Question 1

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 good will sell for

Accepted Answer

A)  $15 or slightly less. 
B)  $25 or slightly more. 
C)  $35 or slightly more. 
D)  $45 or slightly less.

Question 2

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 3

Consumer surplus

Accepted Answer

A)  is the amount of a good that a consumer can buy at a price below equilibrium price. 
B)  is the amount a consumer is willing to pay minus the amount the consumer actually pays. 
C)  is the number of consumers who are excluded from a market because of scarcity. 
D)  measures how much a seller values a good.

Question 4

Figure 7-1 
-Refer to Figure 7-1.When the price rises from P1 to P2,which of the following statements is not true?

Accepted Answer

A)  The buyers who still buy the good are worse off because they now pay more. 
B)  Some buyers leave the market because they are not willing to buy the good at the higher price. 
C)  Buyers place a higher value on the good after the price increase. 
D)  Consumer surplus in the market falls.

Question 5

Motor oil and gasoline are complements.If the price of motor oil increases,consumer surplus in the gasoline market

Accepted Answer

A)  decreases. 
B)  is unchanged. 
C)  increases. 
D)  may increase,decrease,or remain unchanged.

Question 6

Figure 7-7 
-Refer to Figure 7-7.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

Question 7

Figure 7-3 
-Refer to Figure 7-3.If the price of the good is $5,then consumer surplus is

Accepted Answer

A)  $9. 
B)  $11. 
C)  $13. 
D)  $16.

Question 8

Efficiency is related to the size of the economic pie,whereas equality is related to how the pie gets sliced and distributed.

Accepted Answer

A) True 
 B)False

Question 9

Table 7-6
The following table represents the costs of five possible sellers.
 
-Refer to Table 7-6.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)  $770. 
B)  $970. 
C)  $1,170. 
D)  $1,370.

Question 10

Coffee and tea are substitutes.Bad weather that sharply reduces the coffee bean harvest would

Accepted Answer

A)  increase consumer surplus in the market for coffee and decrease producer surplus in the market for tea. 
B)  increase consumer surplus in the market for coffee and increase producer surplus in the market for tea. 
C)  decrease consumer surplus in the market for coffee and increase producer surplus in the market for tea. 
D)  decrease consumer surplus in the market for coffee and decrease producer surplus in the market for tea.

Question 11

Which of the following equations is not valid?

Accepted Answer

A)  Consumer surplus = Value to buyers - Amount paid by buyers 
B)  Producer surplus = Amount received by sellers - Cost to sellers 
C)  Total surplus = Value to buyers - Amount paid by buyers + Amount received by sellers - Costs of sellers 
D)  Total surplus = Value to sellers - Cost to sellers

Question 12

Joel has a 1966 Mustang,which he sells to Susie,an avid car collector.Susie is pleased since she paid $8,000 for the car but would have been willing to pay $11,000 for the car.Susie's consumer surplus is $2,000.

Accepted Answer

A) True 
 B)False

Question 13

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.

Question 14

Figure 7-17 
-Refer to Figure 7-17.At equilibrium,total surplus is

Accepted Answer

A)  $36. 
B)  $72. 
C)  $108. 
D)  $144.

Question 15

Table 7-6
The following table represents the costs of five possible sellers.
 
-Refer to Table 7-6.If the price is $775,who would be willing to supply the product?

Accepted Answer

A)  Abby and Bobby 
B)  Abby,Bobby,and Carlos 
C)  Carlos,Dianne,and Evalina 
D)  Dianne and Evalina

Question 16

Figure 7-15 
-Refer to Figure 7-15.At the equilibrium price,producer surplus is

Accepted Answer

A)  $480. 
B)  $640. 
C)  $1,120. 
D)  $1,280.

Question 17

Table 7-7
The only four producers in a market have the following cost:
 
-Refer to Table 7-7.If Charlie,Quinn,Wrex,and Maxine 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.

Question 18

Producer surplus is the

Accepted Answer

A)  area under the supply curve to the left of the amount sold. 
B)  amount a seller is paid minus the cost of production. 
C)  area between the supply and demand curves,above the equilibrium price. 
D)  cost to sellers of participating in a market.

Question 19

Each seller of a product is willing to sell as long as the price he or she can receive is greater than the opportunity cost of producing the product.

Accepted Answer

A) True 
 B)False

Question 20

Figure 7-16 
-Refer to Figure 7-16.At equilibrium,total surplus is represented by the area

Accepted Answer

A)  A+B+C. 
B)  A+B+D+F. 
C)  A+B+C+D+H+F. 
D)  A+B+C+D+H+F+G+I.

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

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 good will sell for

Welfare economics is the study of

Consumer surplus

Figure 7-1 -Refer to Figure 7-1.When the price rises from P1 to P2,which of the following statements is not true?

Motor oil and gasoline are complements.If the price of motor oil increases,consumer surplus in the gasoline market

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

Figure 7-3 -Refer to Figure 7-3.If the price of the good is $5,then consumer surplus is

Efficiency is related to the size of the economic pie,whereas equality is related to how the pie gets sliced and distributed.

Table 7-6 The following table represents the costs of five possible sellers. -Refer to Table 7-6.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

Coffee and tea are substitutes.Bad weather that sharply reduces the coffee bean harvest would

Which of the following equations is not valid?

Joel has a 1966 Mustang,which he sells to Susie,an avid car collector.Susie is pleased since she paid $8,000 for the car but would have been willing to pay $11,000 for the car.Susie's consumer surplus is $2,000.

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

Figure 7-17 -Refer to Figure 7-17.At equilibrium,total surplus is

Table 7-6 The following table represents the costs of five possible sellers. -Refer to Table 7-6.If the price is $775,who would be willing to supply the product?

Figure 7-15 -Refer to Figure 7-15.At the equilibrium price,producer surplus is

Table 7-7 The only four producers in a market have the following cost: -Refer to Table 7-7.If Charlie,Quinn,Wrex,and Maxine sell the good,and the resulting producer surplus is $700,then the price must have been

Producer surplus is the

Each seller of a product is willing to sell as long as the price he or she can receive is greater than the opportunity cost of producing the product.

Figure 7-16 -Refer to Figure 7-16.At equilibrium,total surplus is represented by the area