Question 1

Josh is willing to pay $500 for a set of tire, but he is able to pay $300 at the local tire store. His consumer surplus is

Accepted Answer

A)  $800.
B)  $300.
C)  $200.
D)  $500.E) B) and C)
F) A) and B)

Question 2

Figure 7-15 
-Refer to Figure 7-15. When the price is P2, producer surplus is

Accepted Answer

A)  A.
B)  A+C.
C)  A+B+C.
D)  D+G.E) A) and B)
F) A) and C)

Question 3

Steak and chicken are substitutes. A sharp reduction in the supply of steak would

Accepted Answer

A)  increase consumer surplus in the market for steak and decrease producer surplus in the market for chicken.
B)  increase consumer surplus in the market for steak and increase producer surplus in the market for chicken.
C)  decrease consumer surplus in the market for steak and increase producer surplus in the market for chicken.
D)  decrease consumer surplus in the market for steak and decrease producer surplus in the market for chicken.E) C) and D)
F) All of the above

Question 4

Table 7-18
The following table shows the cost of producing a good for the only four producers in a market. 
-Refer to Table 7-18. If the market equilibrium price is $28, what is total producer surplus in the market?

Accepted Answer

Total prod...

Question 5

All else equal, what happens to consumer surplus if the price of a good increases?

Accepted Answer

A)  Consumer surplus increases.
B)  Consumer surplus decreases.
C)  Consumer surplus is unchanged.
D)  Consumer surplus may increase, decrease, or remain unchanged.E) B) and C)
F) B) and D)

Question 6

Laissez-faire is a French expression which literally means

Accepted Answer

A)  to make do.
B)  to get involved.
C)  whatever works.
D)  allow them to do.E) None of the above
F) C) and D)

Question 7

When policymakers are considering a particular action, they can use consumer surplus as a(n)

Accepted Answer

A)  objective measure of the benefits to buyers as determined by policymakers.
B)  measure of the benefits to buyers as the buyers perceive them.
C)  potentially flawed measure of the benefits to buyers if the buyers are not rational.
D)  Both b)  and c)  are correct.E) None of the above
F) B) and C)

Question 8

The marginal seller is the seller who

Accepted Answer

A)  cannot compete with the other sellers in the market.
B)  would leave the market first if the price were any lower.
C)  can produce at the lowest cost.
D)  has the largest producer surplus.E) None of the above
F) B) and C)

Question 9

If the United States changed its laws to allow for the legal sale of a kidney, which of the following is likely to occur?

Accepted Answer

A)  The price of kidneys would rise to balance supply and demand.
B)  The gains from trade would make both buyers and sellers better off.
C)  Thousands of lives would be saved.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 10

Which of the following statements is correct?

Accepted Answer

A)  Buyers always want to pay less and sellers always want to be paid more.
B)  Buyers always want to pay less and sellers always want to be paid less.
C)  Buyers always want to pay more and sellers always want to be paid more.
D)  Buyers always want to pay more and sellers always want to be paid less.E) C) and D)
F) All of the above

Question 11

Scenario 7-2
Suppose market demand and market supply are given by the equations: 
-Refer to Scenario 7-2. Suppose a reduction in input prices shifts the market supply curve to  By how much does total consumer surplus increase as a result of this supply shift?

Accepted Answer

Total consumer surplus prior t...

Question 12

Cost is a measure of the

Accepted Answer

A)  seller's willingness to sell.
B)  seller's producer surplus.
C)  producer shortage.
D)  seller's willingness to buy.E) C) and D)
F) B) and C)

Question 13

Figure 7-19 
-Refer to Figure 7-19. If the government imposes a price ceiling of $55 in this market, then total surplus will be

Accepted Answer

A)  $187.50.
B)  $125.00.
C)  $250.00.
D)  $266.67.E) B) and C)
F) B) and D)

Question 14

Scenario 7-2
Suppose market demand and market supply are given by the equations: 
-Refer to Scenario 7-2. How much is total producer surplus at the equilibrium price in this market?

Accepted Answer

Total producer surpl...

Question 15

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 16

Ticket scalping can increase total surplus in the market for tickets to sporting events.

Accepted Answer

A) True 
 B)False

Question 17

Which of the Ten Principles of Economics does welfare economics explain more fully?

Accepted Answer

A)  The cost of something is what you give up to get it.
B)  Rational people think at the margin.
C)  Markets are usually a good way to organize economic activity.
D)  People respond to incentives.E) B) and C)
F) A) and D)

Question 18

All else equal, a decrease in demand will cause an increase in producer surplus.

Accepted Answer

A) True 
 B)False

Question 19

Inefficiency exists in an economy when a good is

Accepted Answer

A)  not being consumed by buyers who value it most highly.
B)  not distributed fairly among buyers.
C)  not produced because buyers do not value it very highly.
D)  being produced with less than all available resources.E) A) and C)
F) B) and C)

Question 20

Figure 7-11 
-Refer to Figure 7-11. If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus?

Accepted Answer

A)  $625
B)  $1,250
C)  $2,500
D)  $5,000E) All of the above
F) B) and D)

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

Which of the Ten Principles of Economics does welfare economics explain more fully?

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All else equal, a decrease in demand will cause an increase in producer surplus.

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Figure 7-19 -Refer to Figure 7-19. If the government imposes a price ceiling of $55 in this market, then total surplus will be

Correct AnswerverifiedShow Answer

Scenario 7-2 Suppose market demand and market supply are given by the equations: -Refer to Scenario 7-2. How much is total producer surplus at the equilibrium price in this market?

Correct AnswerverifiedTotal producer surpl...View AnswerShow Answer

Inefficiency exists in an economy when a good is

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Steak and chicken are substitutes. A sharp reduction in the supply of steak would

Correct AnswerverifiedShow Answer

Laissez-faire is a French expression which literally means

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Which of the following statements is correct?

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When policymakers are considering a particular action, they can use consumer surplus as a(n)

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All else equal, what happens to consumer surplus if the price of a good increases?

Correct AnswerverifiedShow Answer

Josh is willing to pay $500 for a set of tire, but he is able to pay $300 at the local tire store. His consumer surplus is

Correct AnswerverifiedShow Answer

If the United States changed its laws to allow for the legal sale of a kidney, which of the following is likely to occur?

Correct AnswerverifiedShow Answer

Table 7-18 The following table shows the cost of producing a good for the only four producers in a market. -Refer to Table 7-18. If the market equilibrium price is $28, what is total producer surplus in the market?

Correct AnswerverifiedTotal prod...View AnswerShow Answer

Figure 7-15 -Refer to Figure 7-15. When the price is P2, producer surplus is

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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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Figure 7-11 -Refer to Figure 7-11. If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus?

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Scenario 7-2 Suppose market demand and market supply are given by the equations: -Refer to Scenario 7-2. Suppose a reduction in input prices shifts the market supply curve to By how much does total consumer surplus increase as a result of this supply shift?

Correct AnswerverifiedTotal consumer surplus prior t...View AnswerShow Answer

Ticket scalping can increase total surplus in the market for tickets to sporting events.

Correct AnswerverifiedShow Answer

Cost is a measure of the

Correct AnswerverifiedShow Answer

The marginal seller is the seller who

Correct AnswerverifiedShow Answer

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Total producer surpl...
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Total prod...
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Total consumer surplus prior t...
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