Question 1

If the cost of producing passenger motor vehicles increases, then consumer surplus will:

Accepted Answer

A)   decrease
B)   increase
C)   decrease, then increase
D)   increase, then decrease

Question 2

The area below a demand curve and above the price measures:

Accepted Answer

A)   willingness to pay
B)   total surplus
C)   consumer surplus
D)   producer surplus

Question 3

Economists generally agree that the goal in developing the concept of consumer surplus is to:

Accepted Answer

A)   make positive judgements about the desirability of market outcomes
B)   make normative judgements about the desirability of market outcomes
C)   measure the profit of firms producing the good
D)   assess the forgone value when the price is too high

Question 4

Graph 7-1
 1? A)  A + B B)  B + C C)  C + D D)  A + B + C + D" class="answers-bank-image d-inline" rel="preload" >
-Refer to Graph 7-1. What area represents total surplus in the market when the price is P1?

Accepted Answer

A)   A + B
B)   B + C
C)   C + D
D)   A + B + C + D

Question 5

Economists tend to see ticket scalping as:

Accepted Answer

A)   a way for a few to profit while producing nothing of value
B)   an inequitable interference in the orderly process of ticket distribution
C)   a way of increasing the efficiency of ticket distribution
D)   an unproductive activity which should be made illegal everywhere

Question 6

Graph 7-5
 2: A)  the market is in equilibrium B)  willingness to pay is greater than willingness to sell C)  consumer surplus plus producer surplus is maximised D)  willingness to pay is less than willingness to sell" class="answers-bank-image d-inline" rel="preload" >
-In Graph 7-5, at the quantity Q2:

Accepted Answer

A)   the market is in equilibrium
B)   willingness to pay is greater than willingness to sell
C)   consumer surplus plus producer surplus is maximised
D)   willingness to pay is less than willingness to sell

Question 7

Many economists believe that a market in human organs would lead to an efficient allocation of organs.

Accepted Answer

A) True 
 B)False

Question 8

Information regarding the consumer's willingness to pay can be derived from the demand curve.

Accepted Answer

A) True 
 B)False

Question 9

Graph 7-4
 1 - Q1 B)  P2 - Q2 C)  P3 - Q1 D)  none of the combinations are efficient" class="answers-bank-image d-inline" rel="preload" >
-In Graph 7-4, the efficient price-quantity combination is:

Accepted Answer

A)   P1 - Q1
B)   P2 - Q2
C)   P3 - Q1
D)   none of the combinations are efficient

Question 10

Table 7-1
This table refers to five possible buyers' willingness to pay for good Z.
 
-Refer to Table 7-1. If the market price is $6.00, the consumer surplus in the market will be:

Accepted Answer

A)   $1.50
B)   $17.50
C)   $6.00
D)   $0

Question 11

Suppose a market clears and this generates an equilibrium price and quantity. An important outcome of this equilibrium is that it maximises the total benefits to both buyers and sellers.

Accepted Answer

A) True 
 B)False

Question 12

When the market price of a good falls, consumer surplus increases because (1) the consumer surplus received by existing buyers becomes larger and (2) more buyers enter the market at the lower price.

Accepted Answer

A) True 
 B)False

Question 13

Graph 7-4
 
-In Graph 7-4, at the market-clearing equilibrium, total consumer surplus is represented by the area:

Accepted Answer

A)   A
B)   A + B + C
C)   D + E + F
D)   A + B + C + D + E + F

Question 14

Graph 7-5
 3, willingness to buy: A)  and willingness to sell are both P2 B)  is P1 and willingness to sell is P3 C)  and willingness to sell are both P3 D)  is P3 and willingness to sell is P2" class="answers-bank-image d-inline" rel="preload" >
-In Graph 7-5, for the quantity Q3, willingness to buy:

Accepted Answer

A)   and willingness to sell are both P2
B)   is P1 and willingness to sell is P3
C)   and willingness to sell are both P3
D)   is P3 and willingness to sell is P2

Question 15

Welfare economics is the study of:

Accepted Answer

A)   how the allocation of resources affects economic wellbeing
B)   why poor people have low incomes
C)   the social welfare program adopted by the government
D)   how charities deliver welfare to the needy

Question 16

Producer surplus is the:

Accepted Answer

A)   amount represented by the area under the demand curve
B)   amount a seller is paid less the cost of production
C)   amount represented by the area under the supply curve
D)   amount a seller is paid plus the cost of production

Question 17

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 greatest producer surplus

Question 18

If a seller is able to control the market price, the seller has market power and the market outcome will be inefficient.

