Question 1

Consumer surplus is the

Accepted Answer

A)   amount of a good consumers get without paying anything.
B)   amount a consumer pays minus the amount the consumer is willing to pay.
C)   amount a consumer is willing to pay minus the amount the consumer actually pays.
D)   value of a good to a consumer.E) B) and C)
F) A) and D)

Question 2

Other things being equal, what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> When the price of a good rises, produce...

Question 3

The seller's cost of production is

Accepted Answer

A)   the proportion of total cost allocated to profit
B)   the minimum amount the seller is willing to accept for a good.
C)   the seller's producer surplus.
D)   the maximum amount the seller is willing to accept for a good.
E)   the seller's consumer surplus.F) D) and E)
G) C) and D)

Question 4

In general, if a benevolent social planner wanted to maximize the total benefits received by buyers and sellers in a market, the planner should

Accepted Answer

A)   choose a price below the market equilibrium price.
B)   allow the market to seek equilibrium on its own.
C)   choose any price the planner wants because the losses to the sellers (buyers)  from any change in price are exactly offset by the gains to the buyers (sellers) .
D)   choose a price above the market equilibrium price.E) A) and D)
F) B) and C)

Question 5

Which of the following best explains the source of consumer surplus for a good?

Accepted Answer

A)   Many consumers would be willing to pay more than the market price for the good.
B)   Many consumers pay prices that are greater than the equilibrium price of the good.
C)   Many consumers think the market price of the good is greater than its cost.
D)   Many consumers think the price elasticity of demand for the good is unit elastic.E) A) and B)
F) None of the above A

Question 6

If your willingness to pay for a hamburger is €3.00 and the price is €2.00, your consumer surplus is €5.00.

Accepted Answer

A) True 
 B)False

Question 7

An increase in the price of a good along a stationary supply curve

Accepted Answer

A)   increases producer surplus.
B)   does all of the things described in these answers.
C)   decreases producer surplus.
D)   improves market equity.E) A) and C)
F) None of the above

Question 8

Suppose there are three identical vases available to be purchased. Buyer 1 is willing to pay €30 for one, buyer 2 is willing to pay €25 for one, and buyer 3 is willing to pay €20 for one. If the price is €25, how many vases will be sold and what is the value of consumer surplus in this market?

Accepted Answer

A)   Three vases will be sold and consumer surplus is €80.
B)   One vase will be sold and consumer surplus is €5.
C)   One vase will be sold and consumer surplus is €30.
D)   Three vases will be sold and consumer surplus is €0.
E)   Two vases will be sold and consumer surplus is €5.F) A) and C)
G) B) and D)

Question 9

Producer surplus is the area above the supply curve and below the price.

Accepted Answer

A) True 
 B)False  True

Question 10

Refer to the image below. When the price is P2, producer surplus is ​  ​

Accepted Answer

A)   A
B)   A+C.
C)   A+B+C.
D)   D+G.E) All of the above
F) A) and D)

Question 11

This table refers to five possible buyers' willingness to pay for a take-away meal. ?
  Buyer  Willingness To  Pay  David €8.50 Laura €7.00 Megan €5.50 Mallory €4.00 Audrey €3.50\begin{array}{|l|l|}\hline 	ext { Buyer } & \begin{array}{l}	ext { Willingness To } \	ext { Pay }\end{array} \\hline 	ext { David } & € 8.50 \\hline 	ext { Laura } & € 7.00 \\hline 	ext { Megan } & € 5.50 \\hline 	ext { Mallory } & € 4.00 \\hline 	ext { Audrey } & € 3.50 \\hline\end{array} Buyer  David  Laura  Megan  Mallory  Audrey ​ Willingness To  Pay ​€8.50€7.00€5.50€4.00€3.50​​ 
?
Refer to the table above. 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 €9.60.
C)   David, Laura, and Megan will be the only buyers of a take-away meal.
D)   the demand curve for the take-away meal, taking the five individuals into account, is horizontal. E) B) and D)
F) C) and D)

Question 12

Equilibrium in a competitive market maximizes total surplus.

Accepted Answer

A) True 
 B)False  True

Question 13

If a benevolent social planner chooses to produce more than the equilibrium quantity of a good, then

Accepted Answer

A)   the value placed on the last unit of production by buyers exceeds the cost of production.
B)   the cost of production on the last unit produced exceeds the value placed on it by buyers.
C)   consumer surplus is maximized.
D)   total surplus is maximized.
E)   producer surplus is maximized.F) None of the above
G) A) and E)

Question 14

If demand increases when supply is perfectly price elastic, then

Accepted Answer

A)   consumer surplus will remain the same.
B)   consumer surplus will increase.
C)   it is not possible to predict the change in consumer surplus.
D)   consumer surplus will decrease with the increase in price.E) A) and B)
F) A) and C)

Question 15

Donald produces nails at a cost of €200 per ton. If he sells the nails for €350 per ton, his producer surplus per ton is

Accepted Answer

A)   €150.
B)   €200.
C)   €350.
D)   €550.E) A) and B)
F) A) and C)

Question 16

Other things equal, what happens to consumer surplus if the price of a good falls? Why? Illustrate using a demand curve.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> When the price of a good falls, consume...

Question 17

A consumer's willingness to pay directly measures

Accepted Answer

A)   the extent to which advertising and other external forces have influenced the consumer's preferences.
B)   the cost of a good to the buyer.
C)   how much a buyer values a good.
D)   consumer surplus.E) A) and B)
F) B) and C)

Question 18

If Gina sells a shirt for €40, and her producer surplus from the sale is €32, her cost must have been

Accepted Answer

A)   €72.
B)   €32.
C)   €8.
D)   We would have to know the consumer surplus in order to make this determination.E) C) and D)
F) A) and C)

Question 19

This table refers to five possible buyers' willingness to pay for a take-away meal. ?

