Question 1

Suppose that Firms A and B each produce high-resolution computer monitors, but Firm A can do so at a lower cost. Cassie and David each want to purchase a high-resolution computer monitor, but David is willing to pay more than Cassie. If Firm B produces a monitor that David buys, then the market outcome illustrates which of the following principles? (i)  Free markets allocate the supply of goods to the buyers who value them most highly, as measured by their willingness to pay.
(ii)  Free markets allocate the demand for goods to the sellers who can produce them at the least cost.

Accepted Answer

A)   (i)  only
B)   (ii)  only
C)   both (i)  and (ii) 
D)   neither (i)  nor (ii) E) B) and C)
F) B) and D)

Question 2

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

Accepted Answer

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

Question 3

Figure 7-12 
-Refer to Figure 7-12. If the equilibrium price is $200, what is the producer surplus?

Accepted Answer

A)   $7,500
B)   $3,750
C)   $10,000
D)   $15,000E) None of the above
F) A) and B)

Question 4

Consumer surplus equals the

Accepted Answer

A)   value to buyers minus the amount paid by buyers.
B)   value to buyers minus the cost to sellers.
C)   amount received by sellers minus the cost to sellers.
D)   amount received by sellers minus the amount paid by buyers.E) A) and B)
F) All of the above

Question 5

At any quantity, the price given by the supply curve shows the cost of the lowest-cost seller.

Accepted Answer

A) True 
 B)False

Question 6

What happens to consumer surplus in the iPod market if iPods are normal goods and buyers of iPods experience an increase in income?

Accepted Answer

A)   Consumer surplus decreases.
B)   Consumer surplus remains unchanged.
C)   Consumer surplus increases.
D)   Consumer surplus may increase, decrease, or remain unchanged.E) A) and C)
F) All of the above

Question 7

Willingness to pay

Accepted Answer

A)   measures the value that a buyer places on a good.
B)   is the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept.
C)   is the maximum amount a buyer is willing to pay minus the minimum amount a seller is willing to accept.
D)   is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.E) A) and B)
F) A) and D)

Question 8

Tammy loves donuts. The table shown reflects the value Tammy places on each donut she eats:
  
a. Use this information to construct Tammy's demand curve for donuts.
b. If the price of donuts is $0.20, how many donuts will Tammy buy?
c. Show Tammy's consumer surplus on your graph. How much consumer surplus would she have at a price of $0.20?
d. If the price of donuts rose to $0.40, how many donuts would she purchase now? What would happen to Tammy's consumer surplus? Show this change on your graph.

Accepted Answer

a.
.

a. At a price of $0.20, Tammy wou...

Question 9

Table 7-1
 
-Refer to Table 7-1. If the price of the product is $130, then who would be willing to purchase the product?

Accepted Answer

A)   Calvin
B)   Calvin and Sam
C)   Calvin, Sam, and Andrew
D)   Calvin, Sam, Andrew, and LoriE) A) and D)
F) C) and D)

Question 10

Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is

Accepted Answer

A)   $150.
B)   $200.
C)   $350.
D)   $550.E) B) and C)
F) C) and D)

Question 11

Figure 7-33 
-Refer to Figure 7-33. Suppose demand shifts such that consumers wish to purchase 12 fewer units at every price.
How much is total surplus in this market at the new equilibrium price?

Accepted Answer

Total surplus at the...

Question 12

Which of the following events would increase producer surplus?

Accepted Answer

A)   Sellers' costs stay the same and the price of the good increases.
B)   Sellers' costs increase and the price of the good stays the same.
C)   Sellers' costs increase and the price of the good decreases.
D)   All of the above are correct.E) B) and C)
F) A) and B)

Question 13

If the United States legally allowed for a market in transplant organs, it is estimated that one kidney would sell for at least $100,000.

Accepted Answer

A) True 
 B)False

Question 14

Consumer surplus is a good measure of economic welfare if policymakers want to

Accepted Answer

A)   maximize total benefit.
B)   minimize deadweight loss.
C)   respect the preferences of sellers.
D)   respect the preferences of buyers.E) B) and D)
F) B) and C)

Question 15

Welfare economics is the study of

Accepted Answer

A)   the well-being of less fortunate people.
B)   welfare programs in the United States.
C)   how the allocation of resources affects economic well-being.
D)   the effect of income redistribution on work effort.E) A) and B)
F) A) and C)

Question 16

Ray buys a new tractor for $118,000. He receives consumer surplus of $13,000 on his purchase. Ray's willingness to pay is

Accepted Answer

A)   $13,000.
B)   $105,000.
C)   $118,000.
D)   $131,000.E) A) and B)
F) A) and C)

Question 17

Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25) . If there are five buyers in the market, then

Accepted Answer

A)   the marginal buyer's willingness to pay for the 100th unit of the good is $25.
B)   the sum of the five buyers' willingness to pay for the 100th unit of the good is $25.
C)   the average of the five buyers' willingness to pay for the 100th unit of the good is $25.
D)   all of the five buyers are willing to pay at least $25 for the 100th unit of the good.E) B) and D)
F) All of the above

Question 18

Figure 7-34 
-Refer to Figure 7-34. Suppose there is initially a price floor set at $10 in this market. If the government removed the price floor, by how much would total consumer surplus increase for those consumers who were purchasing the good when the price floor was in place?

