Question 1

Ronnie operates a lawn-care service.On each day,the cost of mowing the first lawn is $10;the cost of mowing the second lawn is $12;and the cost of mowing the third lawn is $15.His producer surplus on the first three lawns of the day is $53.If Ronnie charges all customers the same price for lawn mowing,that price is

Accepted Answer

A)  $25.
B)  $30.
C)  $36.
D)  $45.E) C) and D)
F) A) and B)

Question 2

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.E) All of the above
F) A) and B)

Question 3

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 amounts to

Accepted Answer

A)  $24.
B)  $36.
C)  $48.
D)  $72.E) B) and D)
F) None of the above

Question 4

Welfare economics is the study of the welfare system.

Accepted Answer

A) True 
 B)False

Question 5

The following table represents the costs of five possible sellers.
Table 7-4
 
-Refer to Table 7-4.Suppose each of the five sellers can supply at most one unit of the good;then the market quantity supplied is exactly 3 if the price is

Accepted Answer

A)  $670.
B)  $770.
C)  $970.
D)  $1,170.E) C) and D)
F) A) and B)

Question 6

Total surplus in a market is equal to

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)  Amount received by sellers - Amount paid by buyers.E) B) and D)
F) A) and D)

Question 7

The distinction between efficiency and equity can be described as follows:

Accepted Answer

A)  Efficiency refers to maximizing the number of trades among buyers and sellers; equity refers to maximizing the gains from trade among buyers and sellers.
B)  Efficiency refers to minimizing the price paid by buyers; equity refers to maximizing the gains from trade among buyers and sellers.
C)  Efficiency refers to maximizing the size of the pie; equity refers to producing a pie of a given size at the least possible cost.
D)  Efficiency refers to maximizing the size of the pie; equity refers to distributing the pie fairly among members of society.E) None of the above
F) A) and C)

Question 8

Which of the following is not true when the price of a good or service falls?

Accepted Answer

A)  Buyers who were already buying the good or service are better off.
B)  Some new buyers, who are now willing to buy, enter the market.
C)  The total consumer surplus in the market increases.
D)  The total value of purchases before and after the price change is the same.E) B) and C)
F) All of the above

Question 9

Each seller of a product is willing to sell as long as the price he or she can receive is greater than the opportunity cost of producing the product.

Accepted Answer

A) True 
 B)False

Question 10

A consumer's willingness to pay directly measures

Accepted Answer

A)  the extent to which advertising and other external forces have influenced the consumer's decisions regarding his or her purchases of goods and services.
B)  the cost of a good to the buyer.
C)  how much a buyer values a good.
D)  consumer surplus.E) A) and C)
F) B) and D)

Question 11

This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke.
Table 7-2
 
-Refer to Table 7-2.If the market price is $3.80,

Accepted Answer

A)  David's consumer surplus is $4.70 and total consumer surplus for the five individuals is $9.50.
B)  Megan's consumer surplus is $1.70 and total consumer surplus for the five individuals is $9.80.
C)  David, Laura, and Megan will be the only buyers of Vanilla Coke.
D)  the demand curve for Vanilla Coke, taking the five individuals into account, is horizontal.E) None of the above
F) C) and D)

Question 12

Figure 7-7
 
-Refer to Figure 7-7.Which 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 + DE) All of the above
F) B) and D)

Question 13

Inefficiency can be caused in a market by the presence of

Accepted Answer

A)  market power.
B)  externalities.
C)  imperfectly competitive markets.
D)  All of the above are correct.E) A) and D)
F) B) and C)

Question 14

Figure 7-1
 
-Refer to Figure 7-1.When the price is P₁,consumer surplus is

Accepted Answer

A)  a.
B)  A + B.
C)  A + B + C.
D)  A + B + D.E) None of the above
F) All of the above

Question 15

Figure 7-10
 
-Refer to Figure 7-10.At the 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.E) None of the above
F) A) and B)

Question 16

Total surplus = Value to buyers - Costs to sellers.

