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When a market is missing:


A) deadweight loss will increase, but only if more units are exchanged.
B) the government must create the market artificially.
C) total surplus could increase through the creation of a new market.
D) consumers' willingness to pay is too low to sustain the efficient quantity.

E) B) and D)
F) All of the above

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Total surplus can be increased by:


A) policies that help people do business more efficiently.
B) technologies that help people share more and better information.
C) increasing the availability of accurate information.
D) All of these can increase total surplus.

E) A) and B)
F) A) and C)

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A market to buy and sell organs:


A) would generate consumer surplus, but could never generate producer surplus.
B) has been banned by public policy because its creation would cause excessive deadweight loss.
C) would create surplus for those who would interact in it if it existed.
D) has not been created because it would redistribute surplus from producers to consumers.

E) B) and C)
F) None of the above

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Assume the market depicted in the graph is in equilibrium. What is total surplus? A) $40 B) $64 C) $80 D) $160 Assume the market depicted in the graph is in equilibrium. What is total surplus?


A) $40
B) $64
C) $80
D) $160

E) A) and D)
F) B) and C)

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Assume the market depicted in the graph is in equilibrium. What is consumer surplus? A) $30 B) $80 C) $120 D) $200 Assume the market depicted in the graph is in equilibrium. What is consumer surplus?


A) $30
B) $80
C) $120
D) $200

E) A) and C)
F) All of the above

Correct Answer

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For which of the following reasons might a market be missing?


A) Public policy prevents the market from existing.
B) The production of a particular good is banned.
C) Potential buyers and sellers lack accurate information.
D) All of these are reasons why a market might be missing.

E) B) and D)
F) All of the above

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Assume the market depicted in the graph is in equilibrium. What is total surplus? A) $160 B) $180 C) $320 D) $360 Assume the market depicted in the graph is in equilibrium. What is total surplus?


A) $160
B) $180
C) $320
D) $360

E) B) and C)
F) All of the above

Correct Answer

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A market has four individuals, each considering buying a grill. Assume that grills come in only one size and model. Martina considers herself a grill-master, and finds a grill a necessity, so she is willing to pay $400 for a grill. Javier is a meat-lover, honing his grilling skills, and is willing to pay $350 for a grill. Kamal wants to impress his friends with his vegetable grilling skills and is willing to pay $320 for a grill. Lina loves grilled shrimp and thinks it might be cheaper in the long run if she grills her own shrimp instead of eating out at a restaurant, so she is willing to pay $200 for a grill.If the market price of grills falls from $375 to $330, which of the following statements is true?


A) Javier will join the market but will receive no consumer surplus.
B) Javier and Kamal will join the market and together will receive $30 in consumer surplus.
C) Martina will experience a decrease in consumer surplus of $45.
D) Martina will experience an increase in consumer surplus of $45.

E) B) and C)
F) None of the above

Correct Answer

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D

A market has four individuals, each considering buying a grill. Assume that grills come in only one size and model. Martina considers herself a grill-master, and finds a grill a necessity, so she is willing to pay $400 for a grill. Javier is a meat-lover, honing his grilling skills, and is willing to pay $350 for a grill. Kamal wants to impress his friends with his vegetable grilling skills and is willing to pay $320 for a grill. Lina loves grilled shrimp and thinks it might be cheaper in the long run if she grills her own shrimp instead of eating out at a restaurant, so she is willing to pay $200 for a grill.If the market price of grills is $300, what would total consumer surplus be?


A) $1,070
B) $170
C) $200
D) $80

E) None of the above
F) A) and D)

Correct Answer

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Assume the market depicted in the graph is in equilibrium. What is producer surplus? A) $360 B) $40 C) $160 D) $120 Assume the market depicted in the graph is in equilibrium. What is producer surplus?


A) $360
B) $40
C) $160
D) $120

E) C) and D)
F) B) and D)

Correct Answer

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Assume the market depicted in the graph is in equilibrium. Total surplus consists of area(s) : A) A. B) A + B + C. C) A + B + C + D + E. D) D + E. Assume the market depicted in the graph is in equilibrium. Total surplus consists of area(s) :


A) A.
B) A + B + C.
C) A + B + C + D + E.
D) D + E.

