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

Table 7-7 -Refer to Table 7-7. You are selling 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. Which of the following graphs represents the market demand curve?

Figure 7-13 -Refer to Figure 7-13. If the equilibrium price is $60, what is the producer surplus?

Producing a soccer ball costs Jake $5. He sells it to Darby for $35. Darby values the soccer ball at $50. For this transaction, the total surplus in the market is $40.

Given the following two equations: 1) Total Surplus = Consumer Surplus + Producer Surplus 2) Total Surplus = Value to Buyers - Cost to Sellers Show how equation 1) can be used to derive equation 2).

Efficiency refers to whether a market outcome is fair, while equality refers to whether the maximum amount of output was produced from a given number of inputs.

Figure 7-16 -Refer to Figure 7-16. If the price of the good is $300, then producer surplus amounts to

Chad is willing to pay $5.00 to get his first cup of morning latté; he is willing to pay $4.50 for a second cup. He buys his first cup from a vendor selling latté for $3.75 per cup. He returns to that vendor later in the morning to find that the vendor has increased her price to $3.90 per cup. Chad buys a second cup. Which of the following statements is correct?

The equilibrium of supply and demand in a market maximizes the total benefits to buyers and sellers of participating in that market.

Economists say that a market where goods are not consumed by those valuing the goods most highly is

Scenario 7-2 Suppose market demand and market supply are given by the equations: -Refer to Scenario 7-2. How much is total producer surplus at the equilibrium price in this market?

Table 7-11 The following table represents the costs of five possible sellers. -Refer to Table 7-11. If the market price is $1,400, the combined total cost of all participating sellers is

You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field. Assume the ticket has no resale value. Willie Nelson is performing on the same night, and his concert is your next-best alternative activity. Tickets to see Willie Nelson cost $40. On any given day, you would be willing to pay up to $50 to see and hear Willie Nelson perform. Assume there are no other costs of seeing either event. Based on this information, at a minimum, how much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game?

When markets fail, public policy can

Figure 7-34 -Refer to Figure 7-34. Suppose there is initially a price floor set at $10 in this market. If the government removed the price floor, by how much would total producer surplus change, assuming the producers with the lowest cost were the ones supplying the market when the price floor was in place?

The current policy on kidney donation effectively sets a price ceiling of zero.

Producer surplus is

Figure 7-10 -Refer to Figure 7-10. When the price rises from P1 to P2, which area represents the increase in producer surplus to existing producers?

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

Another way to think of the marginal seller is the seller who

Figure 7-25 -Refer to Figure 7-25. Suppose the government imposes a price ceiling of $16 in this market. If the buyers with the highest willingness to pay purchase the good, then total surplus will be