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

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Question 51

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Figure 7-9 -Refer to Figure 7-9. At equilibrium, producer surplus is represented by the area

A) F.
B) F+G.
C) D+H+F.
D) D+H+F+G+I.

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Question 52

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If a consumer places a value of $13 on a particular good and if the price of the good is $16, then the

A) consumer enjoys consumer surplus if he or she buys the good.
B) consumer does not purchase the good.
C) market is not a competitive market.
D) price of the good will fall due to market forces.

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Question 53

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Figure 7-1 -Refer to Figure 7-1. When the price falls from P₂ to P₁, consumer surplus

Scenario 7-2 Suppose market demand and market supply are given by the equations: ​ Q^D = 40 - P Q^S = P - 4 -Refer to Scenario 7-2. How much is total surplus at the equilibrium price in this market?

In order to calculate consumer surplus in a market, we need to know willingness to pay and price.

Figure 7-6 -Refer to Figure 7-6. Area A represents

Suppose you buy an iPod for $100. If your consumer surplus is $30, your willingness to pay is $70.

Moving production from a high-cost producer to a low-cost producer will

Table 7-3 ​ ​ $\begin{array}{|c|c|}\hline \text { Buyer } & \begin{array}{c}\text { Willingness to Pay for a } \\\text { Baseball Game Ticket } \\\text { (Dollars) }\end{array} \\\hline \text { Nancy } & 10 \\\hline \text { Tom } & 15 \\\hline \text { David } & 20 \\\hline \text { Alexa } & 25 \\\hline \text { Eric } & 30 \\\hline \text { Chen } & 35 \\\hline\end{array}$ ​ -Refer to Table 7-3. If you have a ticket that you sell to the group in an auction, who will buy the ticket?

Figure 7-9 -Refer to Figure 7-9. At equilibrium, total surplus is represented by the area

When markets fail, public policy can potentially remedy the problem and increase economic efficiency.

Welfare economics implies that the equilibrium price of a product is considered to be the best price because it

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

If the government removes a binding price ceiling in a market, then the producer surplus in that market will increase.

Figure 7-13 ​ -Refer to Figure 7-13. Suppose demand shifts such that consumers wish to purchase 12 fewer units at every price. How much is total producer surplus in this market at the new equilibrium price?

All else equal, an increase in supply will cause an increase in consumer surplus.

Table 7-6 During the last two days, Harry purchased a latte from two different stores. The table below shows Harry's willingness to pay on each day and his consumer surplus from each purchase. ​ ​ $\begin{array} { | c | c | c | } \hline & \begin{array} { c } \text { Harry's Willingness to Pay } \\\text { (Dollars) }\end{array} & \begin{array} { c } \text { Harry's Consumer Surplus } \\\text { (Dollars) }\end{array} \\\hline \text { First Day } & 5.50 & 2.00 \\\hline \text { Second Day } & 2.00 & 0.50 \\\hline\end{array}$ -Refer to Table 7-6. The price that Harry paid for a latte on the first day is

A supply curve can be used to measure producer surplus because it reflects

Table 7-14 $\begin{array}{l}\begin{array} { | l | l | } \hline \text { Buyer } & \begin{array} { l } \text { Willingness to } \\\text { Pay } ( \$ )\end{array} \\\hline \text { A } & 15 \\\hline B & 30 \\\hline \text { C } & 45 \\\hline \text { D } & 60 \\\hline\end{array}\\\\\begin{array} { | l | l | } \hline \text { Seller } & \text { Cost (\$) } \\\hline W & 10 \\\hline \mathrm { X } & 20 \\\hline \mathrm { Y } & 30 \\\hline \mathrm { Z } & 40 \\\hline\end{array}\end{array}$ -Refer to Table 7-14. How much is total producer surplus at the equilibrium price in this market?

Figure 7-11 ​ -Refer to Figure 7-11. If the market equilibrium price rises from $25 to $35, how much is the increase in producer surplus to the producers supplying units at the initial $25 price?