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Which of the following statements is not correct?


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 all types of market failures.

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

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Table 7-15 Table 7-15 -Refer to Table 7-15. You want to hire a professional photographer to take pictures of your family. The table shows the costs of the four potential sellers in the local photography market. You take bids from the sellers. Who offers the winning bid, and what does he offer to charge for the photography session? A) Steve; more than $400 but less than $450 B) Steve; $399 C) LeBron; more than $700 D) LeBron; more than $600 but less than $700 -Refer to Table 7-15. You want to hire a professional photographer to take pictures of your family. The table shows the costs of the four potential sellers in the local photography market. You take bids from the sellers. Who offers the winning bid, and what does he offer to charge for the photography session?


A) Steve; more than $400 but less than $450
B) Steve; $399
C) LeBron; more than $700
D) LeBron; more than $600 but less than $700

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

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Figure 7-11 Figure 7-11 -Refer to Figure 7-11. If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus? A) $625 B) $1,250 C) $2,500 D) $5,000 -Refer to Figure 7-11. If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus?


A) $625
B) $1,250
C) $2,500
D) $5,000

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

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Total surplus in a market is equal to


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

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

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Figure 7-26 Figure 7-26 -Refer to Figure 7-26. If the government imposes a price floor of $90 in this market, then consumer surplus will be A) $225. B) $450. C) $975. D) $1,350 -Refer to Figure 7-26. If the government imposes a price floor of $90 in this market, then consumer surplus will be


A) $225.
B) $450.
C) $975.
D) $1,350

E) A) and C)
F) All of the above

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Total surplus in a market is consumer surplus minus producer surplus.

A) True
B) False

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Figure 7-13 Figure 7-13 -Refer to Figure 7-13. If the equilibrium price rises from $60 to $120, what is the additional producer surplus to initial producers in the market? A) $1,200 B) $2,400 C) $3,600 D) $4,800 -Refer to Figure 7-13. If the equilibrium price rises from $60 to $120, what is the additional producer surplus to initial producers in the market?


A) $1,200
B) $2,400
C) $3,600
D) $4,800

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

Correct Answer

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Figure 7-14 Figure 7-14 -Refer to Figure 7-14. At the equilibrium price, producer surplus is A) $800. B) $400. C) $450. D) $900. -Refer to Figure 7-14. At the equilibrium price, producer surplus is


A) $800.
B) $400.
C) $450.
D) $900.

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

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Figure 7-11 Figure 7-11 -Refer to Figure 7-11. If the supply curve is S and the demand curve shifts from D to D', what is the change in producer surplus? A) Producer surplus increases by $3,125. B) Producer surplus increases by $5,625. C) Producer surplus decreases by $3,125. D) Producer surplus decreases by $5,625. -Refer to Figure 7-11. If the supply curve is S and the demand curve shifts from D to D', what is the change in producer surplus?


A) Producer surplus increases by $3,125.
B) Producer surplus increases by $5,625.
C) Producer surplus decreases by $3,125.
D) Producer surplus decreases by $5,625.

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

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Producer surplus measures the


A) benefits to sellers of participating in a market.
B) costs to sellers of participating in a market.
C) price that buyers are willing to pay for sellers' output of a good or service.
D) benefit to sellers of producing a greater quantity of a good or service than buyers demand.

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

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Total surplus is


A) the total cost to sellers of providing the good minus the total value of the good to buyers.
B) the total value of the good to buyers minus the cost to sellers of providing the good.
C) the difference between consumer surplus and sellers' cost.
D) always smaller than producer surplus.

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

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Figure 7-7 Figure 7-7 -Refer to Figure 7-7. What is the consumer surplus if the price is $100? A) $2,500 B) $5,000 C) $10,000 D) $20,000 -Refer to Figure 7-7. What is the consumer surplus if the price is $100?


A) $2,500
B) $5,000
C) $10,000
D) $20,000

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

Correct Answer

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Moving production from a high-cost producer to a low-cost producer will


A) lower total surplus.
B) raise total surplus.
C) lower producer surplus.
D) raise producer surplus but lower consumer surplus.

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

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Table 7-4
The numbers in Table 7-1 reveal the maximum willingness to pay for a ticket to a Chicago Cubs vs. St. Louis Cardinal's baseball game at Wrigley Field.
Table 7-4 The numbers in Table 7-1 reveal the maximum willingness to pay for a ticket to a Chicago Cubs vs. St. Louis Cardinal's baseball game at Wrigley Field. -Refer to Table 7-4. If you have two (essentially) identical tickets that you sell to the group in an auction, what will be the selling price for each ticket?
-Refer to Table 7-4. If you have two (essentially) identical tickets that you sell to the group in an auction, what will be the selling price for each ticket? Table 7-4 The numbers in Table 7-1 reveal the maximum willingness to pay for a ticket to a Chicago Cubs vs. St. Louis Cardinal's baseball game at Wrigley Field. -Refer to Table 7-4. If you have two (essentially) identical tickets that you sell to the group in an auction, what will be the selling price for each ticket?

) undefined
) undefined

Correct Answer

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Table 7-5 For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day. Table 7-5 For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Allison, Bob, and Charisse are the only three buyers of oranges, and only three oranges can be supplied per day. -Refer to Table 7-5. The market quantity of oranges demanded per day is exactly 7 if the price of an orange, P, satisfies A) $0.60 < P < $0.75. B) $0.60 < P < $2.00. C) $0.25 < P < $0.75. D) $0.25 < P < $0.60. -Refer to Table 7-5. The market quantity of oranges demanded per day is exactly 7 if the price of an orange, P, satisfies


A) $0.60 < P < $0.75.
B) $0.60 < P < $2.00.
C) $0.25 < P < $0.75.
D) $0.25 < P < $0.60.

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

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Suppose Lauren, Leslie and Lydia all purchase bulletin boards for their rooms for $15 each. Lauren's willingness to pay was $35, Leslie's willingness to pay was $25, and Lydia's willingness to pay was $30. Total consumer surplus for these three would be


A) $15.
B) $30.
C) $45.
D) $90.

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

Correct Answer

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Scenario 7-1 Suppose market demand is given by the equation Scenario 7-1 Suppose market demand is given by the equation -Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, what is the change in total consumer surplus in the market? -Refer to Scenario 7-1. If the market equilibrium price falls from $10 to $5, what is the change in total consumer surplus in the market?

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Consumer s...

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


A) increase.
B) decrease.
C) remain constant.
D) increase for some buyers and decrease for other buyers.

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

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Table 7-4 The numbers in Table 7-1 reveal the maximum willingness to pay for a ticket to a Chicago Cubs vs. St. Louis Cardinal's baseball game at Wrigley Field. Table 7-4 The numbers in Table 7-1 reveal the maximum willingness to pay for a ticket to a Chicago Cubs vs. St. Louis Cardinal's baseball game at Wrigley Field. -Refer to Table 7-4. If tickets sell for $25 each, then what is the total consumer surplus in the market? A) $25 B) $35 C) $60 D) $110 -Refer to Table 7-4. If tickets sell for $25 each, then what is the total consumer surplus in the market?


A) $25
B) $35
C) $60
D) $110

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

Correct Answer

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Figure 7-19 Figure 7-19 -Refer to Figure 7-19. At the equilibrium price, total surplus is A) $125. B) $450. C) $250. D) $500. -Refer to Figure 7-19. At the equilibrium price, total surplus is


A) $125.
B) $450.
C) $250.
D) $500.

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

Correct Answer

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