Question 1

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 both the total revenue for firms and the quantity supplied of the product.
B)   maximizes the combined welfare of buyers and sellers.
C)   minimizes costs and maximizes output.
D)   minimizes the level of welfare payments.

Question 2

Figure 7-1 
-Refer to Figure 7-1. The value of the good to consumers minus the cost of the good to consumers amounts to $325 if the price of the good is

Accepted Answer

A)   $200.
B)   $150.
C)   $125 .
D)   $100.

Question 3

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

Accepted Answer

A)   the actions of sellers.
B)   quantity supplied.
C)   sellers' costs.
D)   the amount that will be purchased by consumers in the market.

Question 4

Figure 7-32 
-Refer to Figure 7-32. How much are consumer surplus, producer surplus, and total surplus at the market equilibrium price?

Accepted Answer

.Consumer surplus is...

Question 5

Figure 7-25 
-Refer to Figure 7-25. Suppose the government imposes a price floor of $28 in this market. If the sellers with the lowest cost are the ones who sell the good and the government does not purchase any excess units produced, then total surplus will be

Accepted Answer

A)   $400.
B)   $800.
C)   $1,120.
D)   $1,184.

Question 6

PlayStations and PlayStation games are complementary goods. A technological advance in the production of PlayStations will

Accepted Answer

A)   increase consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games.
B)   increase consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games.
C)   decrease consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games.
D)   decrease consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games.

Question 7

Figure 7-17 
-Refer to Figure 7-17. If the supply curve is S and the demand curve is D, what is total producer surplus at the equilibrium price?

Accepted Answer

A)   $202.50
B)   $405
C)   $810
D)   $1,215

Question 8

Figure 7-7 
-Refer to Figure 7-7. What happens to the consumer surplus if the price rises from $100 to $150?

Accepted Answer

A)   The new consumer surplus is half of the original consumer surplus.
B)   The new consumer surplus is 25 percent of the original consumer surplus.
C)   The new consumer surplus is double the original consumer surplus.
D)   The new consumer surplus is triple the original consumer surplus.

Question 9

Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is  If 80 units of the good are produced and sold, then producer surplus amounts to $1,200.

Accepted Answer

A) True 
 B)False

Question 10

Figure 7-15 
-Refer to Figure 7-15. When the price falls from P2 to P1, producer surplus

Accepted Answer

A)   decreases by an amount equal to C.
B)   decreases by an amount equal to A+B.
C)   decreases by an amount equal to A+C.
D)   increases by an amount equal to A+B.

Question 11

Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, producer surplus

Accepted Answer

A)   would necessarily increase even if the higher price resulted in a surplus of widgets.
B)   would necessarily decrease because the higher price would create a surplus of widgets.
C)   might increase or decrease.
D)   would be unaffected.

Question 12

Table 7-3
The only four consumers in a market have the following willingness to pay for a good: 
-Refer to Table 7-3. If the price is $20, then consumer surplus in the market is

Accepted Answer

A)   $20, and Wilbur and Ming-la purchase the good.
B)   $45, and Carlos and Quilana purchase the good.
C)   $45, and Quilana, Wilbur, and Ming-la purchase the good.
D)   $55, and Carlos, Wilbur, and Ming-la purchase the good.

Question 13

Figure 7-3 
-Refer to Figure 7-3. When the price rises from P1 to P2, which of the following statements is not true?

Accepted Answer

A)   The buyers who still buy the good are worse off because they now pay more.
B)   Some buyers leave the market because they are not willing to buy the good at the higher price.
C)   Buyers place a higher value on the good after the price increase.
D)   Consumer surplus in the market falls.

Question 14

Table 7-12
The only four producers in a market have the following costs: 
-Refer to Table 7-12. If Evan, Selena, and Angie sell the good, and the resulting producer surplus is $300, then the price must have been

Accepted Answer

A)   $200.
B)   $300.
C)   $450.
D)   $600.

Question 15

Figure 7-12 
-Refer to Figure 7-12. If the equilibrium price rises from $200 to $350, what is the additional producer surplus to initial producers?

Accepted Answer

A)   $15,000
B)   $3,750
C)   $7,500
D)   $30,000

Question 16

Economists generally believe that, although there may be advantages to society from ticket-scalping, the costs to society of this activity outweigh the benefits.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Table 7-17 
-Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, total surplus will be

Accepted Answer

A)   $42.
B)   $48.
C)   $54.
D)   $60.

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.

Question 20

Figure 7-31 
-Refer to Figure 7-31. If the market equilibrium price rises from $25 to $35, how much is the producer surplus for the producers entering the market after the price increase?

Accepted Answer

The producer surplus...

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

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

Table 7-3 The only four consumers in a market have the following willingness to pay for a good: -Refer to Table 7-3. If the price is $20, then consumer surplus in the market is

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Figure 7-15 -Refer to Figure 7-15. When the price falls from P2 to P1, producer surplus

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Producer surplus equals

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Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, producer surplus

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PlayStations and PlayStation games are complementary goods. A technological advance in the production of PlayStations will

Correct AnswerverifiedShow Answer

Figure 7-7 -Refer to Figure 7-7. What happens to the consumer surplus if the price rises from $100 to $150?

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Figure 7-1 -Refer to Figure 7-1. The value of the good to consumers minus the cost of the good to consumers amounts to $325 if the price of the good is

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Figure 7-17 -Refer to Figure 7-17. If the supply curve is S and the demand curve is D, what is total producer surplus at the equilibrium price?

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Table 7-12 The only four producers in a market have the following costs: -Refer to Table 7-12. If Evan, Selena, and Angie sell the good, and the resulting producer surplus is $300, then the price must have been

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

Correct AnswerverifiedShow Answer

Figure 7-25 -Refer to Figure 7-25. Suppose the government imposes a price floor of $28 in this market. If the sellers with the lowest cost are the ones who sell the good and the government does not purchase any excess units produced, then total surplus will be

Correct AnswerverifiedShow Answer

Let P represent price; let QS represent quantity supplied; and assume the equation of the supply curve is If 80 units of the good are produced and sold, then producer surplus amounts to $1,200.

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Table 7-17 -Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, total surplus will be

Correct AnswerverifiedShow Answer

Figure 7-12 -Refer to Figure 7-12. If the equilibrium price rises from $200 to $350, what is the additional producer surplus to initial producers?

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Figure 7-32 -Refer to Figure 7-32. How much are consumer surplus, producer surplus, and total surplus at the market equilibrium price?

Correct Answerverified.Consumer surplus is...View AnswerShow Answer

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it

Correct AnswerverifiedShow Answer

Figure 7-31 -Refer to Figure 7-31. If the market equilibrium price rises from $25 to $35, how much is the producer surplus for the producers entering the market after the price increase?

Correct AnswerverifiedThe producer surplus...View AnswerShow Answer

Economists generally believe that, although there may be advantages to society from ticket-scalping, the costs to society of this activity outweigh the benefits.

Correct AnswerverifiedShow Answer

Figure 7-3 -Refer to Figure 7-3. When the price rises from P1 to P2, which of the following statements is not true?

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.Consumer surplus is...
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The producer surplus...
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