Accepted Answer

The maximu

Question 19

Table 7-16
The following table represents the costs of five possible sellers.
Seller Cost $)
  
-Refer to Table 7-16. If each producer has one unit available for sale, and if the market equilibrium price is $80 per unit, how much is the total producer surplus in this market?

Accepted Answer

A)  $90 
B)  $110 
C)  $130 
D)  $140 
A)  $90 
B)  $110 
C)  $130 
D)  $140

Question 20

ABC Company incurs a cost of 50 cents to produce a dozen eggs, while XYZ Company incurs a cost of 70 cents to produce a dozen eggs. Which of the following price increases would cause both companies to experience an increase in producer surplus?

Accepted Answer

A)  The price of a dozen eggs increases from 40 cents to 55 cents. 
B)  The price of a dozen eggs increases from 55 cents to 70 cents. 
C)  The price of a dozen eggs increases from 55 cents to 75 cents. 
D)  All of these price increases would cause both companies to experience a loss in producer surplus. 
A)  The price of a dozen eggs increases from 40 cents to 55 cents. 
B)  The price of a dozen eggs increases from 55 cents to 70 cents. 
C)  The price of a dozen eggs increases from 55 cents to 75 cents. 
D)  All of these price increases would cause both companies to experience a loss in producer surplus.

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

Which of the following is not true when the price of a good or service falls?

A seller's opportunity cost measures the

Connie can clean windows in large office buildings at a cost of $1 per window. The market price for window- cleaning services is $3 per window. If Connie cleans 100 windows, her producer surplus is $200.

Suppose consumer income increases. If grass seed is a normal good, the equilibrium price of grass seed will

Scenario 7-1 Suppose market demand is given by the equation -Refer to Scenario 7-1. If the market equilibrium price rises from $10 to $15, what is the change in total consumer surplus in the market?

Welfare economics is the study of

Figure 7-27 -Refer to Figure 7-27. Sellers whose costs are greater than the equilibrium price are represented by segment

Economists normally assume people's preferences should be

Figure 7-15 -Refer to Figure 7-15. When the price falls from P2 to P1, producer surplus

Economists argue that restrictions against ticket scalping actually drive up the cost of many tickets.

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

Figure 7-32 -Refer to Figure 7-32. How much are consumer surplus, producer surplus, and total surplus at the market equilibrium price?

If the cost of producing sofas decreases, then consumer surplus in the sofa market will

Inefficiency can be caused in a market by the presence of

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

Josh is willing to pay $500 for a set of tire, but he is able to pay $300 at the local tire store. His consumer surplus is

What do economists call the highest amount a consumer will pay to purchase a good?

Table 7-16 The following table represents the costs of five possible sellers. Seller Cost $) -Refer to Table 7-16. If each producer has one unit available for sale, and if the market equilibrium price is $80 per unit, how much is the total producer surplus in this market?

ABC Company incurs a cost of 50 cents to produce a dozen eggs, while XYZ Company incurs a cost of 70 cents to produce a dozen eggs. Which of the following price increases would cause both companies to experience an increase in producer 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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