Question 1

Efficiency refers to whether a market outcome is fair,while equity refers to whether the maximum amount of output was produced from a given number of inputs.

Accepted Answer

A) True 
 B)False

Question 2

Total surplus in a market is represented by the total area

Accepted Answer

A)  under the demand curve and above the price.
B)  above the supply curve and up to the equilibrium price.
C)  under price and up to the point of equilibrium.
D)  between the demand and supply curves up to the point of equilibrium.E) C) and D)
F) B) and D)

Question 3

Table 7-3
For each of three potential buyers of oranges, the table displays the willingness to pay for the first three oranges of the day. Assume Alex, Barb, and Carlos are the only three buyers of oranges, and only three oranges can be supplied per day.
 
-Refer to Table 7-3.Who experiences the largest loss of consumer surplus when the price of an orange increases from $0.70 to $1.40?

Accepted Answer

A)  Alex
B)  Barb
C)  Carlos
D)  All three individuals experience the same loss of consumer surplus.E) B) and C)
F) None of the above

Question 4

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

Accepted Answer

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

Question 5

The "invisible hand" refers to

Accepted Answer

A)  the marketplace guiding the self-interests of market participants into promoting general economic well-being.
B)  the fact that social planners sometimes have to intervene, even in perfectly competitive markets, to make those markets more efficient.
C)  the equity that results from market forces allocating the goods produced in the market.
D)  the automatic maximization of consumer surplus in free markets.E) A) and B)
F) A) and D)

Question 6

Which of the Ten Principles of Economics does welfare economics explain more fully?

Accepted Answer

A)  The cost of something is what you give up to get it.
B)  Markets are usually a good way to organize economic activity.
C)  Trade can make everyone better off.
D)  A country's standard of living depends on its ability to produce goods and services.E) B) and C)
F) A) and D)

Question 7

Which of the following statements is not correct?

Accepted Answer

A)  A seller would be eager to sell her product at a price higher than her cost.
B)  A seller would refuse to sell her product at a price lower than her cost.
C)  A seller would be indifferent about selling her product at a price equal to her cost.
D)  Since sellers cannot set the price for their product, they must be willing to sell their product at any price.E) All of the above
F) A) and B)

Question 8

When the demand for a good increases and the supply of the good remains unchanged,consumer surplus

Accepted Answer

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

Question 9

Suppose Bart,Benjamin,and Brent each purchase a particular type of electric pencil sharpener at a price of $20.Bart's willingness to pay was $22,Benjamin's willingness to pay was $25,and Brent's willingness to pay was $30.Which of the following statements is correct?

Accepted Answer

A)  Had the price of the pencil sharpener been $26 rather than $20, only Brent would have been a buyer.
B)  Brent's consumer surplus is the smallest of the three individual consumer surpluses.
C)  For the three individuals together, consumer surplus amounts to $60.
D)  The fact that all three individuals paid $20 for the same type of pencil sharpener indicates that each one placed the same value on that pencil sharpener.E) All of the above
F) C) and D)

Question 10

Producer surplus is the

Accepted Answer

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

Question 11

Which of the following events would increase producer surplus?

Accepted Answer

A)  Sellers' costs stay the same and the price of the good increases.
B)  Sellers' costs increase and the price of the good stays the same.
C)  Sellers' costs increase and the price of the good decreases.
D)  All of the above are correct.E) B) and D)
F) C) and D)

Question 12

The willingness to pay is the maximum amount that a buyer will pay for a good and measures how much the buyer values the good.

Accepted Answer

A) True 
 B)False

Question 13

Figure 7-6
 
-Refer to Figure 7-6.When the price falls from P₂ to P₁,which of the following would not be true?

Accepted Answer

A)  The sellers who still sell the good are worse off because they now receive less.
B)  Some sellers leave the market because they are not willing to sell the good at the lower price.
C)  The total cost of what is now sold by sellers is actually higher than it was before the decrease in the price.
D)  Producer surplus would fall by area A + B.E) All of the above
F) B) and D)

Question 14

Ally mows lawns for a living.Ally's out-of-pocket expenses (for equipment,gasoline,and so on) plus the value that she places on her own time amount to her

Accepted Answer

A)  producer surplus.
B)  producer deficit.
C)  cost of mowing lawns.
D)  profit.E) B) and C)
F) A) and B)

Question 15

Figure 7-9
 
-Refer to Figure 7-9.Assume demand increases and as a result,equilibrium price increases to $22 and equilibrium quantity increases to 110.The increase in producer surplus to producers already in the market would be equal to

Accepted Answer

A)  $90.
B)  $210.
C)  $360.
D)  $480.E) None of the above
F) C) and D)

Question 16

Figure 7-9
 
-Refer to Figure 7-9.Assume demand increases and as a result,equilibrium price increases to $22 and equilibrium quantity increases to 110.The increase in producer surplus is equal to

Accepted Answer

A)  $210.
B)  $360.
C)  $480.
D)  $570.E) A) and B)
F) A) and C)

Question 17

Figure 7-4
 
-Refer to Figure 7-4.Which area represents the increase in producer surplus when the price rises from P₁ to P₂ due to new producers entering the market?

Accepted Answer

A)  BCE
B)  ACF
C)  DEF
D)  AFEBE) All of the above
F) B) and C)

Question 18

Suppose that the equilibrium price in the market for widgets is $5.If a law increased the minimum legal price for widgets to $6,

Accepted Answer

A)  the resulting increase in consumer surplus would be larger than any possible loss of producer surplus.
B)  the resulting increase in consumer surplus would be smaller than any possible loss of producer surplus.
C)  any possible increase in producer surplus would be larger than the loss of consumer surplus.
D)  any possible increase in producer surplus would be smaller than the loss of consumer surplus.E) B) and C)
F) C) and D)

Question 19

Figure 7-11. On the graph below, Q represents the quantity of the good and P represents the good's price.
 
