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

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Question 71

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If Darby values a soccer ball at $50, and she pays $40 for it, her consumer surplus is $10.

A) True
B) False

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Question 72

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Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market

A) decreases.
B) is unchanged.
C) increases.
D) may increase, decrease, or remain unchanged.

E) A) and D)
F) A) and C)

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Question 73

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Markets will always allocate resources efficiently.

Figure 7-10 ​ -Suppose John's cost for performing some carpentry work is $120. If John is paid $200 for the carpentry work, what is his producer surplus?

Figure 7-11 ​ -Refer to Figure 7-11. If the market equilibrium price is $25, how much is total producer surplus in this market?

Scenario 7-2 Suppose market demand and market supply are given by the equations: ​ Q^D = 40 - P Q^S = P - 4 -Refer to Scenario 7-2. How much is total consumer surplus at the equilibrium price in this market?

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

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.

Total surplus in a market can be measured as the area below the supply curve plus the area above the demand curve, up to the point of equilibrium.

Scenario 7-1 Suppose market demand is given by the equation $Q ^ { D } = 40 - 2 P$ -Refer to Scenario 7-1. If the market equilibrium price is $10, how much is total consumer surplus in this market?

The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate

Figure 7-8 -Refer to Figure 7-8. Total surplus can be measured as the area

If the government imposes a binding price floor in a market, then the consumer surplus in that market will decrease.

Figure 7-11 ​ -Refer to Figure 7-11. 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?

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

Figure 7-12 ​ -Refer to Figure 7-12. How much are consumer surplus, producer surplus, and total surplus at the market equilibrium price?

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

Figure 7-14 ​ -Refer to Figure 7-14. 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 enter the market after the price floor is removed?

Figure 7-12 ​ -Refer to Figure 7-12. If the government imposed a price floor at $35 in this market, how much is consumer surplus?

The lower the price, the lower the consumer surplus, all else equal.