Question 1

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) None of the above
F) All of the above

Question 2

Efficiency is attained when

Accepted Answer

A)   total surplus is maximized.
B)   producer surplus is maximized.
C)   all resources are being used.
D)   consumer surplus is maximized and producer surplus is minimized.E) C) and D)
F) A) and B)

Question 3

Figure 7-10 
-Refer to Figure 7-10. 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)   AHGBE) B) and C)
F) B) and D)

Question 4

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

Question 5

Table 7-17
 
-Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, producer surplus will be

Accepted Answer

A)   $16.
B)   $18.
C)   $24.
D)   $26.E) A) and B)
F) A) and C)

Question 6

Figure 7-24 
-Refer to Figure 7-24. At equilibrium, producer surplus is

Accepted Answer

A)   $36.
B)   $72.
C)   $54.
D)   $18.E) A) and B)
F) C) and D)

Question 7

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

Question 8

Figure 7-27 
-Refer to Figure 7-27. Buyers who value this good less than the equilibrium price are represented by which line segment?

Accepted Answer

A)   AC.
B)   CK.
C)   BC.
D)   CH.E) All of the above
F) C) and D)

Question 9

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it

Accepted Answer

A)   maximizes costs of the seller.
B)   maximizes tax revenue for the government.
C)   maximizes the combined welfare of buyers and sellers.
D)   minimizes the expenditure of buyers.E) None of the above
F) B) and D)

Question 10

When there is a technological advance in the pork industry, consumer surplus in that market will

Accepted Answer

A)   increase.
B)   decrease.
C)   not change, since technology affects producers and not consumers.
D)   not change, since consumers' willingness to pay is unaffected by the technological advance.E) A) and B)
F) All of the above

Question 11

Table 7-12
The only four producers in a market have the following costs:
 
-Refer to Table 7-12. If the sellers bid against each other for the right to sell the good to a consumer, then the producer surplus will be

Accepted Answer

A)   $0 or slightly more.
B)   $50 or slightly less.
C)   $150 or slightly less.
D)   $200 or slightly more.E) All of the above
F) A) and B)

Question 12

Table 7-7
 
-Refer to Table 7-7. You have an extra ticket to the Midwest Regional Sweet 16 game in the men's NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You hold an auction to sell the ticket. Who makes the winning bid, and what does he offer to pay for the ticket?

Accepted Answer

A)   Michael; $501
B)   Michael; more than $400 but less than or equal to $500
C)   Earvin; $400
D)   Earvin; more than $350 but less than or equal to $400E) A) and B)
F) A) and C)

Question 13

Table 7-14
The only four producers in a market have the following costs:
 
-Refer to Table 7-14. If the sellers bid against each other for the right to sell the good to a single consumer, then the good will sell for

Accepted Answer

A)   $30 or slightly more.
B)   $40 or slightly less.
C)   $55 or slightly less.
D)   $65 or slightly less.E) A) and D)
F) None of the above

Question 14

If John's willingness to pay for a good is $20 and the price of the good is $15, how much is John's consumer surplus
from purchasing the good?

Accepted Answer

Consumer s...

Question 15

George produces cupcakes. His production cost is $10 per dozen. He sells the cupcakes for $16 per dozen. His producer surplus per dozen cupcakes is

Accepted Answer

A)   $6.
B)   $10.
C)   $16.
D)   $26.E) A) and B)
F) A) and C)

Question 16

Figure 7-22 
-Refer to Figure 7-22. At the equilibrium price, total surplus is

Accepted Answer

A)   $2,500.
B)   $1,000.
C)   $3,500.
D)   $7,000.E) None of the above
F) A) and B)

Question 17

Table 7-11
The following table represents the costs of five possible sellers.
 
-Refer to Table 7-11. Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 2 if the price is

Accepted Answer

A)   $1,700.
B)   $1,100.
C)   $1,650.
D)   $1,050.E) A) and B)
F) All of the above

Question 18

Answer each of the following questions about supply and producer surplus.
a. What is producer surplus, and how is it measured?
b. What is the relationship between the cost to sellers and the supply curve?
c. Other things equal, what happens to producer surplus when the price of a good rises?
Illustrate your answer on a supply curve.

