Question 1

Total surplus in a market is

Accepted Answer

A)  the total cost to sellers of providing the good minus the total value of the good to buyers.
B)  the total value of the good to buyers minus the cost to sellers of providing the good.
C)  the difference between consumer surplus and sellers' cost.
D)  always smaller than producer surplus.E) None of the above
F) A) and B)

Question 2

Table 7-3
For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Alex, Barb, and Carlos are the only three buyers of oranges, and only three oranges can be supplied per day.
 
-Refer to Table 7-3.If the market price of an orange is $0.70,the market quantity of oranges demanded per day is

Accepted Answer

A)  5.
B)  6.
C)  7.
D)  9.E) B) and D)
F) A) and C)

Question 3

Moving production from a high-cost producer to a low-cost producer will

Accepted Answer

A)  lower total surplus.
B)  raise total surplus.
C)  lower producer surplus.
D)  raise producer surplus but lower consumer surplus.E) B) and C)
F) None of the above

Question 4

Producer surplus measures

Accepted Answer

A)  the benefits to sellers of participating in a market.
B)  the costs to sellers of participating in a market.
C)  the price that buyers are willing to pay for sellers' output of a good or service.
D)  the benefit to sellers of producing a greater quantity of a good or service than buyers demand.E) A) and C)
F) B) and D)

Question 5

When markets fail,public policy can potentially remedy the problem and increase economic efficiency.

Accepted Answer

A) True 
 B)False

Question 6

A buyer is willing to buy a product at a price greater than or equal to his willingness to pay,but would refuse to buy a product at a price less than his willingness to pay.

Accepted Answer

A) True 
 B)False

Question 7

Producer surplus is the area

Accepted Answer

A)  under the supply curve.
B)  between the supply and demand curves.
C)  below the price and above the supply curve.
D)  under the demand curve, and above the price.E) A) and D)
F) None of the above

Question 8

In a market,the marginal buyer is the buyer

Accepted Answer

A)  whose willingness to pay is higher than that of all other buyers and potential buyers.
B)  whose willingness to pay is lower than that of all other buyers and potential buyers.
C)  who is willing to buy exactly one unit of the good.
D)  who would be the first to leave the market if the price were any higher.E) All of the above
F) C) and D)

Question 9

If an allocation of resources is efficient,then

Accepted Answer

A)  consumer surplus is maximized.
B)  producer surplus is maximized.
C)  all potential gains from trade among buyers are sellers are being realized.
D)  the allocation is necessarily equitable as well.E) All of the above
F) B) and C)

Question 10

Which of the following is correct?

Accepted Answer

A)  Efficiency deals with the size of the economic pie and equity deals with how fairly the pie is sliced.
B)  Equity can be judged on positive grounds whereas efficiency requires normative judgments.
C)  Efficiency is more difficult to evaluate than equity.
D)  Equity and efficiency are both maximized in a society when total surplus is maximized.E) None of the above
F) B) and C)

Question 11

At any quantity,the price given by the supply curve shows the cost of the lowest-cost seller.

Accepted Answer

A) True 
 B)False

Question 12

Figure 7-1
 
-Refer to Figure 7-1.Area C represents

Accepted Answer

A)  the decrease in consumer surplus that results from a downward-sloping demand curve.
B)  consumer surplus to new consumers who enter the market when the price falls from P₂ to P₁.
C)  the increase in producer surplus when quantity sold increases from Q₂ to Q₁.
D)  the decrease in consumer surplus to each consumer in the market when the price increases from P₁ to P₂.E) None of the above
F) A) and B)

Question 13

Producer surplus directly measures

Accepted Answer

A)  the well-being of society as a whole.
B)  the well-being of buyers and sellers.
C)  the well-being of sellers.
D)  sellers' willingness to sell.E) A) and B)
F) None of the above

Question 14

Market Supply and Demand for Pepperoni Pizza
Table 7-5
 
-Refer to Table 7-5.As the table suggests,the demand curve is a straight line and so is the supply curve.Take this into account and suppose the price is $8,with only 4 pizzas being bought and sold.Total surplus amounts to

Accepted Answer

A)  $20.
B)  $30.
C)  $36.
D)  $40.E) A) and C)
F) C) and D)

Question 15

Positive analysis refers to what

Accepted Answer

A)  is.
B)  should be.
C)  will be.
D)  used to be.E) A) and C)
F) B) and C)

Question 16

Figure 7-9
 
-Refer to Figure 7-9.If the price decreases from $22 to $16,consumer surplus increases by

Accepted Answer

A)  $120.
B)  $360.
C)  $480.
D)  $600.E) All of the above
F) B) and C)

Question 17

Tammy loves donuts.The table shown reflects the value Tammy places on each donut she eats:
  
a.Use this information to construct Tammy's demand curve for donuts.
b.If the price of donuts is $0.20, how many donuts will Tammy buy?
c.Show Tammy's consumer surplus on your graph.How much consumer surplus would she have at a price of $0.20?
d.If the price of donuts rose to $0.40, how many donuts would she purchase now? What would happen to Tammy's consumer surplus? Show this change on your graph.

