Question 1

Total surplus = Value to buyers - Costs to sellers.

Accepted Answer

A) True 
 B)False

Question 2

Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is

Accepted Answer

A)  $150.
B)  $425.
C)  $500.
D)  $850.E) A) and B)
F) All of the above

Question 3

Dallas buys strawberries, and he would be willing to pay more than he now pays. Suppose that Dallas has a change in his tastes such that he values strawberries more than before. If the market price is the same as before, then

Accepted Answer

A)  Dallas's consumer surplus would be unaffected.
B)  Dallas's consumer surplus would increase.
C)  Dallas's consumer surplus would decrease.
D)  Dallas would be wise to buy fewer strawberries than before.E) All of the above
F) C) and D)

Question 4

Figure 7-14 
-Refer to Figure 7-14. If the government imposes a price ceiling of $50 in this market, then the new producer surplus will be

Accepted Answer

A)  $200.
B)  $100.
C)  $125.
D)  $250.E) A) and B)
F) A) and C)

Question 5

Chuck would be willing to pay $20 to attend a dog show, but he buys a ticket for $15. Chuck values the dog show at

Accepted Answer

A)  $5.
B)  $15.
C)  $20.
D)  $35.E) B) and C)
F) A) and B)

Question 6

Total surplus in a market is equal to

Accepted Answer

A)  consumer surplus + producer surplus.
B)  value to buyers - amount paid by buyers.
C)  amount received by sellers - costs of sellers.
D)  producer surplus - consumer surplus.E) C) and D)
F) A) and B)

Question 7

Figure 7-10 
-Refer to Figure 7-10. Which area represents producer surplus when the price is P1?

Accepted Answer

A)  BCG
B)  ACH
C)  ABGD
D)  DGHE) A) and D)
F) B) and C)

Question 8

Suppose the demand for peaches decreases. What will happen to producer surplus in the market for peaches?

Accepted Answer

A)  It increases.
B)  It decreases.
C)  It remains unchanged.
D)  It may increase, decrease, or remain unchanged.E) A) and B)
F) A) and C)

Question 9

Which of the following is not true when the price of a good or service falls?

Accepted Answer

A)  Buyers who were already buying the good or service are better off.
B)  Some new buyers, who are now willing to buy, enter the market.
C)  The total consumer surplus in the market increases.
D)  The total value of purchases before and after the price change is the same.E) B) and C)
F) None of the above

Question 10

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

Accepted Answer

A)  ABD.
B)  ABF.
C)  FBD.
D)  HGCI.E) C) and D)
F) All of the above

Question 11

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it

Accepted Answer

A)  maximizes both the total revenue for firms and the quantity supplied of the product.
B)  maximizes the combined welfare of buyers and sellers.
C)  minimizes costs and maximizes output.
D)  minimizes the level of welfare payments.E) B) and D)
F) A) and B)

Question 12

Free markets allocate (a) the supply of goods to the buyers who value them most highly and (b) the demand for goods to the sellers who can produce them at least cost.

Accepted Answer

A) True 
 B)False

Question 13

Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25) . If there are five buyers in the market, then

Accepted Answer

A)  the marginal buyer's willingness to pay for the 100th unit of the good is $25.
B)  the sum of the five buyers' willingness to pay for the 100th unit of the good is $25.
C)  the average of the five buyers' willingness to pay for the 100th unit of the good is $25.
D)  all of the five buyers are willing to pay at least $25 for the 100th unit of the good.E) All of the above
F) B) and D)

Question 14

Scenario 7-1
Suppose market demand is given by the equation 
-Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, how much consumer surplus do consumers entering the market after the price drop receive?

Accepted Answer

The consumers enteri...

Question 15

Consumer surplus

Accepted Answer

A)  is the amount a buyer pays for a good minus the amount the buyer is willing to pay for it.
B)  is represented on a supply-demand graph by the area below the price and above the demand curve.
C)  measures the benefit sellers receive from participating in a market.
D)  measures the benefit buyers receive from participating in a market.E) None of the above
F) A) and D)

Question 16

If the price of oak lumber increases, what happens to consumer surplus in the market for oak cabinets?

Accepted Answer

A)  Consumer surplus increases.
B)  Consumer surplus decreases.
C)  Consumer surplus will not change consumer surplus; only producer surplus changes.
D)  Consumer surplus depends on what event led to the increase in the price of oak lumber.E) None of the above
F) A) and B)

Question 17

Caroline sharpens knives in her spare time for extra income. Buyers of her service are willing to pay $2.95 per knife for as many knives as Caroline is willing to sharpen. On a particular day, she is willing to sharpen the first knife for $2.00, the second knife for $2.25, the third knife for $2.75, and the fourth knife for $3.50. Assume Caroline is rational in deciding how many knives to sharpen. Her producer surplus is

Accepted Answer

A)  $0.95.
B)  $1.15.
C)  $1.30.
D)  $1.85.E) None of the above
F) C) and D)

Question 18

Donald produces nails at a cost of $350 per ton. If he sells the nails for $500 per ton, his producer surplus is

