Question 1

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

Question 2

The "invisible hand" is

Accepted Answer

A)   used to describe the welfare system in the United States.
B)   a concept developed by Adam Smith to describe the virtues of free markets.
C)   a concept used by J.M. Keynes to describe the role of government in guiding the allocation of resources in the economy.
D)   a term used by some economists to characterize the role of government in an economy - inevitable but invisible.E) B) and D)
F) B) and C)

Question 3

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

Accepted Answer

A)   AC.
B)   CK.
C)   BC.
D)   CH.E) None of the above
F) B) and D)

Question 4

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

Question 5

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

Question 6

Figure 7-19 
-Refer to Figure 7-19. At the equilibrium price, consumer surplus is

Accepted Answer

A)   $100.
B)   $200.
C)   $50.
D)   $450.E) B) and C)
F) A) and B)

Question 7

Figure 7-21 
-Refer to Figure 7-21. Which area represents consumer surplus when the price is P1?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) A) and D)
F) A) and C)

Question 8

Table 7-1
 
-Refer to Table 7-1. If the market price is $105,

Accepted Answer

A)   Calvin's consumer surplus is $45 and total consumer surplus is $85.
B)   Sam's consumer surplus is $30 and total consumer surplus is $90.
C)   Andrew's consumer surplus is $15 and total consumer surplus is $67.50.
D)   Lori's consumer surplus is ­$2 and total consumer surplus is $100.E) A) and D)
F) B) and C)

Question 9

Table 7-15
 
-Refer to Table 7-15. You want to hire a professional photographer to take pictures of your family. The table shows the costs of the four potential sellers in the local photography market. You take bids from the sellers. Who offers the winning bid, and what does he offer to charge for the photography session?

Accepted Answer

A)   Steve; more than $400 but less than $450
B)   Steve; $399
C)   LeBron; more than $700
D)   LeBron; more than $600 but less than $700E) All of the above
F) A) and D)

Question 10

If the current allocation of resources in the market for hammers is inefficient, then it must be the case that

Accepted Answer

A)   producer surplus exceeds consumer surplus in the market for hammers.
B)   consumer surplus exceeds producer surplus in the market for hammers.
C)   the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources.
D)   the costs that sellers of hammers are incurring could be reduced by moving to a different allocation of resources.E) A) and B)
F) B) and D)

Question 11

Suppose you buy an iPod for $100. If your consumer surplus is $30, your willingness to pay is $70.

Accepted Answer

A) True 
 B)False

Question 12

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is

Accepted Answer

A)   zero.
B)   negative, and the consumer would not purchase the product.
C)   positive, and the consumer would purchase the product.
D)   There is not enough information given to answer this question.E) C) and D)
F) None of the above

Question 13

Efficiency in a market is achieved when

Accepted Answer

A)   a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs.
B)   the sum of producer surplus and consumer surplus is maximized.
C)   all firms are producing the good at the same low cost per unit.
D)   no buyer is willing to pay more than the equilibrium price for any unit of the good.E) None of the above
F) All of the above

Question 14

All else equal, an increase in demand will always increase consumer surplus.

Accepted Answer

A) True 
 B)False

Question 15

Refer to Table 7-12. If Evan, Selena, Angie, and Kris sell the good, and the resulting producer surplus is $700, then the price must have been

Accepted Answer

A)   $200.
B)   $300.
C)   $500.
D)   $700.E) C) and D)
F) A) and C)

Question 16

If a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will

Accepted Answer

A)   increase producer surplus.
B)   reduce producer surplus.
C)   not affect producer surplus.
D)   Any of the above are possible.E) A) and B)
F) None of the above

Question 17

Hot dogs and hot dog buns are complements. An increase in the price of flour used to make hot dogs buns will

Accepted Answer

A)   increase consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs.
B)   increase consumer surplus in the market for hot dogs and increase producer surplus in the market for hot dog buns.
C)   decrease consumer surplus in the market for hot dog buns and increase producer surplus in the market for hot dogs.
D)   decrease consumer surplus in the market for hot dog buns and decrease producer surplus in the market for hot dogs.E) A) and C)
F) B) and C)

