Question 1

Table 7-9
 
-Refer to Table 7-9.Both the demand curve and the supply curve are straight lines.If the price is $8 but only 4 units are bought and sold,total surplus will be

Accepted Answer

A)   $20.
B)   $30.
C)   $36.
D)   $40.E) None of the above
F) C) and D)

Question 2

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

Accepted Answer

A)   Efficiency refers to maximizing the number of trades among buyers and sellers;equality refers to maximizing the gains from trade among buyers and sellers.
B)   Efficiency refers to minimizing the price paid by buyers;equality refers to maximizing the gains from trade among buyers and sellers.
C)   Efficiency refers to maximizing the size of the pie;equality refers to producing a pie of a given size at the least possible cost.
D)   Efficiency refers to maximizing the size of the pie;equality refers to distributing the pie fairly among members of society.E) B) and C)
F) B) and D)

Question 3

Figure 7-11 
-Refer to Figure 7-11.When the price rises from P1 to P2,what area represents the increase in producer surplus?

Accepted Answer

A)   A
B)   A+B
C)   A+B+C
D)   GE) All of the above
F) A) and D)

Question 4

Consumer surplus is

Accepted Answer

A)   a concept that helps us make normative statements about the desirability of market outcomes.
B)   represented on a graph by the area below the demand curve and above the price.
C)   a good measure of economic welfare if buyers' preferences are the primary concern.
D)   All of the above are correct.E) None of the above
F) A) and C)

Question 5

Suppose Katie,Kendra,and Kristen each purchase a particular type of cell phone at a price of $80.Katie's willingness to pay was $100,Kendra's willingness to pay was $95,and Kristen's willingness to pay was $80.Which of the following statements is correct?

Accepted Answer

A)   For the three individuals together,consumer surplus amounts to $35.
B)   Having bought the cell phone,Kristen is better off than she would have been had she not bought it.
C)   Had the price of the cell phone been $95 rather than $80,Katie and Kendra definitely would have been buyers and Kristen definitely would not have been a buyer.
D)   The fact that all three individuals paid $80 for the same type of cell phone indicates that each one placed the same value on that cell phone.E) A) and D)
F) None of the above

Question 6

Table 7-6
The following table represents the costs of five possible sellers.
 
-Refer to Table 7-6.Who is a marginal seller when the price is $1,200?

Accepted Answer

A)   Bobby
B)   Bobby and Abby
C)   Carlos,Dianne,and Evalina
D)   Carlos,Dianne,Evalina,and BobbyE) B) and C)
F) C) and D)

Question 7

Inefficiency exists in an economy when a good is

Accepted Answer

A)   not being consumed by buyers who value it most highly.
B)   not distributed fairly among buyers.
C)   not produced because buyers do not value it very highly.
D)   being produced with less than all available resources.E) A) and B)
F) C) and D)

Question 8

Kristi and Rebecca sell lemonade on the corner.It costs them 7 cents to make each cup.On a certain day,they sell 40 cups,and their producer surplus for that day amounts to $15.20.Kristi and Rebecca sold each cup for

Accepted Answer

A)   31 cents.
B)   38 cents.
C)   45 cents.
D)   55 cents.E) None of the above
F) A) and B)

Question 9

Table 7-2
This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke.
 
-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) A) and C)
F) C) and D)

Question 10

If a consumer is willing and able to pay $20 for a particular good and if he pays $16 for the good,then for that consumer,consumer surplus amounts to

Accepted Answer

A)   $4.
B)   $16.
C)   $20.
D)   $36.E) None of the above
F) A) and B)

Question 11

Figure 7-16 
-Refer to Figure 7-16.If the price were P3,consumer surplus would be represented by the area

Accepted Answer

A)   A.
B)   A+B+C.
C)   D+H+F.
D)   A+B+C+D+H+F.E) B) and D)
F) A) and D)

Question 12

An example of positive analysis is studying

Accepted Answer

A)   how market forces produce equilibrium.
B)   whether equilibrium outcomes are fair.
C)   whether equilibrium outcomes are socially desirable.
D)   if income distributions are fair.E) B) and C)
F) A) and C)

Question 13

Market power and externalities are examples of market failures.

Accepted Answer

A) True 
 B)False

Question 14

Even though participants in the economy are motivated by self-interest,the "invisible hand" of the marketplace guides this self-interest into promoting general economic well-being.

Accepted Answer

A) True 
 B)False

Question 15

An example of normative analysis is studying

Accepted Answer

A)   how market forces produce equilibrium.
B)   surpluses and shortages.
C)   whether equilibrium outcomes are socially desirable.
D)   income distributions.E) A) and B)
F) A) and D)

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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) All of the above

Question 18

Which of the following equations is valid?

Accepted Answer

A)   Consumer surplus = Total surplus - Cost to sellers
B)   Producer surplus = Total surplus - Consumer surplus
C)   Total surplus = Value to buyers - Amount paid by buyers
D)   Total surplus = Amount received by sellers - Cost to sellersE) B) and C)
F) None of the above

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Producer surplus is

Accepted Answer

A)   measured using the demand curve for a good.
B)   always a negative number for sellers in a competitive market.
C)   the amount a seller is paid minus the cost of production.
D)   the opportunity cost of production minus the cost of producing goods that go unsold.E) A) and D)
F) A) and C)

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

Table 7-6 The following table represents the costs of five possible sellers. -Refer to Table 7-6.Who is a marginal seller when the price is $1,200?

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Table 7-9 -Refer to Table 7-9.Both the demand curve and the supply curve are straight lines.If the price is $8 but only 4 units are bought and sold,total surplus will be

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Even though participants in the economy are motivated by self-interest,the "invisible hand" of the marketplace guides this self-interest into promoting general economic well-being.

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Inefficiency exists in an economy when a good is

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

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Which of the following equations is valid?

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Consumer surplus is

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

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An example of positive analysis is studying

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An example of normative analysis is studying

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If a consumer is willing and able to pay $20 for a particular good and if he pays $16 for the good,then for that consumer,consumer surplus amounts to

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Figure 7-16 -Refer to Figure 7-16.If the price were P3,consumer surplus would be represented by the area

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

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

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Figure 7-11 -Refer to Figure 7-11.When the price rises from P1 to P2,what area represents the increase in producer surplus?

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Kristi and Rebecca sell lemonade on the corner.It costs them 7 cents to make each cup.On a certain day,they sell 40 cups,and their producer surplus for that day amounts to $15.20.Kristi and Rebecca sold each cup for

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

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Suppose Katie,Kendra,and Kristen each purchase a particular type of cell phone at a price of $80.Katie's willingness to pay was $100,Kendra's willingness to pay was $95,and Kristen's willingness to pay was $80.Which of the following statements is correct?

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Producer surplus is

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Market power and externalities are examples of market failures.

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