Question 1

When market price increases,producer surplus increases because (1)producer surplus received by existing sellers increases,and (2)new sellers enter the market.

Accepted Answer

A) True 
 B)False

Question 2

The decisions of buyers and sellers that affect people who are not participants in the market create

Accepted Answer

A)  market power.
B)  externalities.
C)  profiteering.
D)  market equilibrium.E) A) and C)
F) C) and D)

Question 3

Figure 7-10
 
-Refer to Figure 7-10.The efficient price-quantity combination is

Accepted Answer

A)  P₁ and Q₁.
B)  P₂ and Q₂.
C)  P₃ and Q₁.
D)  P₄ and 0.E) A) and B)
F) C) and D)

Question 4

Suppose there is an early freeze in California that reduces the size of the lemon crop.What happens to consumer surplus in the market for lemons?

Accepted Answer

A)  It increases.
B)  It decreases.
C)  It is not affected by this change in market forces.
D)  We would have to know whether the demand for lemons is elastic or inelastic to make this determination.E) A) and B)
F) B) and C)

Question 5

Consumer surplus in a market can be represented by the

Accepted Answer

A)  area below the demand curve and above the price.
B)  distance from the demand curve to the horizontal axis.
C)  distance from the demand curve to the vertical axis.
D)  area below the demand curve and above the horizontal axis.E) B) and C)
F) B) and D)

Question 6

Consumer surplus is equal to the

Accepted Answer

A)  Value to buyers - Amount paid by buyers.
B)  Amount paid by buyers - Costs of sellers.
C)  Value to buyers - Costs of sellers.
D)  Value to buyers - Willingness to pay of buyers.E) A) and D)
F) C) and D)

Question 7

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 existing buyers?

Accepted Answer

A)  ABD
B)  ACF
C)  BCED
D)  DEFE) C) and D)
F) B) and D)

Question 8

Dallas buys strawberries,and he would be willing to pay more than he now pays.Suppose that Dallas has a change in his tastes such that he values strawberries more than before.If the market price is the same as before,then

Accepted Answer

A)  Dallas's consumer surplus would be unaffected.
B)  Dallas's consumer surplus would increase.
C)  Dallas's consumer surplus would decrease.
D)  Dallas would be wise to buy fewer strawberries than before.E) B) and D)
F) A) and C)

Question 9

Figure 7-4
 
-Refer to Figure 7-4.Which area represents producer surplus when the price is P₂?

Accepted Answer

A)  BCE
B)  ACF
C)  ABED
D)  AFEBE) B) and D)
F) A) and B)

Question 10

Figure 7-11. On the graph below, Q represents the quantity of the good and P represents the good's price.
 
-Refer to Figure 7-11.At the equilibrium,consumer surplus is measured by the area

Accepted Answer

A)  ACG.
B)  AFG.
C)  DBG.
D)  CFG.E) B) and C)
F) A) and D)

Question 11

Suppose televisions are a normal good and buyers of televisions experience a decrease in income.As a result,consumer surplus in the television market

Accepted Answer

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

Question 12

Figure 7-11. On the graph below, Q represents the quantity of the good and P represents the good's price.
 
-Refer to Figure 7-11.At the equilibrium,producer surplus is measured by the area

Accepted Answer

A)  ACG.
B)  AFG.
C)  DBG.
D)  CFG.E) All of the above
F) B) and C)

Question 13

Figure 7-9
 
-Refer to Figure 7-9.At the equilibrium price,consumer surplus is

Accepted Answer

A)  $480.
B)  $640.
C)  $1,120.
D)  $1,280.E) A) and D)
F) All of the above

Question 14

Figure 7-9
 
-Refer to Figure 7-9.If 110 units of the good are being bought and sold,then

Accepted Answer

A)  the cost to sellers is equal to the value to buyers.
B)  the value to buyers is greater than the cost to sellers.
C)  the cost to sellers is greater than the value to buyers.
D)  producer surplus is greater than consumer surplus.E) A) and D)
F) None of the above

Question 15

Figure 7-5. On the graph below, Q represents the quantity of the good and P represents the good's price.
 
-Refer to Figure 7-5.If the price of the good is $8.50,then producer surplus is

Accepted Answer

A)  $6.50.
B)  $8.00.
C)  $9.50.
D)  $11.00.E) C) and D)
F) A) and B)

Question 16

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

Question 17

At the equilibrium price of a good,the good will be purchased by those buyers who

Accepted Answer

A)  value the good more than price.
B)  value the good less than price.
C)  have the money to buy the good.
D)  consider the good a necessity.E) C) and D)
F) None of the above

Question 18

Denise values a stainless steel dishwasher for her new house at $500.The actual price of the dishwasher is $650.Denise

Accepted Answer

A)  buys the dishwasher and on her purchase she experiences a consumer surplus of $150.
B)  buys the dishwasher and on her purchase she experiences a consumer surplus of $-150.
C)  does not buy the dishwasher and on her purchase she experiences a consumer surplus of $150 on her non-purchase.
D)  does not buy the dishwasher and on her purchase she experiences a consumer surplus of $0 on her non-purchase.E) None of the above
F) B) and D)

Question 19

Producer surplus equals

Accepted Answer

A)  Value to buyers - Amount paid by buyers.
B)  Amount received by sellers - Costs of sellers.
C)  Value to buyers - Costs of sellers.
D)  Value to buyers - Amount paid by buyers + Amount received by sellers - Costs of sellers.E) A) and B)
F) None of the above

Question 20

Consumer surplus measures the benefit to buyers of participating in a market.

Accepted Answer

A) True 
 B)False

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

Dallas buys strawberries,and he would be willing to pay more than he now pays.Suppose that Dallas has a change in his tastes such that he values strawberries more than before.If the market price is the same as before,then

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Consumer surplus is equal to the

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Denise values a stainless steel dishwasher for her new house at $500.The actual price of the dishwasher is $650.Denise

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Figure 7-9 -Refer to Figure 7-9.If 110 units of the good are being bought and sold,then

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Figure 7-4 -Refer to Figure 7-4.Which area represents producer surplus when the price is P₂?

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Figure 7-11. On the graph below, Q represents the quantity of the good and P represents the good's price. -Refer to Figure 7-11.At the equilibrium,consumer surplus is measured by the area

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At the equilibrium price of a good,the good will be purchased by those buyers who

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Consumer surplus measures the benefit to buyers of participating in a market.

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Suppose there is an early freeze in California that reduces the size of the lemon crop.What happens to consumer surplus in the market for lemons?

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Figure 7-9 -Refer to Figure 7-9.At the equilibrium price,consumer surplus is

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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 existing buyers?

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Laissez-faire is a French expression which literally means

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Figure 7-5. On the graph below, Q represents the quantity of the good and P represents the good's price. -Refer to Figure 7-5.If the price of the good is $8.50,then producer surplus is

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When market price increases,producer surplus increases because (1)producer surplus received by existing sellers increases,and (2)new sellers enter the market.

Correct AnswerverifiedShow Answer

Consumer surplus in a market can be represented by the

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The decisions of buyers and sellers that affect people who are not participants in the market create

Correct AnswerverifiedShow Answer

Suppose televisions are a normal good and buyers of televisions experience a decrease in income.As a result,consumer surplus in the television market

Correct AnswerverifiedShow Answer

Figure 7-11. On the graph below, Q represents the quantity of the good and P represents the good's price. -Refer to Figure 7-11.At the equilibrium,producer surplus is measured by the area

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Figure 7-10 -Refer to Figure 7-10.The efficient price-quantity combination is

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Producer surplus equals

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