Buyer  Willingness To  Pay  David €8.50 Laura €7.00 Megan €5.50 Mallory €4.00 Audrey €3.50\begin{array}{|l|l|}\hline 	ext { Buyer } & \begin{array}{l}	ext { Willingness To } \	ext { Pay }\end{array} \\hline 	ext { David } & € 8.50 \\hline 	ext { Laura } & € 7.00 \\hline 	ext { Megan } & € 5.50 \\hline 	ext { Mallory } & € 4.00 \\hline 	ext { Audrey } & € 3.50 \\hline\end{array} Buyer  David  Laura  Megan  Mallory  Audrey ​ Willingness To  Pay ​€8.50€7.00€5.50€4.00€3.50​​ 
?
Refer to the table above. Which of the following is not true?
?

Accepted Answer

A)   At a price of €9.00, no buyer is willing to purchase take-away meal.
B)   At a price of €5.50, Megan is indifferent between buying a case of take-away meal and not buying one.
C)   At a price of €4.00, total consumer surplus in the market will be €9.00.
D)   All of the above are correct. E) None of the above
F) A) and D)

Question 20

Free markets are efficient because they allocate output to buyers who have a willingness to pay that is below the price.

Accepted Answer

A) True 
 B)False

Exam 7: Consumers, Producers and the Efficiency of Markets

Consumer surplus is the

Correct Answer
verified

Other things being equal, what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve.

Correct Answer
verified
When the price of a good rises, produce...
View Answer

The seller's cost of production is

Correct Answer
verified

In general, if a benevolent social planner wanted to maximize the total benefits received by buyers and sellers in a market, the planner should

Correct Answer
verified

Which of the following best explains the source of consumer surplus for a good?

Correct Answer
verified
A

If your willingness to pay for a hamburger is €3.00 and the price is €2.00, your consumer surplus is €5.00.

Correct Answer
verified

An increase in the price of a good along a stationary supply curve

Correct Answer
verified

Correct Answer
verified

Producer surplus is the area above the supply curve and below the price.

Correct Answer
verified
True

Refer to the image below. When the price is P2, producer surplus is

Correct Answer
verified

Correct Answer
verified

Equilibrium in a competitive market maximizes total surplus.

Correct Answer
verified
True

If a benevolent social planner chooses to produce more than the equilibrium quantity of a good, then

Correct Answer
verified

If demand increases when supply is perfectly price elastic, then

Correct Answer
verified

Donald produces nails at a cost of €200 per ton. If he sells the nails for €350 per ton, his producer surplus per ton is

Correct Answer
verified

Other things equal, what happens to consumer surplus if the price of a good falls? Why? Illustrate using a demand curve.

Correct Answer
verified
When the price of a good falls, consume...
View Answer

A consumer's willingness to pay directly measures

Correct Answer
verified

If Gina sells a shirt for €40, and her producer surplus from the sale is €32, her cost must have been

Correct Answer
verified

Correct Answer
verified

Free markets are efficient because they allocate output to buyers who have a willingness to pay that is below the price.

Correct Answer
verified

Exam 7: Consumers, Producers and the Efficiency of Markets

Consumer surplus is the

Correct AnswerverifiedShow Answer

Other things being equal, what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve.

Correct Answerverified When the price of a good rises, produce...View AnswerShow Answer

The seller's cost of production is

Correct AnswerverifiedShow Answer

In general, if a benevolent social planner wanted to maximize the total benefits received by buyers and sellers in a market, the planner should

Correct AnswerverifiedShow Answer

Which of the following best explains the source of consumer surplus for a good?

Correct AnswerverifiedA

If your willingness to pay for a hamburger is €3.00 and the price is €2.00, your consumer surplus is €5.00.

Correct AnswerverifiedShow Answer

An increase in the price of a good along a stationary supply curve

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Producer surplus is the area above the supply curve and below the price.

Correct AnswerverifiedTrue

Refer to the image below. When the price is P2, producer surplus is ​ ​

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Equilibrium in a competitive market maximizes total surplus.

Correct AnswerverifiedTrue

If a benevolent social planner chooses to produce more than the equilibrium quantity of a good, then

Correct AnswerverifiedShow Answer

If demand increases when supply is perfectly price elastic, then

Correct AnswerverifiedShow Answer

Donald produces nails at a cost of €200 per ton. If he sells the nails for €350 per ton, his producer surplus per ton is

Correct AnswerverifiedShow Answer

Other things equal, what happens to consumer surplus if the price of a good falls? Why? Illustrate using a demand curve.

Correct Answerverified When the price of a good falls, consume...View AnswerShow Answer

A consumer's willingness to pay directly measures

Correct AnswerverifiedShow Answer

If Gina sells a shirt for €40, and her producer surplus from the sale is €32, her cost must have been

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Free markets are efficient because they allocate output to buyers who have a willingness to pay that is below the price.

Correct AnswerverifiedShow Answer

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Correct Answer
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When the price of a good rises, produce...
View Answer

Correct Answer
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A

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Correct Answer
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True

Refer to the image below. When the price is P2, producer surplus is

Correct Answer
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Correct Answer
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True

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Correct Answer
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Correct Answer
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Correct Answer
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When the price of a good falls, consume...
View Answer

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Correct Answer
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