Question 1

Figure 7-22 
-Refer to Figure 7-22.At the quantity Q3,

Accepted Answer

A)  the market is in equilibrium.
B)  consumer surplus is maximized.
C)  the sum of consumer surplus and producer surplus is maximized.
D)  the marginal value to buyers is less than the marginal cost to sellers.E) B) and C)
F) None of the above

Question 2

If the cost of producing sofas decreases,then consumer surplus in the sofa market will

Accepted Answer

A)  increase.
B)  decrease.
C)  remain constant.
D)  increase for some buyers and decrease for other buyers.E) All of the above
F) C) and D)

Question 3

Answer each of the following questions about demand and consumer surplus.
a.What is consumer surplus,and how is it measured?
b.What is the relationship between the demand curve and the willingness to pay?
c.Other things equal,what happens to consumer surplus if the price of a good falls? Why? Illustrate using a demand curve.
d.In what way does the demand curve represent the benefit consumers receive from participating in a market? In addition to the demand curve,what else must be considered to determine consumer surplus?

Accepted Answer

a.
Consumer surplus measures the benefi...

Question 4

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 C)
F) B) and C)

Question 5

If a market is in equilibrium,then it is impossible for a social planner to raise economic welfare by increasing or decreasing the quantity of the good.

Accepted Answer

A) True 
 B)False

Question 6

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

Question 7

Figure 7-17

-Refer to Figure 7-17.Which area represents producer surplus when the price is P1?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) B) and D)
F) B) and C)

Question 8

Figure 7-7 
-Refer to Figure 7-7.If the price of the good is 9.50,then producer surplus is

Accepted Answer

A)  2.50.
B)  6.50.
C)  8.00.
D)  10.00.E) A) and B)
F) B) and D)

Question 9

The area below the demand curve and above the supply curve measures the producer surplus in a market.

Accepted Answer

A) True 
 B)False

Question 10

Given the following two equations:
1)Total Surplus = Consumer Surplus + Producer Surplus
2)Total Surplus = Value to Buyers - Cost to Sellers
Show how equation (1)can be used to derive equation (2).

Accepted Answer

Start with the equation: Total Surplus =...

Question 11

Figure 7-8

-Refer to Figure 7-8.Which area represents producer surplus when the price is P2?

Accepted Answer

A)  BCG
B)  ACH
C)  ABGD
D)  AHGBE) C) and D)
F) B) and D)

Question 12

Figure 7-12 
-Refer to Figure 7-12.Area A represents

Accepted Answer

A)  producer surplus to new producers entering the market as the result of an increase in price from P1 to P2.
B)  the increase in consumer surplus that results from an upward-sloping supply curve.
C)  the increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2.
D)  the increase in producer surplus to those producers already in the market when the price increases from P1 to P2.E) All of the above
F) B) and C)

Question 13

Efficiency in a market is achieved when

Accepted Answer

A)  a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs.
B)  the sum of producer surplus and consumer surplus is maximized.
C)  all firms are producing the good at the same low cost per unit.
D)  no buyer is willing to pay more than the equilibrium price for any unit of the good.E) C) and D)
F) B) and D)

Question 14

Suppose there is an increase in supply that reduces market price.Consumer surplus increases because (1)consumer surplus received by existing buyers increases and (2)new buyers enter the market.

Accepted Answer

A) True 
 B)False

Question 15

Figure 7-16 
-Refer to Figure 7-16.For quantities greater than M,the value to the marginal buyer is

Accepted Answer

A)  greater than the cost to the marginal seller,so increasing the quantity increases total surplus.
B)  less than the cost to the marginal seller,so increasing the quantity increases total surplus.
C)  greater than the cost to the marginal seller,so decreasing the quantity increases total surplus.
D)  less than the cost to the marginal seller,so decreasing the quantity increases total surplus.E) None of the above
F) B) and C)

Question 16

Total surplus = Value to buyers - Costs to sellers.

Accepted Answer

A) True 
 B)False

Question 17

Free markets allocate (a)the supply of goods to the buyers who value them most highly and (b)the demand for goods to the sellers who can produce them at least cost.

Accepted Answer

A) True 
 B)False

Question 18

If the demand for light bulbs increases,producer surplus in the market for light bulbs

Accepted Answer

A)  increases.
B)  decreases.
C)  remains the same.
D)  may increase,decrease,or remain the same.E) None of the above
F) A) and B)

Question 19

Efficiency refers to whether a market outcome is fair,while equality refers to whether the maximum amount of output was produced from a given number of inputs.

Accepted Answer

A) True 
 B)False

Question 20

The marginal seller is the seller who

Accepted Answer

A)  cannot compete with the other sellers in the market.
B)  would leave the market first if the price were any lower.
C)  can produce at the lowest cost.
D)  has the largest producer surplus.E) All of the above
F) A) and D)

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

Correct Answer
verified
a.
Consumer surplus measures the benefi...
View Answer

If the cost of producing sofas decreases,then consumer surplus in the sofa market will

Correct Answer
verified

If a market is in equilibrium,then it is impossible for a social planner to raise economic welfare by increasing or decreasing the quantity of the good.