Accepted Answer

A) True 
 B)False

Question 19

Graph 7-3
 2 to P1, which of the following is NOT true? A)  the sellers who still sell the good are worse off because they now receive less B)  some sellers leave the market because they are not willing to sell the good at the lower price C)  the total cost of what is now sold by sellers is actually higher D)  all of the above are correct" class="answers-bank-image d-inline" rel="preload" >
-Refer to Graph 7-3. When the price falls from P2 to P1, which of the following is NOT true?

Accepted Answer

A)   the sellers who still sell the good are worse off because they now receive less
B)   some sellers leave the market because they are not willing to sell the good at the lower price
C)   the total cost of what is now sold by sellers is actually higher
D)   all of the above are correct

Question 20

Suppose the price of music downloads falls. Explain what will happen to:
a. existing buyers who were already downloading music.
b. potential buyers who have not yet begun downloading music.
c. the consumer surplus in this market.
d. the number of downloads that will now occur.

Accepted Answer

a. Exsting buyers will be better off bec...

Exam 7: Consumers, Producers and the Efficiency of Markets

When the market price of a good falls, consumer surplus increases because (1) the consumer surplus received by existing buyers becomes larger and (2) more buyers enter the market at the lower price.

Correct AnswerverifiedShow Answer

Graph 7-1 -Refer to Graph 7-1. What area represents total surplus in the market when the price is P1?

Correct AnswerverifiedShow Answer

Information regarding the consumer's willingness to pay can be derived from the demand curve.

Correct AnswerverifiedShow Answer

Producer surplus is the:

Correct AnswerverifiedShow Answer

The marginal seller is the seller who:

Correct AnswerverifiedShow Answer

Graph 7-4 -In Graph 7-4, at the market-clearing equilibrium, total consumer surplus is represented by the area:

Correct AnswerverifiedShow Answer

Economists generally agree that the goal in developing the concept of consumer surplus is to:

Correct AnswerverifiedShow Answer

Graph 7-5 -In Graph 7-5, for the quantity Q3, willingness to buy:

Correct AnswerverifiedShow Answer

Graph 7-3 -Refer to Graph 7-3. When the price falls from P2 to P1, which of the following is NOT true?

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Graph 7-5 -In Graph 7-5, at the quantity Q2:

Correct AnswerverifiedShow Answer

Graph 7-4 -In Graph 7-4, the efficient price-quantity combination is:

Correct AnswerverifiedShow Answer

If a seller is able to control the market price, the seller has market power and the market outcome will be inefficient.

Correct AnswerverifiedShow Answer

The area below a demand curve and above the price measures:

Correct AnswerverifiedShow Answer

If the cost of producing passenger motor vehicles increases, then consumer surplus will:

Correct AnswerverifiedShow Answer

Table 7-1 This table refers to five possible buyers' willingness to pay for good Z. -Refer to Table 7-1. If the market price is $6.00, the consumer surplus in the market will be:

Correct AnswerverifiedShow Answer

Welfare economics is the study of:

Correct AnswerverifiedShow Answer

Suppose the price of music downloads falls. Explain what will happen to: a. existing buyers who were already downloading music. b. potential buyers who have not yet begun downloading music. c. the consumer surplus in this market. d. the number of downloads that will now occur.

Correct Answerverifieda. Exsting buyers will be better off bec...View AnswerShow Answer

Many economists believe that a market in human organs would lead to an efficient allocation of organs.

Correct AnswerverifiedShow Answer

Suppose a market clears and this generates an equilibrium price and quantity. An important outcome of this equilibrium is that it maximises the total benefits to both buyers and sellers.

Correct AnswerverifiedShow Answer

Economists tend to see ticket scalping as:

Correct AnswerverifiedShow Answer

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Graph 7-1 -Refer to Graph 7-1. What area represents total surplus in the market when the price is P₁?

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Graph 7-5 -In Graph 7-5, for the quantity Q₃,willingness to buy:

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Graph 7-3 -Refer to Graph 7-3. When the price falls from P₂ to P₁, which of the following is NOT true?

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Graph 7-5 -In Graph 7-5, at the quantity Q₂:

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a. Exsting buyers will be better off bec...
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