Question 18

Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for $3,000. Michael's willingness to pay is

Accepted Answer

A)   $500.
B)   $3,000.
C)   $3,500.
D)   $6,500.E) A) and C)
F) A) and D)

Question 19

The study of how the allocation of resources affects economic well-being is called

Accepted Answer

A)   consumer economics.
B)   macroeconomics.
C)   willingness-to-pay economics.
D)   welfare economics.E) B) and D)
F) A) and C)

Question 20

Pat bought a new car for $15,500 but was willing to pay $24,000. The consumer surplus is

Accepted Answer

A)   $8,500.
B)   $15,500.
C)   $24,000.
D)   $39,500.E) All of the above
F) C) and D)

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

Hot dogs and hot dog buns are complements. An increase in the price of flour used to make hot dogs buns will

Correct Answer
verified

Pat bought a new car for $15,500 but was willing to pay $24,000. The consumer surplus is

Correct Answer
verified

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

Correct Answer
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Total surplus is represented by the area below the

Correct Answer
verified

All else equal, an increase in demand will always increase consumer surplus.

Correct Answer
verified

Suppose you buy an iPod for $100. If your consumer surplus is $30, your willingness to pay is $70.

Correct Answer
verified

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

Correct Answer
verified

Figure 7-19 -Refer to Figure 7-19. At the equilibrium price, consumer surplus is

Correct Answer
verified

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
verified

If the current allocation of resources in the market for hammers is inefficient, then it must be the case that

Correct Answer
verified

The study of how the allocation of resources affects economic well-being is called

Correct Answer
verified

Table 7-1 -Refer to Table 7-1. If the market price is $105,

Correct Answer
verified

If a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will

Correct Answer
verified

Correct Answer
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If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is

Correct Answer
verified

The "invisible hand" is

Correct Answer
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Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for $3,000. Michael's willingness to pay is

Correct Answer
verified

Refer to Table 7-12. If Evan, Selena, Angie, and Kris sell the good, and the resulting producer surplus is $700, then the price must have been

Correct Answer
verified

Efficiency in a market is achieved when

Correct Answer
verified

Figure 7-21 -Refer to Figure 7-21. Which area represents consumer surplus when the price is P1?

Correct Answer
verified

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

Hot dogs and hot dog buns are complements. An increase in the price of flour used to make hot dogs buns will

Correct AnswerverifiedShow Answer

Pat bought a new car for $15,500 but was willing to pay $24,000. The consumer surplus is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Total surplus is represented by the area below the

Correct AnswerverifiedShow Answer

All else equal, an increase in demand will always increase consumer surplus.

Correct AnswerverifiedShow Answer

Suppose you buy an iPod for $100. If your consumer surplus is $30, your willingness to pay is $70.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 7-19 -Refer to Figure 7-19. At the equilibrium price, consumer 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

If the current allocation of resources in the market for hammers is inefficient, then it must be the case that

Correct AnswerverifiedShow Answer

The study of how the allocation of resources affects economic well-being is called

Correct AnswerverifiedShow Answer

Table 7-1 -Refer to Table 7-1. If the market price is $105,

Correct AnswerverifiedShow Answer

If a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is

Correct AnswerverifiedShow Answer

The "invisible hand" is

Correct AnswerverifiedShow Answer

Michael values a stainless steel refrigerator for his new house at $3,500, but he succeeds in buying one for $3,000. Michael's willingness to pay is

Correct AnswerverifiedShow Answer

Refer to Table 7-12. If Evan, Selena, Angie, and Kris sell the good, and the resulting producer surplus is $700, then the price must have been

Correct AnswerverifiedShow Answer

Efficiency in a market is achieved when

Correct AnswerverifiedShow Answer

Figure 7-21 -Refer to Figure 7-21. Which area represents consumer surplus when the price is P1?

Correct AnswerverifiedShow Answer

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