Question 1

The decisions of buyers and sellers that affect people who are not participants in the market create

Accepted Answer

A)  market power. 
B)  externalities. 
C)  profiteering. 
D)  market equilibrium.

Question 2

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 3

Figure 7-25 
-Refer to Figure 7-25. Suppose the government imposes a price floor of $28 in this market. If the sellers with the lowest cost are the ones who sell the good and the government does not purchase any excess units produced, then total surplus will be

Accepted Answer

A)  $400. 
B)  $800. 
C)  $1,120. 
D)  $1,184.

Question 4

Figure 7-11 
-Refer to Figure 7-11. If the supply curve is S', the demand curve is D, and the equilibrium price is $150, what is the producer surplus?

Accepted Answer

A)  $625 
B)  $1,250 
C)  $2,500 
D)  $5,000

Question 5

When the demand for a good increases and the supply of the good remains unchanged, consumer surplus

Accepted Answer

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

Question 6

If Martin sells a shirt for $40, and his producer surplus from the sale is $8, his cost must have been

Accepted Answer

A)  $32. 
B)  $48. 
C)  $8. 
D)  $40.

Question 7

Table 7-18
The following table shows the willingness to pay for a good for the only four consumers in a market.
 
-Refer to Table 7-18. If the price of the good is $20, how many units will be demanded?

Accepted Answer

The answer of Table 7-18
The following table shows the willingness...

Question 8

Figure 7-15 
-Refer to Figure 7-15. When the price falls from P2 to P1, which of the following would not be true?

Accepted Answer

A)  The sellers who still sell the good are worse off because they now receive less. 
B)  Some sellers leave the market because they are not willing to sell the good at the lower price. 
C)  The total cost of what is now sold by sellers is actually higher than it was before the decrease in the price. 
D)  Producer surplus would fall by area A + B.

Question 9

If Darby values a soccer ball at $50, and she pays $40 for it, her consumer surplus is $90.

Accepted Answer

A) True 
 B)False

Question 10

When the supply of a good decreases and the demand for the good remains unchanged, consumer surplus

Accepted Answer

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

Question 11

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 12

Which of the following will cause a decrease in producer surplus?

Accepted Answer

A)  the imposition of a binding price ceiling in the market 
B)  an increase in the number of buyers of the good 
C)  income increases and buyers consider the good to be normal 
D)  the price of a complement decreases

Question 13

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is

Accepted Answer

A)  $175. 
B)  $575. 
C)  $750. 
D) $1,325.

Question 14

At the equilibrium price of a good, the good will be sold by those sellers

Accepted Answer

A)  whose cost is more than price. 
B)  whose cost is less than price. 
C)  that can produce the good. 
D)  enter the market first.

Question 15

Suppose your own demand curve for tomatoes slopes downward. Suppose also that, for the last tomato you bought this week, you paid a price exactly equal to your willingness to pay. Then

Accepted Answer

A)  you should buy more tomatoes before the end of the week. 
B)  you already have bought too many tomatoes this week. 
C)  your consumer surplus on the last tomato you bought is zero. 
D)  your consumer surplus on all of the tomatoes you have bought this week is zero.

Question 16

Figure 7-22 
-Refer to Figure 7-22. If the price decreases from $80 to $70 due to a shift in the supply curve, consumer surplus increases by

Accepted Answer

A)  $250. 
B)  $750. 
C)  $1000. 
D)  $500.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Total surplus is represented by the area below the

Accepted Answer

A)  demand curve and above the price. 
B)  price and up to the point of equilibrium. 
C)  demand curve and above the supply curve, up to the equilibrium quantity. 
D)  demand curve and above the horizontal axis, up to the equilibrium quantity.

Question 19

Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6,

Accepted Answer

A)  the resulting increase in consumer surplus would be larger than any possible loss of producer surplus. 
B)  the resulting increase in consumer surplus would be smaller than any possible loss of producer surplus. 
C)  any possible increase in producer surplus would be larger than the loss of consumer surplus. 
D)  any possible increase in producer surplus would be smaller than the loss of consumer surplus.

Question 20

Bill created a new software program he is willing to sell for $200. He sells his first copy and enjoys a producer surplus of $150. What is the price paid for the software?

Accepted Answer

A)  $50. 
B)  $150. 
C)  $200. 
D)  $350.

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