E) A) and D)
F) B) and C)

Correct Answer

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According to the graph shown, if the market goes from equilibrium to having its price set at $10: A) deadweight loss will become bigger than total surplus. B) consumer surplus will definitely fall. C) total surplus may rise or fall. D) $12 of surplus will be transferred from producers to consumers. According to the graph shown, if the market goes from equilibrium to having its price set at $10:


A) deadweight loss will become bigger than total surplus.
B) consumer surplus will definitely fall.
C) total surplus may rise or fall.
D) $12 of surplus will be transferred from producers to consumers.

E) A) and B)
F) All of the above

Correct Answer

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Assume there are three hardware stores, each willing to sell one standard model hammer in a given time period. House Depot could offer a hammer for a minimum of $7. Lace Hardware could offer a hammer for a minimum of $10. Bob's Hardware could offer a hammer for a minimum of $13.If the market price of hammers is $10, which of the following statements is true?


A) Only House Depot would have positive surplus by supplying hammers to the market.
B) Only House Depot and Lace Hardware would have positive surplus by supplying hammers to the market.
C) House Depot, Lace Hardware, and Bob's Hardware would all supply hammers to the market, but Bob's would have negative surplus.
D) Only House Depot and Bob's Hardware would supply hammers to the market.

E) B) and D)
F) None of the above

Correct Answer

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When a market is efficient:


A) any additional changes to make someone better off will make someone else worse off.
B) a central planner must be involved.
C) total surplus is zero.
D) any additional changes to make someone better off will reduce the deadweight loss.

E) A) and B)
F) A) and C)

Correct Answer

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A

Assume the market depicted in the graph is in equilibrium. If the price is subsequently set at $28, which of the following statements is true? I. Some producers will gain surplus. II. All consumers will lose surplus. III. Total surplus may increase or decrease. A) III only B) I and III only C) I and II only D) I, II, and III Assume the market depicted in the graph is in equilibrium. If the price is subsequently set at $28, which of the following statements is true? I. Some producers will gain surplus. II. All consumers will lose surplus. III. Total surplus may increase or decrease.


A) III only
B) I and III only
C) I and II only
D) I, II, and III

E) None of the above
F) B) and D)

Correct Answer

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Assume the market depicted in the graph is in equilibrium. If the market goes from equilibrium to having its price set at $18: A) consumer surplus will rise by $6,750. B) producer surplus will fall by $4,500. C) total surplus will rise by $2,250. D) total surplus will fall by $2,250. Assume the market depicted in the graph is in equilibrium. If the market goes from equilibrium to having its price set at $18:


A) consumer surplus will rise by $6,750.
B) producer surplus will fall by $4,500.
C) total surplus will rise by $2,250.
D) total surplus will fall by $2,250.

E) A) and B)
F) B) and C)

Correct Answer

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Assume the market depicted in the graph is in equilibrium. If the market price is set to $14, which of the following statements is true? A) Some consumers will gain surplus, but total surplus will fall. B) Some producers will gain surplus, but total surplus will fall. C) Some producers will lose surplus, but total surplus will rise. D) Some consumers will lose surplus, but total surplus will rise. Assume the market depicted in the graph is in equilibrium. If the market price is set to $14, which of the following statements is true?


A) Some consumers will gain surplus, but total surplus will fall.
B) Some producers will gain surplus, but total surplus will fall.
C) Some producers will lose surplus, but total surplus will rise.
D) Some consumers will lose surplus, but total surplus will rise.

E) A) and C)
F) A) and B)

Correct Answer

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B

In a well-functioning competitive market, total surplus:


A) can never be zero.
B) can never fall below zero.
C) is always zero.
D) is always below zero.

E) All of the above
F) C) and D)

Correct Answer

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According to the graph shown, if the market goes from equilibrium to having its price set at $10: A) area (C + E) becomes deadweight loss. B) area (B) transfers from consumer surplus to producer surplus. C) $12 of surplus transfers from consumers to producers. D) All of these are correct. According to the graph shown, if the market goes from equilibrium to having its price set at $10:


A) area (C + E) becomes deadweight loss.
B) area (B) transfers from consumer surplus to producer surplus.
C) $12 of surplus transfers from consumers to producers.
D) All of these are correct.

E) B) and D)
F) A) and D)

Correct Answer

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Consider a market that is currently in equilibrium. If the demand curve shifts to the right and a new equilibrium is reached:


A) total surplus will increase.
B) consumer surplus may increase or decrease.
C) producer surplus will increase.
D) producer surplus will decrease.

E) A) and C)
F) All of the above

Correct Answer

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