Accepted Answer

A) True 
 B)False

Question 17

Figure 7-12
 
-Refer to Figure 7-12.At the quantity Q₂,

Accepted Answer

A)  the value to buyers and the cost to sellers are both P₂.
B)  the value to buyers is P₂ and the cost to sellers is P₃.
C)  the value to buyers and the cost to sellers are both P₃.
D)  the value to buyers is P₃ and the cost to sellers is P₂.E) B) and D)
F) None of the above

Question 18

If the price a consumer pays for a product is equal to a consumer's willingness to pay,then the consumer surplus relevant to that purchase is

Accepted Answer

A)  zero.
B)  negative and the consumer would not purchase the product.
C)  positive and the consumer would purchase the product.
D)  There is not enough information given to answer this question.E) B) and C)
F) All of the above

Question 19

One of the basic principles of economics is that markets are usually a good way to organize economic activity.This principle is explained by the study of

Accepted Answer

A)  factor markets.
B)  energy markets.
C)  welfare economics.
D)  labor economics.E) A) and B)
F) A) and C)

Question 20

Table 7-3
For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Alex, Barb, and Carlos are the only three buyers of oranges, and only three oranges can be supplied per day.
 
-Refer to Table 7-3.Which of the following statements is correct?

Accepted Answer

A)  Neither Barb's consumer surplus nor Carlos's consumer surplus can exceed Alex's consumer surplus, for any price of an orange.
B)  All three individuals will buy at least one orange only if the price of an orange is less than $0.25.
C)  If the price of an orange is $0.60, total consumer surplus is $4.90.
D)  All of the above are correct.E) A) and B)
F) A) and C)

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

The distinction between efficiency and equity can be described as follows:

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Figure 7-12 -Refer to Figure 7-12.At the quantity Q₂,

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Total surplus in a market is equal to

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Each seller of a product is willing to sell as long as the price he or she can receive is greater than the opportunity cost of producing the product.

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Which of the following is not true when the price of a good or service falls?

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Total surplus = Value to buyers - Costs to sellers.

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Figure 7-7 -Refer to Figure 7-7.Which area represents total surplus in the market when the price is P₁?

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If the price a consumer pays for a product is equal to a consumer's willingness to pay,then the consumer surplus relevant to that purchase is

Correct Answer
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Inefficiency can be caused in a market by the presence of

Correct Answer
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Figure 7-10 -Refer to Figure 7-10.At the equilibrium,total consumer surplus is represented by the area

Correct Answer
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One of the basic principles of economics is that markets are usually a good way to organize economic activity.This principle is explained by the study of

Correct Answer
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This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. Table 7-2 -Refer to Table 7-2.If the market price is $3.80,

Correct Answer
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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

Correct Answer
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The following table represents the costs of five possible sellers. Table 7-4 -Refer to Table 7-4.Suppose each of the five sellers can supply at most one unit of the good;then the market quantity supplied is exactly 3 if the price is

Correct Answer
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Figure 7-1 -Refer to Figure 7-1.When the price is P₁,consumer surplus is

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Welfare economics is the study of the welfare system.

Correct Answer
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A consumer's willingness to pay directly measures

Correct Answer
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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 amounts to

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

The distinction between efficiency and equity can be described as follows:

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Figure 7-12 -Refer to Figure 7-12.At the quantity Q₂,

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Total surplus in a market is equal to

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Each seller of a product is willing to sell as long as the price he or she can receive is greater than the opportunity cost of producing the product.

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Which of the following is not true when the price of a good or service falls?

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Total surplus = Value to buyers - Costs to sellers.

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Figure 7-7 -Refer to Figure 7-7.Which area represents total surplus in the market when the price is P₁?

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If the price a consumer pays for a product is equal to a consumer's willingness to pay,then the consumer surplus relevant to that purchase is

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Inefficiency can be caused in a market by the presence of

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Figure 7-10 -Refer to Figure 7-10.At the equilibrium,total consumer surplus is represented by the area

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One of the basic principles of economics is that markets are usually a good way to organize economic activity.This principle is explained by the study of

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This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. Table 7-2 -Refer to Table 7-2.If the market price is $3.80,

Correct AnswerverifiedShow Answer

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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The following table represents the costs of five possible sellers. Table 7-4 -Refer to Table 7-4.Suppose each of the five sellers can supply at most one unit of the good;then the market quantity supplied is exactly 3 if the price is

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Figure 7-1 -Refer to Figure 7-1.When the price is P₁,consumer surplus is

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Welfare economics is the study of the welfare system.

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A consumer's willingness to pay directly measures

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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 amounts to

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