Accepted Answer

Those consumers who were alrea...

Question 19

Total surplus measures the

Accepted Answer

A)   loss to buyers from paying higher prices plus the benefit to sellers from receiving lower prices.
B)   buyers' willingness to pay less the sellers' costs.
C)   fairness of the distribution of resources in society.
D)   value to the government of goods and services sold in society.E) A) and B)
F) B) and C)

Question 20

Figure 7-33 
-Refer to Figure 7-33. 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?

Accepted Answer

Total producer surpl...

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

Correct Answer
verified
a.
.
a. At a price of $0.20, Tammy wou...
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Figure 7-12 -Refer to Figure 7-12. If the equilibrium price rises from $200 to $350, what is the producer surplus to new producers

Correct Answer
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Figure 7-12 -Refer to Figure 7-12. If the equilibrium price is $200, what is the producer surplus?

Correct Answer
verified

Consumer surplus is a good measure of economic welfare if policymakers want to

Correct Answer
verified

Figure 7-33 -Refer to Figure 7-33. 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?

Correct Answer
verified
Total producer surpl...
View Answer

Consumer surplus equals the

Correct Answer
verified

Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25) . If there are five buyers in the market, then

Correct Answer
verified

Total surplus measures the

Correct Answer
verified

Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is

Correct Answer
verified

Figure 7-34 -Refer to Figure 7-34. Suppose there is initially a price floor set at $10 in this market. If the government removed the price floor, by how much would total consumer surplus increase for those consumers who were purchasing the good when the price floor was in place?

Correct Answer
verified
Those consumers who were alrea...
View Answer

Figure 7-33 -Refer to Figure 7-33. Suppose demand shifts such that consumers wish to purchase 12 fewer units at every price. How much is total surplus in this market at the new equilibrium price?

Correct Answer
verified
Total surplus at the...
View Answer

Ray buys a new tractor for $118,000. He receives consumer surplus of $13,000 on his purchase. Ray's willingness to pay is

Correct Answer
verified

Willingness to pay

Correct Answer
verified

At any quantity, the price given by the supply curve shows the cost of the lowest-cost seller.

Correct Answer
verified

If the United States legally allowed for a market in transplant organs, it is estimated that one kidney would sell for at least $100,000.

Correct Answer
verified

Welfare economics is the study of

Correct Answer
verified

Which of the following events would increase producer surplus?

Correct Answer
verified

Table 7-1 -Refer to Table 7-1. If the price of the product is $130, then who would be willing to purchase the product?

Correct Answer
verified

What happens to consumer surplus in the iPod market if iPods are normal goods and buyers of iPods experience an increase in income?

Correct Answer
verified

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

Correct Answerverifieda.. a. At a price of $0.20, Tammy wou...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Figure 7-12 -Refer to Figure 7-12. If the equilibrium price is $200, what is the producer surplus?

Correct AnswerverifiedShow Answer

Consumer surplus is a good measure of economic welfare if policymakers want to

Correct AnswerverifiedShow Answer

Figure 7-33 -Refer to Figure 7-33. 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?

Correct AnswerverifiedTotal producer surpl...View AnswerShow Answer

Consumer surplus equals the

Correct AnswerverifiedShow Answer

Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25) . If there are five buyers in the market, then

Correct AnswerverifiedShow Answer

Total surplus measures the

Correct AnswerverifiedShow Answer

Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is

Correct AnswerverifiedShow Answer

Figure 7-34 -Refer to Figure 7-34. Suppose there is initially a price floor set at $10 in this market. If the government removed the price floor, by how much would total consumer surplus increase for those consumers who were purchasing the good when the price floor was in place?

Correct AnswerverifiedThose consumers who were alrea...View AnswerShow Answer

Figure 7-33 -Refer to Figure 7-33. Suppose demand shifts such that consumers wish to purchase 12 fewer units at every price. How much is total surplus in this market at the new equilibrium price?

Correct AnswerverifiedTotal surplus at the...View AnswerShow Answer

Ray buys a new tractor for $118,000. He receives consumer surplus of $13,000 on his purchase. Ray's willingness to pay is

Correct AnswerverifiedShow Answer

Willingness to pay

Correct AnswerverifiedShow Answer

At any quantity, the price given by the supply curve shows the cost of the lowest-cost seller.

Correct AnswerverifiedShow Answer

If the United States legally allowed for a market in transplant organs, it is estimated that one kidney would sell for at least $100,000.

Correct AnswerverifiedShow Answer

Welfare economics is the study of

Correct AnswerverifiedShow Answer

Which of the following events would increase producer surplus?

Correct AnswerverifiedShow Answer

Table 7-1 -Refer to Table 7-1. If the price of the product is $130, then who would be willing to purchase the product?

Correct AnswerverifiedShow Answer

What happens to consumer surplus in the iPod market if iPods are normal goods and buyers of iPods experience an increase in income?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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a.
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a. At a price of $0.20, Tammy wou...
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Total producer surpl...
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Those consumers who were alrea...
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Total surplus at the...
View Answer

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