Correct Answer
verified

If the demand for light bulbs increases,producer surplus in the market for light bulbs

Correct Answer
verified

Figure 7-17 -Refer to Figure 7-17.Which area represents producer surplus when the price is P1?

Correct Answer
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Figure 7-22 -Refer to Figure 7-22.At the quantity Q3,

Correct Answer
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Figure 7-7 -Refer to Figure 7-7.If the price of the good is 9.50,then producer surplus is

Correct Answer
verified

Producer surplus equals

Correct Answer
verified

Given the following two equations: 1)Total Surplus = Consumer Surplus + Producer Surplus 2)Total Surplus = Value to Buyers - Cost to Sellers Show how equation (1)can be used to derive equation (2).

Correct Answer
verified
Start with the equation: Total Surplus =...
View Answer

The area below the demand curve and above the supply curve measures the producer surplus in a market.

Correct Answer
verified

Efficiency refers to whether a market outcome is fair,while equality refers to whether the maximum amount of output was produced from a given number of inputs.

Correct Answer
verified

Efficiency in a market is achieved when

Correct Answer
verified

Figure 7-8 -Refer to Figure 7-8.Which area represents producer surplus when the price is P2?

Correct Answer
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Producer surplus is

Correct Answer
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Figure 7-16 -Refer to Figure 7-16.For quantities greater than M,the value to the marginal buyer is

Correct Answer
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Figure 7-12 -Refer to Figure 7-12.Area A represents

Correct Answer
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Suppose there is an increase in supply that reduces market price.Consumer surplus increases because (1)consumer surplus received by existing buyers increases and (2)new buyers enter the market.

Correct Answer
verified

The marginal seller is the seller who

Correct Answer
verified

Free markets allocate (a)the supply of goods to the buyers who value them most highly and (b)the demand for goods to the sellers who can produce them at least cost.

Correct Answer
verified

Total surplus = Value to buyers - Costs to sellers.

Correct Answer
verified

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

Correct Answerverifieda. Consumer surplus measures the benefi...View AnswerShow Answer

If the cost of producing sofas decreases,then consumer surplus in the sofa market will

Correct AnswerverifiedShow Answer

If a market is in equilibrium,then it is impossible for a social planner to raise economic welfare by increasing or decreasing the quantity of the good.

Correct AnswerverifiedShow Answer

If the demand for light bulbs increases,producer surplus in the market for light bulbs

Correct AnswerverifiedShow Answer

Figure 7-17 -Refer to Figure 7-17.Which area represents producer surplus when the price is P1?

Correct AnswerverifiedShow Answer

Figure 7-22 -Refer to Figure 7-22.At the quantity Q3,

Correct AnswerverifiedShow Answer

Figure 7-7 -Refer to Figure 7-7.If the price of the good is 9.50,then producer surplus is

Correct AnswerverifiedShow Answer

Producer surplus equals

Correct AnswerverifiedShow Answer

Given the following two equations: 1)Total Surplus = Consumer Surplus + Producer Surplus 2)Total Surplus = Value to Buyers - Cost to Sellers Show how equation (1)can be used to derive equation (2).

Correct AnswerverifiedStart with the equation: Total Surplus =...View AnswerShow Answer

The area below the demand curve and above the supply curve measures the producer surplus in a market.

Correct AnswerverifiedShow Answer

Efficiency refers to whether a market outcome is fair,while equality refers to whether the maximum amount of output was produced from a given number of inputs.

Correct AnswerverifiedShow Answer

Efficiency in a market is achieved when

Correct AnswerverifiedShow Answer

Figure 7-8 -Refer to Figure 7-8.Which area represents producer surplus when the price is P2?

Correct AnswerverifiedShow Answer

Producer surplus is

Correct AnswerverifiedShow Answer

Figure 7-16 -Refer to Figure 7-16.For quantities greater than M,the value to the marginal buyer is

Correct AnswerverifiedShow Answer

Figure 7-12 -Refer to Figure 7-12.Area A represents

Correct AnswerverifiedShow Answer

Suppose there is an increase in supply that reduces market price.Consumer surplus increases because (1)consumer surplus received by existing buyers increases and (2)new buyers enter the market.

Correct AnswerverifiedShow Answer

The marginal seller is the seller who

Correct AnswerverifiedShow Answer

Free markets allocate (a)the supply of goods to the buyers who value them most highly and (b)the demand for goods to the sellers who can produce them at least cost.

Correct AnswerverifiedShow Answer

Total surplus = Value to buyers - Costs to sellers.

Correct AnswerverifiedShow Answer

Correct Answer
verified
a.
Consumer surplus measures the benefi...
View Answer

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Start with the equation: Total Surplus =...
View Answer

Correct Answer
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Correct Answer
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