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Table 7-7 The following table represents the costs of five possible sellers. Table 7-7 The following table represents the costs of five possible sellers. -Refer to Table 7-7.Suppose each of the five sellers can supply at most one unit of the good.The market quantity supplied is exactly 3 if the price is A) $670. B) $770. C) $970. D) $1,170. -Refer to Table 7-7.Suppose each of the five sellers can supply at most one unit of the good.The market quantity supplied is exactly 3 if the price is


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

E) B) and C)
F) B) and D)

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In order to conclude that markets are efficient,we assume that they are perfectly competitive.

A) True
B) False

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


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

E) A) and C)
F) B) and C)

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Michael values a stainless steel refrigerator for his new house at $3,500,but he succeeds in buying one for $3,000.Michael's consumer surplus is


A) $500.
B) $3,000.
C) $3,500.
D) $6,500.

E) A) and B)
F) A) and C)

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Producer surplus is the


A) area under the supply curve to the left of the amount sold.
B) amount a seller is paid minus the cost of production.
C) area between the supply and demand curves, above the equilibrium price.
D) cost to sellers of participating in a market.

E) A) and C)
F) B) and C)

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Table 7-11 Table 7-11 -Refer to Table 7-11.Both the demand curve and the supply curve are straight lines.If 6 units are bought and sold,then total surplus is A) $18 lower than it would be if the equilibrium number of units were bought and sold. B) $22 lower than it would be if the equilibrium number of units were bought and sold. C) $26 lower than it would be if the equilibrium number of units were bought and sold. D) $6 higher than it would be if the equilibrium number of units were bought and sold. -Refer to Table 7-11.Both the demand curve and the supply curve are straight lines.If 6 units are bought and sold,then total surplus is


A) $18 lower than it would be if the equilibrium number of units were bought and sold.
B) $22 lower than it would be if the equilibrium number of units were bought and sold.
C) $26 lower than it would be if the equilibrium number of units were bought and sold.
D) $6 higher than it would be if the equilibrium number of units were bought and sold.

E) A) and C)
F) B) and C)

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Figure 7-19 Figure 7-19 -Refer to Figure 7-19.At equilibrium,consumer surplus is represented by the area A) A. B) A+B+C. C) D+H+F. D) A+B+C+D+H+F. -Refer to Figure 7-19.At equilibrium,consumer surplus is represented by the area


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

E) None of the above
F) B) and C)

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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.


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

E) B) and D)
F) None of the above

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The current policy on kidney donation effectively sets a price ceiling of zero.

A) True
B) False

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Welfare economics is the study of


A) taxes and subsidies.
B) how technology is best put to use in the production of goods and services.
C) government welfare programs for needy people.
D) how the allocation of resources affects economic well-being.

E) C) and D)
F) B) and C)

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At the equilibrium price of a good,the good will be purchased by those buyers who


A) value the good more than price.
B) value the good less than price.
C) have the money to buy the good.
D) consider the good a necessity.

E) All of the above
F) B) and D)

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-On a graph,the area below a demand curve and above the price measures A) producer surplus. B) consumer surplus. C) deadweight loss. D) willingness to pay. -On a graph,the area below a demand curve and above the price measures


A) producer surplus.
B) consumer surplus.
C) deadweight loss.
D) willingness to pay.

E) A) and C)
F) None of the above

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Total surplus in a market is equal to


A) consumer surplus + producer surplus.
B) value to buyers - amount paid by buyers.
C) amount received by sellers - costs of sellers.
D) producer surplus - consumer surplus.

E) A) and C)
F) None of the above

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Which of the following equations is not valid?


A) Consumer surplus = Value to buyers - Amount paid by buyers
B) Producer surplus = Amount received by sellers - Cost to sellers
C) Total surplus = Value to buyers - Amount paid by buyers + Amount received by sellers - Costs of sellers
D) Total surplus = Value to sellers - Cost to sellers

E) None of the above
F) A) and D)

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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


A) $25.
B) $30.
C) $36.
D) $45.

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

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

A) True
B) False

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Producer surplus equals


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) A) and B)
F) A) and C)

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Figure 7-20 Figure 7-20 -Refer to Figure 7-20.If 10 units of the good are produced and sold,then A) the marginal cost to sellers exceeds the marginal value to buyers. B) producer surplus is maximized. C) total surplus is minimized. D) the marginal value to buyers exceeds the marginal cost to sellers. -Refer to Figure 7-20.If 10 units of the good are produced and sold,then


A) the marginal cost to sellers exceeds the marginal value to buyers.
B) producer surplus is maximized.
C) total surplus is minimized.
D) the marginal value to buyers exceeds the marginal cost to sellers.

E) A) and D)
F) B) and D)

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Answer the following questions based on the graph that represents J.R.'s demand for ribs per week at Judy's Rib Shack. a.At the equilibrium price,how many ribs would J.R.be willing to purchase? b.How much is J.R.willing to pay for 20 ribs? c.What is the magnitude of J.R.'s consumer surplus at the equilibrium price? d.At the equilibrium price,how many ribs would Judy be willing to sell? e.How high must the price of ribs be for Judy to supply 20 ribs to the market? f.At the equilibrium price,what is the magnitude of total surplus in the market? g.If the price of ribs rose to $10,what would happen to J.R.'s consumer surplus? h.If the price of ribs fell to $5,what would happen to Judy's producer surplus? i.Explain why the graph that is shown verifies the fact that the market equilibrium (quantity)maximizes the sum of producer and consumer surplus. Answer the following questions based on the graph that represents J.R.'s demand for ribs per week at Judy's Rib Shack. a.At the equilibrium price,how many ribs would J.R.be willing to purchase? b.How much is J.R.willing to pay for 20 ribs? c.What is the magnitude of J.R.'s consumer surplus at the equilibrium price? d.At the equilibrium price,how many ribs would Judy be willing to sell? e.How high must the price of ribs be for Judy to supply 20 ribs to the market? f.At the equilibrium price,what is the magnitude of total surplus in the market? g.If the price of ribs rose to $10,what would happen to J.R.'s consumer surplus? h.If the price of ribs fell to $5,what would happen to Judy's producer surplus? i.Explain why the graph that is shown verifies the fact that the market equilibrium (quantity)maximizes the sum of producer and consumer surplus.

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a.40
b.$10.00
c.$80.00.d.40
e.$5
f.$200
...

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Ticket scalping can increase total surplus in the market for tickets to sporting events.

A) True
B) False

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