-Refer to Figure 7-11.The equilibrium allocation of resources is

Accepted Answer

A)  efficient because total surplus is maximized at the equilibrium.
B)  efficient because consumer surplus is maximized at the equilibrium.
C)  inefficient because consumer surplus is larger than producer surplus at the equilibrium.
D)  inefficient because total surplus is maximized when 10 units of output are produced and sold.E) A) and B)
F) All of the above

Question 20

The French expression used by free-market advocates,which literally translates as "allow them to do," is

Accepted Answer

A)  laissez-faire.
B)  je ne sais pas.
C)  si'l vous plait.
D)  tête-à-tête.E) A) and B)
F) None of the above

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

Figure 7-11. On the graph below, Q represents the quantity of the good and P represents the good's price. -Refer to Figure 7-11.The equilibrium allocation of resources is

Correct Answer
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Producer surplus is the

Correct Answer
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Figure 7-9 -Refer to Figure 7-9.Assume demand increases and as a result,equilibrium price increases to $22 and equilibrium quantity increases to 110.The increase in producer surplus is equal to

Correct Answer
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Figure 7-4 -Refer to Figure 7-4.Which area represents the increase in producer surplus when the price rises from P₁ to P₂ due to new producers entering the market?

Correct Answer
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Figure 7-6 -Refer to Figure 7-6.When the price falls from P₂ to P₁,which of the following would not be true?

Correct Answer
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Which of the following events would increase producer surplus?

Correct Answer
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Figure 7-9 -Refer to Figure 7-9.Assume demand increases and as a result,equilibrium price increases to $22 and equilibrium quantity increases to 110.The increase in producer surplus to producers already in the market would be equal to

Correct Answer
verified

Suppose Bart,Benjamin,and Brent each purchase a particular type of electric pencil sharpener at a price of $20.Bart's willingness to pay was $22,Benjamin's willingness to pay was $25,and Brent's willingness to pay was $30.Which of the following statements is correct?

Correct Answer
verified

Suppose that the equilibrium price in the market for widgets is $5.If a law increased the minimum legal price for widgets to $6,

Correct Answer
verified

Which of the following statements is not correct?

Correct Answer
verified

When the demand for a good increases and the supply of the good remains unchanged,consumer surplus

Correct Answer
verified

The French expression used by free-market advocates,which literally translates as "allow them to do," is

Correct Answer
verified

The "invisible hand" refers to

Correct Answer
verified

Ally mows lawns for a living.Ally's out-of-pocket expenses (for equipment,gasoline,and so on) plus the value that she places on her own time amount to her

Correct Answer
verified

Which of the Ten Principles of Economics does welfare economics explain more fully?

Correct Answer
verified

Correct Answer
verified

The willingness to pay is the maximum amount that a buyer will pay for a good and measures how much the buyer values the good.

Correct Answer
verified

Total surplus in a market is represented by the total area

Correct Answer
verified

Efficiency refers to whether a market outcome is fair,while equity refers to whether the maximum amount of output was produced from a given number of inputs.

Correct Answer
verified

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

Correct Answer
verified

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

Figure 7-11. On the graph below, Q represents the quantity of the good and P represents the good's price. -Refer to Figure 7-11.The equilibrium allocation of resources is

Correct AnswerverifiedShow Answer

Producer surplus is the

Correct AnswerverifiedShow Answer

Figure 7-9 -Refer to Figure 7-9.Assume demand increases and as a result,equilibrium price increases to $22 and equilibrium quantity increases to 110.The increase in producer surplus is equal to

Correct AnswerverifiedShow Answer

Figure 7-4 -Refer to Figure 7-4.Which area represents the increase in producer surplus when the price rises from P₁ to P₂ due to new producers entering the market?

Correct AnswerverifiedShow Answer

Figure 7-6 -Refer to Figure 7-6.When the price falls from P₂ to P₁,which of the following would not be true?

Correct AnswerverifiedShow Answer

Which of the following events would increase producer surplus?

Correct AnswerverifiedShow Answer

Figure 7-9 -Refer to Figure 7-9.Assume demand increases and as a result,equilibrium price increases to $22 and equilibrium quantity increases to 110.The increase in producer surplus to producers already in the market would be equal to

Correct AnswerverifiedShow Answer

Suppose Bart,Benjamin,and Brent each purchase a particular type of electric pencil sharpener at a price of $20.Bart's willingness to pay was $22,Benjamin's willingness to pay was $25,and Brent's willingness to pay was $30.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Suppose that the equilibrium price in the market for widgets is $5.If a law increased the minimum legal price for widgets to $6,

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

When the demand for a good increases and the supply of the good remains unchanged,consumer surplus

Correct AnswerverifiedShow Answer

The French expression used by free-market advocates,which literally translates as "allow them to do," is

Correct AnswerverifiedShow Answer

The "invisible hand" refers to

Correct AnswerverifiedShow Answer

Ally mows lawns for a living.Ally's out-of-pocket expenses (for equipment,gasoline,and so on) plus the value that she places on her own time amount to her

Correct AnswerverifiedShow Answer

Which of the Ten Principles of Economics does welfare economics explain more fully?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The willingness to pay is the maximum amount that a buyer will pay for a good and measures how much the buyer values the good.

Correct AnswerverifiedShow Answer

Total surplus in a market is represented by the total area

Correct AnswerverifiedShow Answer

Efficiency refers to whether a market outcome is fair,while equity refers to whether the maximum amount of output was produced from a given number of inputs.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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