Accepted Answer

a. Producer surplus measures the benefit...

Question 19

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) A) and B)
F) None of the above

Question 20

The distinction between efficiency and equality can be described as follows:

Accepted Answer

A)   Efficiency refers to maximizing the number of trades among buyers and sellers; equality refers to maximizing the gains from trade among buyers and sellers.
B)   Efficiency refers to minimizing the price paid by buyers; equality refers to maximizing the gains from trade among buyers and sellers.
C)   Efficiency refers to maximizing the size of the pie; equality refers to producing a pie of a given size at the least possible cost.
D)   Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society.E) All of the above
F) B) and C)

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

Figure 7-24 -Refer to Figure 7-24. At equilibrium, producer surplus is

Correct Answer
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Figure 7-10 -Refer to Figure 7-10. Which area represents the increase in producer surplus when the price rises from P1 to P2?

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

Correct Answer
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Table 7-17 -Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, producer surplus will be

Correct Answer
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Figure 7-27 -Refer to Figure 7-27. Buyers who value this good less than the equilibrium price are represented by which line segment?

Correct Answer
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a. Producer surplus measures the benefit...
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Table 7-14 The only four producers in a market have the following costs: -Refer to Table 7-14. If the sellers bid against each other for the right to sell the good to a single consumer, then the good will sell for

Correct Answer
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The distinction between efficiency and equality can be described as follows:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it

Correct Answer
verified

Efficiency is attained when

Correct Answer
verified

When there is a technological advance in the pork industry, consumer surplus in that market will

Correct Answer
verified

Figure 7-22 -Refer to Figure 7-22. At the equilibrium price, total surplus is

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

George produces cupcakes. His production cost is $10 per dozen. He sells the cupcakes for $16 per dozen. His producer surplus per dozen cupcakes is

Correct Answer
verified

If John's willingness to pay for a good is $20 and the price of the good is $15, how much is John's consumer surplus from purchasing the good?

Correct Answer
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Consumer s...
View Answer

Table 7-12 The only four producers in a market have the following costs: -Refer to Table 7-12. If the sellers bid against each other for the right to sell the good to a consumer, then the producer surplus will be

Correct Answer
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Table 7-11 The following table represents the costs of five possible sellers. -Refer to Table 7-11. Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 2 if the price is

Correct Answer
verified

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

Figure 7-24 -Refer to Figure 7-24. At equilibrium, producer surplus is

Correct AnswerverifiedShow Answer

Figure 7-10 -Refer to Figure 7-10. Which area represents the increase in producer surplus when the price rises from P1 to P2?

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

Table 7-17 -Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, producer surplus will be

Correct AnswerverifiedShow Answer

Figure 7-27 -Refer to Figure 7-27. Buyers who value this good less than the equilibrium price are represented by which line segment?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Table 7-14 The only four producers in a market have the following costs: -Refer to Table 7-14. If the sellers bid against each other for the right to sell the good to a single consumer, then the good will sell for

Correct AnswerverifiedShow Answer

The distinction between efficiency and equality can be described as follows:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it

Correct AnswerverifiedShow Answer

Efficiency is attained when

Correct AnswerverifiedShow Answer

When there is a technological advance in the pork industry, consumer surplus in that market will

Correct AnswerverifiedShow Answer

Figure 7-22 -Refer to Figure 7-22. At the equilibrium price, total surplus is

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

George produces cupcakes. His production cost is $10 per dozen. He sells the cupcakes for $16 per dozen. His producer surplus per dozen cupcakes is

Correct AnswerverifiedShow Answer

If John's willingness to pay for a good is $20 and the price of the good is $15, how much is John's consumer surplus from purchasing the good?

Correct AnswerverifiedConsumer s...View AnswerShow Answer

Table 7-12 The only four producers in a market have the following costs: -Refer to Table 7-12. If the sellers bid against each other for the right to sell the good to a consumer, then the producer surplus will be

Correct AnswerverifiedShow Answer

Table 7-11 The following table represents the costs of five possible sellers. -Refer to Table 7-11. Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 2 if the price is

Correct AnswerverifiedShow Answer

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a. Producer surplus measures the benefit...
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Consumer s...
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