Question 1

A demand curve reflects each of the following except the

Accepted Answer

A)  willingness to pay of all buyers in the market.
B)  value each buyer in the market places on the good.
C)  highest price buyers are willing to pay for each quantity.
D)  ability of buyers to obtain the quantity they desire.E) None of the above
F) A) and C)

Question 2

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 total revenue for firms and maximizes the quantity supplied of the product.
B)  maximizes the combined welfare of buyers and sellers.
C)  minimizes costs and maximizes profits of sellers.
D)  minimizes the level of welfare payments to those who no longer live below the poverty line.E) B) and D)
F) All of the above

Question 3

Chad is willing to pay $5.00 to get his first cup of morning latté.He buys a cup from a vendor selling latté for $3.75 per cup.Chad's consumer surplus is

Accepted Answer

A)  $8.75.
B)  $5.00.
C)  $3.75.
D)  $1.25.E) C) and D)
F) None of the above

Question 4

Janine would be willing to pay $50 to see Les Misérables,but she buys a ticket for only $30.Janine values the performance at

Accepted Answer

A)  $20.
B)  $30.
C)  $50.
D)  $80.E) B) and C)
F) A) and D)

Question 5

Suppose the demand for nachos increases.What will happen to producer surplus in the market for nachos?

Accepted Answer

A)  It increases.
B)  It decreases.
C)  It remains unchanged.
D)  It may increase, decrease, or remain unchanged.E) B) and D)
F) None of the above

Question 6

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

Question 7

On a graph,consumer surplus is the area

Accepted Answer

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

Question 8

We can say that the allocation of resources is efficient if

Accepted Answer

A)  producer surplus is maximized.
B)  consumer surplus is maximized.
C)  total surplus is maximized.
D)  sellers' costs are minimized.E) C) and D)
F) B) and D)

Question 9

Welfare economics is the study of

Accepted Answer

A)  how the allocation of resources affects economic well-being.
B)  how technology is best put to use in the production of goods and services.
C)  government welfare programs for needy people.
D)  taxes and subsidies.E) All of the above
F) A) and B)

Question 10

Figure 7-2
 
-Refer to Figure 7-2.When the price falls from P₁ to P₂,which area represents the increase in consumer surplus to new buyers entering the market?

Accepted Answer

A)  ABD
B)  ACF
C)  BCDE
D)  DEFE) B) and D)
F) None of the above

Question 11

The equilibrium of supply and demand in a market maximizes the total benefits to buyers and sellers of participating in that market.

Accepted Answer

A) True 
 B)False

Question 12

Figure 7-2
 
-Refer to Figure 7-2.Which area represents consumer surplus at a price of P₁?

Accepted Answer

A)  ABD
B)  ACF
C)  BCDE
D)  DEFE) All of the above
F) A) and B)

Question 13

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.Consumer surplus amounts to

Accepted Answer

A)  $8.
B)  $12.
C)  $16.
D)  $18.E) A) and B)
F) A) and C)

Question 14

Many economists believe that restrictions against ticket scalping result in each of the following except

Accepted Answer

A)  a smaller audience for cultural and sporting events.
B)  shorter lines at cultural and sporting events.
C)  less tax revenue for the state.
D)  an increase in ticket prices.E) B) and C)
F) A) and C)

Question 15

Cornflakes and milk are complementary goods.A decrease in the price of corn will

Accepted Answer

A)  increase consumer surplus in the market for cornflakes and decrease producer surplus in the market for milk.
B)  increase consumer surplus in the market for cornflakes and increase producer surplus in the market for milk.
C)  decrease consumer surplus in the market for cornflakes and increase producer surplus in the market for milk.
D)  decrease consumer surplus in the market for cornflakes and decrease producer surplus in the market for milk.E) C) and D)
F) B) and D)

Question 16

The following table represents the costs of five possible sellers.
Table 7-4
 
-Refer to Table 7-4.If the price is $775,who would be willing to supply the product?

Accepted Answer

A)  Dale and Jill
B)  Dale, Jill and Denise
C)  Denise, Catherine and Jackson
D)  Catherine and JacksonE) B) and D)
F) B) and C)

Question 17

Orange juice and apple juice are substitutes.Bad weather that sharply reduces the orange harvest would

Accepted Answer

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

Question 18

Which of the following statements is not correct about a market in equilibrium?

Accepted Answer

A)  The price determines which buyers and which sellers participate in the market.
B)  Those buyers who value the good more than the price choose to buy the good.
C)  Those sellers whose costs are less than the price choose to produce and sell the good.
D)  Consumer surplus will be equal to producer surplus.E) A) and D)
F) None of the above

Question 19

Figure 7-4
 
-Refer to Figure 7-4.Which area represents the increase in producer surplus when the price rises from P₁ to P₂?

Accepted Answer

A)  BCE
B)  ACF
C)  ABED
D)  AFEBE) B) and C)
F) None of the above

Question 20

Consumer surplus is the

Accepted Answer

A)  amount of a good consumers get without paying anything for it.
B)  amount a consumer pays minus the amount the consumer is willing to pay.
C)  amount a consumer is willing to pay minus the amount the consumer actually pays.
D)  value of a good to a consumer.E) B) and C)
F) All of the above

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

Many economists believe that restrictions against ticket scalping result in each of the following except

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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.Consumer surplus amounts to

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Janine would be willing to pay $50 to see Les Misérables,but she buys a ticket for only $30.Janine values the performance at

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Which of the following statements is not correct about a market in equilibrium?

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Figure 7-4 -Refer to Figure 7-4.Which area represents the increase in producer surplus when the price rises from P₁ to P₂?

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The marginal seller is the seller who

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On a graph,consumer surplus is the area

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Cornflakes and milk are complementary goods.A decrease in the price of corn will

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Chad is willing to pay $5.00 to get his first cup of morning latté.He buys a cup from a vendor selling latté for $3.75 per cup.Chad's consumer surplus is

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The following table represents the costs of five possible sellers. Table 7-4 -Refer to Table 7-4.If the price is $775,who would be willing to supply the product?

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The equilibrium of supply and demand in a market maximizes the total benefits to buyers and sellers of participating in that market.

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A demand curve reflects each of the following except the

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

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Figure 7-2 -Refer to Figure 7-2.Which area represents consumer surplus at a price of P₁?

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Suppose the demand for nachos increases.What will happen to producer surplus in the market for nachos?

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Figure 7-2 -Refer to Figure 7-2.When the price falls from P₁ to P₂,which area represents the increase in consumer surplus to new buyers entering the market?

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We can say that the allocation of resources is efficient if

Correct AnswerverifiedShow Answer

Consumer surplus is the

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Orange juice and apple juice are substitutes.Bad weather that sharply reduces the orange harvest would

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Welfare economics is the study of

Correct AnswerverifiedShow Answer

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