Question 1

Which of the following is not equal to total surplus?

Accepted Answer

A) consumer surplus - producer surplus 
B) buyers' willingness to pay - sellers' costs 
C) value to buyers - amount paid by buyers + amount received by sellers - cost to sellers 
D) value to buyers - cost to sellers

Question 2

Suppose you sell a kayak for $600, but you were willing to sell it for $450. The buyer was willing to pay $650. The total surplus is $200.

Accepted Answer

A) True 
 B)False

Question 3

Figure 7-19 
-Refer to Figure 7-19. If the government imposes a price floor of $55 in this market, then total surplus will be

Accepted Answer

A) $100.00 higher than it would be without the price floor. 
B) $50.00 lower than it would be without the price floor. 
C) $125.00 lower than it would be without the price floor. 
D) $62.50 lower than it would be without the price floor.

Question 4

Table 7-10
The following table represents the costs of five possible sellers.
Seller
Cost
Abby
$1,600
Bobby
$1,300
Dianne
$1,100
Evaline
$900
Carlos
$800
-Refer to Table 7-10. Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 4 if the price is

Accepted Answer

A) $860. 
B) $1,050. 
C) $1,650. 
D) $1,400.

Question 5

Table 7-3
The only four consumers in a market have the following willingness to pay for a good: 
-Refer to Table 7-3. If there is only one unit of the good and if the buyers bid against each other for the right to purchase it, then the consumer surplus will be

Accepted Answer

A) $0 or slightly more. 
B) $10 or slightly less. 
C) $30 or slightly more. 
D) $45 or slightly less.

Question 6

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

Accepted Answer

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

Question 7

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.

Question 8

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.

Question 9

Chad is willing to pay $5.00 to get his first cup of morning latté. He buys a cup from a vendor selling latté for $3.75 per cup. Chad's consumer surplus is

Accepted Answer

A) $8.75. 
B) $5.00. 
C) $3.75. 
D) $1.25.

Question 10

Market failure is the inability of

Accepted Answer

A) buyers to interact harmoniously with sellers in the market. 
B) a market to establish an equilibrium price. 
C) buyers to place a value on the good or service. 
D) some unregulated markets to allocate resources efficiently.

Question 11

Table 7-14
Seller
Cost
LeBron
$700
Kobe
$600
Kevin
$450
Steve
$400
-Refer to Table 7-14. 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

Question 12

Table 7-12
The numbers reveal the opportunity costs of providing 10 piano lessons of equal quality.
Seller
Cost
Marcia
$200
Jan
$250
Cindy
$350
Greg
$400
Peter
$700
Bobby
$800
-Refer to Table 7-12. You wish to purchase 10 piano lessons, so you take bids from each of the sellers. You will not accept a bid below a seller's cost because you are concerned that the seller will not provide all 10 lessons. What bid will you accept?

Accepted Answer

A) $351 
B) $251 
C) $249 
D) $199

Question 13

Figure 7-24 
-Refer to Figure 7-24. At equilibrium, producer surplus is measured by the area

Accepted Answer

A) ABD. 
B) ABF. 
C) CDI. 
D) BDF.

Question 14

Tomato sauce and spaghetti noodles are complementary goods. A decrease in the price of tomatoes will

Accepted Answer

A) increase consumer surplus in the market for tomato sauce and decrease producer surplus in the market for spaghetti noodles. 
B) increase consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles. 
C) decrease consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles. 
D) decrease consumer surplus in the market for tomato sauce and decrease producer surplus in the market for spaghetti noodles.

Question 15

Figure 7-22 
-Refer to Figure 7-22. Assume demand increases, which causes the equilibrium price to increase from $50 to $70. The increase in producer surplus to producers already in the market would be

Accepted Answer

A) $1,600. 
B) $600. 
C) $800. 
D) $1,200.

Question 16

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 $100.

Accepted Answer

A) True 
 B)False

Question 17

At the equilibrium price of a good, the good will be purchased by those buyers who

Accepted Answer

A) value the good more than price. 
B) value the good less than price. 
C) have the money to buy the good. 
D) consider the good a necessity.

Question 18

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.

Question 19

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 $0.90, then the market quantity of oranges demanded per day is

Accepted Answer

A) 5. 
B) 2. 
C) 3. 
D) 4.

Question 20

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 consumer surplus amounts to

Accepted Answer

A) $0.60. 
B) $1.20. 
C) $1.40. 
D) $3.40

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

Which of the following is not equal to total surplus?

Suppose you sell a kayak for $600, but you were willing to sell it for $450. The buyer was willing to pay $650. The total surplus is $200.

Figure 7-19 -Refer to Figure 7-19. If the government imposes a price floor of $55 in this market, then total surplus will be

Table 7-3 The only four consumers in a market have the following willingness to pay for a good: -Refer to Table 7-3. If there is only one unit of the good and if the buyers bid against each other for the right to purchase it, then the consumer surplus will be

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

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