Accepted Answer

a.

b. At a price of $0.20,Tammy would...

Question 18

Table 7-3
For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Alex, Barb, and Carlos are the only three buyers of oranges, and only three oranges can be supplied per day.
 
-Refer to Table 7-3.The market quantity of oranges demanded per day is exactly 5 if the price of an orange,P,satisfies

Accepted Answer

A)  $1.00 
B)  $0.80 
C)  $0.80 
D)  $0.75 < P < $0.80.E) B) and C)
F) All of the above

Question 19

Answer each of the following questions about demand and consumer surplus.
a.What is consumer surplus, and how is it measured?
b.What is the relationship between the demand curve and the willingness to pay?
c.Other things equal, what happens to consumer surplus if the price of a good falls? Why? Illustrate using a demand curve.
d.In what way does the demand curve represent the benefit consumers receive from participating in a market? In addition to the demand curve, what else must be considered to determine consumer surplus?

Accepted Answer

a. Consumer surplus measures the benefit...

Question 20

Figure 7-11. On the graph below, Q represents the quantity of the good and P represents the good's price.
 
-Refer to Figure 7-11.At the equilibrium,total surplus amounts to

Accepted Answer

A)  $64.
B)  $72.
C)  $96.
D)  $108.E) A) and B)
F) A) and C)

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

Positive analysis refers to what

Correct Answer
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When markets fail,public policy can potentially remedy the problem and increase economic efficiency.

Correct Answer
verified

Producer surplus is the area

Correct Answer
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Producer surplus directly measures

Correct Answer
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At any quantity,the price given by the supply curve shows the cost of the lowest-cost seller.

Correct Answer
verified

Figure 7-9 -Refer to Figure 7-9.If the price decreases from $22 to $16,consumer surplus increases by

Correct Answer
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Which of the following is correct?

Correct Answer
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a. Consumer surplus measures the benefit...
View Answer

If an allocation of resources is efficient,then

Correct Answer
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a.

b. At a price of $0.20,Tammy would...
View Answer

A buyer is willing to buy a product at a price greater than or equal to his willingness to pay,but would refuse to buy a product at a price less than his willingness to pay.

Correct Answer
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Market Supply and Demand for Pepperoni Pizza Table 7-5 -Refer to Table 7-5.As the table suggests,the demand curve is a straight line and so is the supply curve.Take this into account and suppose the price is $8,with only 4 pizzas being bought and sold.Total surplus amounts to

Correct Answer
verified

Correct Answer
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Figure 7-11. On the graph below, Q represents the quantity of the good and P represents the good's price. -Refer to Figure 7-11.At the equilibrium,total surplus amounts to

Correct Answer
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Total surplus in a market is

Correct Answer
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Figure 7-1 -Refer to Figure 7-1.Area C represents

Correct Answer
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In a market,the marginal buyer is the buyer

Correct Answer
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Producer surplus measures

Correct Answer
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Correct Answer
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Moving production from a high-cost producer to a low-cost producer will

Correct Answer
verified

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

Positive analysis refers to what

Correct AnswerverifiedShow Answer

When markets fail,public policy can potentially remedy the problem and increase economic efficiency.

Correct AnswerverifiedShow Answer

Producer surplus is the area

Correct AnswerverifiedShow Answer

Producer surplus directly measures

Correct AnswerverifiedShow Answer

At any quantity,the price given by the supply curve shows the cost of the lowest-cost seller.

Correct AnswerverifiedShow Answer

Figure 7-9 -Refer to Figure 7-9.If the price decreases from $22 to $16,consumer surplus increases by

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Correct Answerverifieda. Consumer surplus measures the benefit...View AnswerShow Answer

If an allocation of resources is efficient,then

Correct AnswerverifiedShow Answer

Correct Answerverifieda. b. At a price of $0.20,Tammy would...View AnswerShow Answer

A buyer is willing to buy a product at a price greater than or equal to his willingness to pay,but would refuse to buy a product at a price less than his willingness to pay.

Correct AnswerverifiedShow Answer

Market Supply and Demand for Pepperoni Pizza Table 7-5 -Refer to Table 7-5.As the table suggests,the demand curve is a straight line and so is the supply curve.Take this into account and suppose the price is $8,with only 4 pizzas being bought and sold.Total surplus amounts to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 7-11. On the graph below, Q represents the quantity of the good and P represents the good's price. -Refer to Figure 7-11.At the equilibrium,total surplus amounts to

Correct AnswerverifiedShow Answer

Total surplus in a market is

Correct AnswerverifiedShow Answer

Figure 7-1 -Refer to Figure 7-1.Area C represents

Correct AnswerverifiedShow Answer

In a market,the marginal buyer is the buyer

Correct AnswerverifiedShow Answer

Producer surplus measures

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Moving production from a high-cost producer to a low-cost producer will

Correct AnswerverifiedShow Answer

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a. Consumer surplus measures the benefit...
View Answer

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a.

b. At a price of $0.20,Tammy would...
View Answer

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