Question 1

Inefficiency exists in an economy when a good is

Accepted Answer

A) being produced with less than all available resources. 
B) not distributed fairly among buyers. 
C) not being produced by the lowest-cost producers. 
D) being consumed by buyers who value it most highly.

Question 2

In which of the following circumstances would a buyer be indifferent about buying a good?

Accepted Answer

A) The amount of consumer surplus the buyer would experience as a result of buying the good is zero. 
B) The price of the good is equal to the buyer's willingness to pay for the good. 
C) The price of the good is equal to the value the buyer places on the good. 
D) All of the above are correct.

Question 3

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.

Question 4

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

Accepted Answer

A) $100. 
B) $200. 
C) $300. 
D) $400.

Question 5

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

Accepted Answer

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

Question 6

Figure 7-24 
-Refer to Figure 7-24. If the government imposes a price ceiling at $12, then producer surplus is

Accepted Answer

A) CDI. 
B) BDF. 
C) BCIF. 
D) HGCD.

Question 7

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

Accepted Answer

A) $600 
B) $1,200 
C) $2,400 
D) $4,800

Question 8

Figure 7-24 
-Refer to Figure 7-24. At equilibrium, total surplus is

Accepted Answer

A) $36. 
B) $54. 
C) $18. 
D) $108.

Question 9

Figure 7-6 
-Refer to Figure 7-6. If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by

Accepted Answer

A) $200. 
B) $400. 
C) $600. 
D) $800.

Question 10

The consumption of water by local residents that may include pesticide runoff from local farmers' fields is an example of

Accepted Answer

A) market equilibrium. 
B) market power. 
C) externalities. 
D) laissez-faire.

Question 11

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.

Question 12

Producer surplus equals the

Accepted Answer

A) value to buyers minus the amount paid by buyers. 
B) value to buyers minus the cost to sellers. 
C) amount received by sellers minus the cost to sellers. 
D) amount received by sellers minus the amount paid by buyers.

Question 13

Unless markets are perfectly competitive, they may fail to maximize the total benefits to buyers and sellers.

Accepted Answer

A) True 
 B)False

Question 14

Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day. 
-Refer to Table 7-5. If the market price of an orange is $0.70, then the market quantity of oranges demanded per day is

Accepted Answer

A) 5. 
B) 6. 
C) 4. 
D) 7.

Question 15

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.

Question 16

Table 7-6
For each of three potential buyers of apples, the table displays the willingness to pay for the first three apples of the day. Assume Xavier, Yadier, and Zavi are the only three buyers of apples, and only three apples can be supplied per day. 
-Refer to Table 7-6. If the market price of an apple is $1.40, then the market quantity of apples demanded per day is

Accepted Answer

A) 1. 
B) 2. 
C) 3. 
D) 4.

Question 17

At Nick's Bakery, the cost to make a cheese danish is $1.50 per danish. As a result of selling ten danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his danishes for

Accepted Answer

A) $2.00 each. 
B) $0.50 each. 
C) $3.50 each. 
D) $5.00 each.

Question 18

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 19

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

Accepted Answer

A) efficiency is achieved in this market. 
B) the marginal value to buyers equals the marginal cost to sellers. 
C) the sum of consumer surplus and producer surplus is maximized. 
D) All of the above are correct.

Question 20

Table 7-5
For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day. 
-Refer to Table 7-5. The market quantity of oranges demanded per day is exactly 7 if the price of an orange, P, satisfies

Accepted Answer

A) $0.60 < P < $0.75. 
B) $0.60 < P < $2.00. 
C) $0.25 < P < $0.75. 
D) $0.25 < P < $0.60.

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

Inefficiency exists in an economy when a good is

In which of the following circumstances would a buyer be indifferent about buying a good?

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

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

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

Figure 7-24 -Refer to Figure 7-24. If the government imposes a price ceiling at $12, then producer surplus is

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

Figure 7-24 -Refer to Figure 7-24. At equilibrium, total surplus is

Figure 7-6 -Refer to Figure 7-6. If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by