Question 1

Henry is willing to pay 45 cents,and Janine is willing to pay 55 cents,for 1 pound of bananas.When the price of bananas falls from 50 cents a pound to 40 cents a pound,

Accepted Answer

A)   Henry experiences an increase in consumer surplus, but Janine does not.
B)   Janine experiences an increase in consumer surplus, but Henry does not.
C)   both Janine and Henry experience an increase in consumer surplus.
D)   neither Janine nor Henry experiences an increase in consumer surplus.E) None of the above
F) All of the above

Question 2

Which of the following is not correct?

Accepted Answer

A)   Market power can cause markets to be inefficient.
B)   When the decisions of buyers and sellers affect nonparticipants, markets may be inefficient.
C)   The tools of welfare economics cannot help economists when markets are inefficient.
D)   Externalities can cause markets to be inefficient.E) C) and D)
F) B) and D)

Question 3

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it

Accepted Answer

A)   maximizes costs of the seller.
B)   maximizes tax revenue for the government.
C)   maximizes the combined welfare of buyers and sellers.
D)   minimizes the expenditure of buyers.E) B) and D)
F) A) and C)

Question 4

Let P represent price; let Qˢ represent quantity supplied; and assume the equation of the supply curve is  .If 90 units of the good are produced and sold,then producer surplus amounts to $1,350.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Consumer surplus can be measured as the area between the demand curve and the equilibrium price.

Accepted Answer

A) True 
 B)False

Question 7

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 D)
F) A) and C)

Question 8

Raisin bran and milk are complementary goods.A decrease in the price of raisins will

Accepted Answer

A)   increase consumer surplus in the market for raisin bran and decrease producer surplus in the market for milk.
B)   increase consumer surplus in the market for raisin bran and increase producer surplus in the market for milk.
C)   decrease consumer surplus in the market for raisin bran and increase producer surplus in the market for milk.
D)   decrease consumer surplus in the market for raisin bran and decrease producer surplus in the market for milk.E) A) and D)
F) A) and C)

Question 9

Figure 7-8
 
-Refer to Figure 7-8.Which area represents producer surplus when the price is P1?

Accepted Answer

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

Question 10

Total surplus in a market will increase when the government

Accepted Answer

A)   imposes a tax on that market.
B)   imposes a binding price floor on that market.
C)   removes a binding price ceiling from that market.
D)   None of the above is correct.E) C) and D)
F) B) and C)

Question 11

Figure 7-1
 
-Refer to Figure 7-1.If the price of the good is $250,then consumer surplus amounts to

Accepted Answer

A)   $50.
B)   $100.
C)   $150.
D)   $200.E) All of the above
F) B) and C)

Question 12

As a result of a decrease in price,

Accepted Answer

A)   new buyers enter the market, increasing consumer surplus.
B)   new buyers enter the market, decreasing consumer surplus.
C)   existing buyers exit the market, increasing consumer surplus.
D)   existing buyers exit the market, decreasing consumer surplus.E) All of the above
F) B) and C)

Question 13

Suppose that the market price for pizzas increases.The increase in producer surplus comes from the benefit of the higher prices to

Accepted Answer

A)   only existing sellers who now receive higher prices on the pizzas they were already selling.
B)   only new sellers who enter the market because of the higher prices.
C)   both existing sellers who now receive higher prices on the pizzas they were already selling and new sellers who enter the market because of the higher prices.
D)   Producer surplus does not increase; it decreases.E) A) and B)
F) A) and C)

Question 14

Chad is willing to pay $5.00 to get his first cup of morning latté.He buys a cup from a vendor selling latté for $3.75 per cup.Chad's consumer surplus is

Accepted Answer

A)   $8.75.
B)   $5.00.
C)   $3.75.
D)   $1.25.E) A) and B)
F) A) and C)

Question 15

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

Question 16

Suppose Larry,Moe,and Curly are bidding in an auction for a mint-condition video of Charlie Chaplin's first movie.Each has in mind a maximum amount that he will bid.This maximum is called

Accepted Answer

A)   a resistance price.
B)   willingness to pay.
C)   consumer surplus.
D)   producer surplus.E) A) and C)
F) B) and C)

Question 17

Which of the following statements is not correct?

Accepted Answer

A)   An invisible hand leads buyers and sellers to an equilibrium that maximizes total surplus.
B)   Market power can cause markets to be inefficient.
C)   Externalities can cause markets to be inefficient.
D)   The invisible hand can remedy most if not all types of market failures.E) B) and C)
F) C) and D)

Question 18

Which of the following statements is correct?

Accepted Answer

A)   Buyers always want to pay less and sellers always want to be paid more.
B)   Buyers always want to pay less and sellers always want to be paid less.
C)   Buyers always want to pay more and sellers always want to be paid more.
D)   Buyers always want to pay more and sellers always want to be paid less.E) A) and C)
F) A) and B)

Question 19

If a market is allowed to adjust freely to its equilibrium price and quantity,then an increase in demand will

Accepted Answer

A)   increase producer surplus.
B)   reduce producer surplus.
C)   not affect producer surplus.
D)   Any of the above are possible.E) All of the above
F) C) and D)

Question 20

Suppose the market demand curve for a good passes through the point (quantity demanded = 100,price = $25) .If there are five buyers in the market,then

Accepted Answer

A)   the marginal buyer's willingness to pay for the 100th unit of the good is $25.
B)   the sum of the five buyers' willingness to pay for the 100th unit of the good is $25.
C)   the average of the five buyers' willingness to pay for the 100th unit of the good is $25.
D)   all of the five buyers are willing to pay at least $25 for the 100th unit of the good.E) C) and D)
F) A) and B)

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

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

Correct AnswerverifiedShow Answer

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 AnswerverifiedShow Answer

Suppose the market demand curve for a good passes through the point (quantity demanded = 100,price = $25) .If there are five buyers in the market,then

Correct AnswerverifiedShow Answer

Total surplus in a market will increase when the government

Correct AnswerverifiedShow Answer

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it

Correct AnswerverifiedShow Answer

Suppose that the market price for pizzas increases.The increase in producer surplus comes from the benefit of the higher prices to

Correct AnswerverifiedShow Answer

Raisin bran and milk are complementary goods.A decrease in the price of raisins will

Correct AnswerverifiedShow Answer

If a market is allowed to adjust freely to its equilibrium price and quantity,then an increase in demand will

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Figure 7-8 -Refer to Figure 7-8.Which area represents producer surplus when the price is P1?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Consumer surplus can be measured as the area between the demand curve and the equilibrium price.

Correct AnswerverifiedShow Answer

Henry is willing to pay 45 cents,and Janine is willing to pay 55 cents,for 1 pound of bananas.When the price of bananas falls from 50 cents a pound to 40 cents a pound,

Correct AnswerverifiedShow Answer

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,

Correct AnswerverifiedShow Answer

Chad is willing to pay $5.00 to get his first cup of morning latté.He buys a cup from a vendor selling latté for $3.75 per cup.Chad's consumer surplus is

Correct AnswerverifiedShow Answer

As a result of a decrease in price,

Correct AnswerverifiedShow Answer

Suppose Larry,Moe,and Curly are bidding in an auction for a mint-condition video of Charlie Chaplin's first movie.Each has in mind a maximum amount that he will bid.This maximum is called

Correct AnswerverifiedShow Answer

Let P represent price; let Qˢ represent quantity supplied; and assume the equation of the supply curve is .If 90 units of the good are produced and sold,then producer surplus amounts to $1,350.

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

Figure 7-1 -Refer to Figure 7-1.If the price of the good is $250,then consumer surplus amounts to

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified