Question 1

Total surplus is represented by the area

Accepted Answer

A)   under the demand curve and above the price.
B)   above the supply curve and up to the price.
C)   under the supply curve and up to the price.
D)   between the demand and supply curves up to the point of equilibrium.E) A) and D)
F) A) and B)

Question 2

Which of the following statements is not correct?

Accepted Answer

A)   A seller would be eager to sell her product at a price higher than her cost.
B)   A seller would refuse to sell her product at a price lower than her cost.
C)   A seller would be indifferent about selling her product at a price equal to her cost.
D)   Since sellers cannot set the price for their product,they must be willing to sell their product at any price.E) B) and C)
F) A) and C)

Question 3

Which of the following will cause an increase in consumer surplus?

Accepted Answer

A)   an increase in the production cost of the good
B)   a technological improvement in the production of the good
C)   a decrease in the number of sellers of the good
D)   the imposition of a binding price floor in the marketE) A) and B)
F) B) and D)

Question 4

Suppose that Firms A and B each produce high-resolution computer monitors,but Firm A can do so at a lower cost.Cassie and David each want to purchase a high-resolution computer monitor,but David is willing to pay more than Cassie.Which of the following market outcomes is efficient?

Accepted Answer

A)   Firm A produces a monitor that Cassie buys.David does not purchase a monitor.
B)   Firm A produces a monitor that David buys.
C)   Firm B produces a monitor that Cassie buys.David does not purchase a monitor.
D)   Firm B produces a monitor that David buys.E) B) and C)
F) A) and D)

Question 5

Justin builds fences for a living.Justin's out-of-pocket expenses (for wood,paint,etc.) plus the value that he places on his own time amount to his

Accepted Answer

A)   producer surplus.
B)   producer deficit.
C)   cost of building fences.
D)   profit.E) A) and B)
F) All of the above

Question 6

Consumer surplus is

Accepted Answer

A)   the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.
B)   the amount a buyer is willing to pay for a good minus the cost of producing the good.
C)   the amount by which the quantity supplied of a good exceeds the quantity demanded of the good.
D)   a buyer's willingness to pay for a good plus the price of the good.E) B) and C)
F) All of the above

Question 7

Market power and externalities are examples of

Accepted Answer

A)   laissez-faire economics.
B)   public policy.
C)   market failure.
D)   welfare economics.E) A) and B)
F) All of the above

Question 8

Each seller of a product is willing to sell as long as the price he or she can receive is greater than the opportunity cost of producing the product.

Accepted Answer

A) True 
 B)False

Question 9

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

Question 10

Producer surplus is the cost of production minus the amount a seller is paid.

Accepted Answer

A) True 
 B)False

Question 11

Figure 7-18 
-Refer to Figure 7-18.If 40 units of the good are being bought and sold,then

Accepted Answer

A)   the marginal cost to sellers is equal to the marginal value to buyers.
B)   the marginal value to buyers is greater than the marginal cost to sellers.
C)   the marginal cost to sellers is greater than the marginal value to buyers.
D)   producer surplus would be greater than consumer surplus.E) A) and B)
F) All of the above

Question 12

Figure 7-9 
-Refer to Figure 7-9.If the demand curve is D and the supply curve shifts from S' to S,what is the change in producer surplus?

Accepted Answer

A)   Producer surplus increases by $625.
B)   Producer surplus increases by $1,875.
C)   Producer surplus decreases by $625.
D)   Producer surplus decreases by $1,875.E) B) and D)
F) B) and C)

Question 13

An example of positive analysis is studying

Accepted Answer

A)   how market forces produce equilibrium.
B)   whether equilibrium outcomes are fair.
C)   whether equilibrium outcomes are socially desirable.
D)   if income distributions are fair.E) All of the above
F) A) and D)

Question 14

If a consumer is willing and able to pay $20 for a particular good and if he pays $16 for the good,then for that consumer,consumer surplus amounts to

Accepted Answer

A)   $4.
B)   $16.
C)   $20.
D)   $36.E) A) and B)
F) B) and C)

Question 15

Brock is willing to pay $400 for a new suit,but he is able to buy the suit for $350.His consumer surplus is

Accepted Answer

A)   $50.
B)   $150.
C)   $350.
D)   $400.E) All of the above
F) A) and B)

Question 16

Table 7-8
The only four producers in a market have the following costs:
 
-Refer to Table 7-8.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) C) and D)
F) B) and D)

Question 17

Welfare economics is the study of the welfare system.

Accepted Answer

A) True 
 B)False

Question 18

Table 7-1
 
-Refer to Table 7-1.If the price of the product is $22,then who would be willing to purchase the product?

Accepted Answer

A)   Lori
B)   Lori and Audrey
C)   Lori,Audrey,and Zach
D)   Lori,Audrey,Zach,and CalvinE) A) and D)
F) B) and D)

Question 19

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

Question 20

Figure 7-12 
-Refer to Figure 7-12.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) None of the above
F) C) and D)

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

Justin builds fences for a living.Justin's out-of-pocket expenses (for wood,paint,etc.) plus the value that he places on his own time amount to his

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Which of the following will cause an increase in consumer surplus?

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Welfare economics is the study of the welfare system.

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Brock is willing to pay $400 for a new suit,but he is able to buy the suit for $350.His consumer surplus is

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Table 7-1 -Refer to Table 7-1.If the price of the product is $22,then who would be willing to purchase the product?

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Figure 7-18 -Refer to Figure 7-18.If 40 units of the good are being bought and sold,then

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Figure 7-12 -Refer to Figure 7-12.Area B represents

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Table 7-8 The only four producers in a market have the following costs: -Refer to Table 7-8.If the sellers bid against each other for the right to sell the good to a consumer,then the producer surplus will be

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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

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Which of the following statements is not correct?

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Suppose that Firms A and B each produce high-resolution computer monitors,but Firm A can do so at a lower cost.Cassie and David each want to purchase a high-resolution computer monitor,but David is willing to pay more than Cassie.Which of the following market outcomes is efficient?

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An example of positive analysis is studying

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Market power and externalities are examples of

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Producer surplus is the cost of production minus the amount a seller is paid.

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Each seller of a product is willing to sell as long as the price he or she can receive is greater than the opportunity cost of producing the product.

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Total surplus is represented by the area

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If a consumer is willing and able to pay $20 for a particular good and if he pays $16 for the good,then for that consumer,consumer surplus amounts to

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Consumer surplus is

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Figure 7-9 -Refer to Figure 7-9.If the demand curve is D and the supply curve shifts from S' to S,what is the change in producer surplus?

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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

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