Accepted Answer

A)  $150.
B)  $350.
C)  $500.
D)  $850.E) None of the above
F) B) and C)

Question 19

Figure 7-26 
-Refer to Figure 7-26. At the equilibrium price, total surplus is

Accepted Answer

A)  $600.
B)  $1,200.
C)  $1,500.
D)  $1,800.E) C) and D)
F) B) and C)

Question 20

Figure 7-15 
-Refer to Figure 7-15. Area B represents

Accepted Answer

A)  the combined profits of all producers when the price is P2.
B)  the increase in producer surplus to all producers as the result of an increase in the price from P1 to P2.
C)  producer surplus to new producers entering the market as the result of an increase in the price from P1 to P2.
D)  that portion of the increase in producer surplus that is offset by a loss in consumer surplus when the price increases from P1 to P2.E) C) and D)
F) None of the above

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

Total surplus = Value to buyers - Costs to sellers.

Correct Answer
verified

Correct Answer
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Figure 7-26 -Refer to Figure 7-26. At the equilibrium price, total surplus is

Correct Answer
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Chuck would be willing to pay $20 to attend a dog show, but he buys a ticket for $15. Chuck values the dog show at

Correct Answer
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Total surplus in a market is equal to

Correct Answer
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Dallas buys strawberries, and he would be willing to pay more than he now pays. Suppose that Dallas has a change in his tastes such that he values strawberries more than before. If the market price is the same as before, then

Correct Answer
verified

Figure 7-14 -Refer to Figure 7-14. If the government imposes a price ceiling of $50 in this market, then the new producer surplus will be

Correct Answer
verified

Suppose the demand for peaches decreases. What will happen to producer surplus in the market for peaches?

Correct Answer
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Figure 7-10 -Refer to Figure 7-10. Which area represents producer surplus when the price is P1?

Correct Answer
verified

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it

Correct Answer
verified

If the price of oak lumber increases, what happens to consumer surplus in the market for oak cabinets?

Correct Answer
verified

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

Correct Answer
verified

Scenario 7-1 Suppose market demand is given by the equation -Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, how much consumer surplus do consumers entering the market after the price drop receive?

Correct Answer
verified
The consumers enteri...
View Answer

Which of the following is not true when the price of a good or service falls?

Correct Answer
verified

Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is

Correct Answer
verified

Consumer surplus

Correct Answer
verified

Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25) . If there are five buyers in the market, then

Correct Answer
verified

Donald produces nails at a cost of $350 per ton. If he sells the nails for $500 per ton, his producer surplus is

Correct Answer
verified

Free markets allocate (a) the supply of goods to the buyers who value them most highly and (b) the demand for goods to the sellers who can produce them at least cost.

Correct Answer
verified

Figure 7-15 -Refer to Figure 7-15. Area B represents

Correct Answer
verified

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

Total surplus = Value to buyers - Costs to sellers.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 7-26 -Refer to Figure 7-26. At the equilibrium price, total surplus is

Correct AnswerverifiedShow Answer

Chuck would be willing to pay $20 to attend a dog show, but he buys a ticket for $15. Chuck values the dog show at

Correct AnswerverifiedShow Answer

Total surplus in a market is equal to

Correct AnswerverifiedShow Answer

Dallas buys strawberries, and he would be willing to pay more than he now pays. Suppose that Dallas has a change in his tastes such that he values strawberries more than before. If the market price is the same as before, then

Correct AnswerverifiedShow Answer

Figure 7-14 -Refer to Figure 7-14. If the government imposes a price ceiling of $50 in this market, then the new producer surplus will be

Correct AnswerverifiedShow Answer

Suppose the demand for peaches decreases. What will happen to producer surplus in the market for peaches?

Correct AnswerverifiedShow Answer

Figure 7-10 -Refer to Figure 7-10. Which area represents producer surplus when the price is P1?

Correct AnswerverifiedShow Answer

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it

Correct AnswerverifiedShow Answer

If the price of oak lumber increases, what happens to consumer surplus in the market for oak cabinets?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Scenario 7-1 Suppose market demand is given by the equation -Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, how much consumer surplus do consumers entering the market after the price drop receive?

Correct AnswerverifiedThe consumers enteri...View AnswerShow Answer

Which of the following is not true when the price of a good or service falls?

Correct AnswerverifiedShow Answer

Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is

Correct AnswerverifiedShow Answer

Consumer surplus

Correct AnswerverifiedShow Answer

Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25) . If there are five buyers in the market, then

Correct AnswerverifiedShow Answer

Donald produces nails at a cost of $350 per ton. If he sells the nails for $500 per ton, his producer surplus is

Correct AnswerverifiedShow Answer

Free markets allocate (a) the supply of goods to the buyers who value them most highly and (b) the demand for goods to the sellers who can produce them at least cost.

Correct AnswerverifiedShow Answer

Figure 7-15 -Refer to Figure 7-15. Area B represents

Correct AnswerverifiedShow Answer

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The consumers enteri...
View Answer

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