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Table 7-17 Table 7-17 -Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, consumer surplus will be A) $21. B) $28. C) $36. D) $42. -Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, consumer surplus will be


A) $21.
B) $28.
C) $36.
D) $42.

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Refer to Table 7-12. If the sellers bid against each other for the right to sell the good to a consumer, then the producer surplus will be


A) $0 or slightly more.
B) $50 or slightly less.
C) $150 or slightly less.
D) $200 or slightly more.

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A consumer's willingness to pay directly measures


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.

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Figure 7-15 Figure 7-15 -Refer to Figure 7-15. Area A represents A) producer surplus to new producers entering the market as the result of an increase in price from P1 to P2. B) the increase in consumer surplus that results from an upward-sloping supply curve. C) the increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2. D) the increase in producer surplus to those producers already in the market when the price increases from P1 to P2. -Refer to Figure 7-15. Area A represents


A) producer surplus to new producers entering the market as the result of an increase in price from P1 to P2.
B) the increase in consumer surplus that results from an upward-sloping supply curve.
C) the increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2.
D) the increase in producer surplus to those producers already in the market when the price increases from P1 to P2.

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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.

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Figure 7-8 Figure 7-8 -Refer to Figure 7-8. If the government imposes a price ceiling of $80 in this market, then, assuming those with the highest willingness to pay purchase the good, consumer surplus will be A) $900. B) $1,200. C) $1,500. D) $1,600. -Refer to Figure 7-8. If the government imposes a price ceiling of $80 in this market, then, assuming those with the highest willingness to pay purchase the good, consumer surplus will be


A) $900.
B) $1,200.
C) $1,500.
D) $1,600.

Correct Answer

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Figure 7-5 Figure 7-5 -Refer to Figure 7-5. If the price of the good is $6, then consumer surplus is A) $16. B) $24. C) $30. D) $36. -Refer to Figure 7-5. If the price of the good is $6, then consumer surplus is


A) $16.
B) $24.
C) $30.
D) $36.

Correct Answer

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A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it


A) maximizes both the total revenue for firms and the quantity supplied of the product.
B) maximizes the combined welfare of buyers and sellers.
C) minimizes costs and maximizes output.
D) minimizes the level of welfare payments.

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Which of the following will cause an increase in producer surplus?


A) the imposition of a binding price ceiling in the market
B) buyers expect the price of the good to be lower next month
C) the price of a substitute increases
D) income increases and buyers consider the good to be inferior

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Figure 7-20 Figure 7-20 -Refer to Figure 7-20. For quantities greater than M, the value to the marginal buyer is A) greater than the cost to the marginal seller, so increasing the quantity increases total surplus. B) less than the cost to the marginal seller, so increasing the quantity increases total surplus. C) greater than the cost to the marginal seller, so decreasing the quantity increases total surplus. D) less than the cost to the marginal seller, so decreasing the quantity increases total surplus. -Refer to Figure 7-20. For quantities greater than M, the value to the marginal buyer is


A) greater than the cost to the marginal seller, so increasing the quantity increases total surplus.
B) less than the cost to the marginal seller, so increasing the quantity increases total surplus.
C) greater than the cost to the marginal seller, so decreasing the quantity increases total surplus.
D) less than the cost to the marginal seller, so decreasing the quantity increases total surplus.

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All else equal, an increase in supply will cause an increase in consumer surplus.

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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. If the market price of an orange is $0.40, then A) 6 oranges are demanded per day, and consumer surplus amounts to $4.95. B) 6 oranges are demanded per day, and consumer surplus amounts to $5.10. C) 7 oranges are demanded per day, and consumer surplus amounts to $5.30. D) 7 oranges are demanded per day, and consumer surplus amounts to $5.15. -Refer to Table 7-5. If the market price of an orange is $0.40, then


A) 6 oranges are demanded per day, and consumer surplus amounts to $4.95.
B) 6 oranges are demanded per day, and consumer surplus amounts to $5.10.
C) 7 oranges are demanded per day, and consumer surplus amounts to $5.30.
D) 7 oranges are demanded per day, and consumer surplus amounts to $5.15.

Correct Answer

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Suppose that the equilibrium price in the market for tomatoes is $3 per pound. If a law reduced the maximum legal price for tomatoes to $2 per pound,


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

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. Which of the following statements is correct? A) Neither Bob's consumer surplus nor Charisse's consumer surplus can exceed Allison's consumer surplus, for any price of an orange. B) All three individuals will buy at least one orange only if the price of an orange is less than $0.25. C) If the price of an orange is $0.60, then consumer surplus is $4.90. D) All of the above are correct. -Refer to Table 7-5. Which of the following statements is correct?


A) Neither Bob's consumer surplus nor Charisse's consumer surplus can exceed Allison's consumer surplus, for any price of an orange.
B) All three individuals will buy at least one orange only if the price of an orange is less than $0.25.
C) If the price of an orange is $0.60, then consumer surplus is $4.90.
D) All of the above are correct.

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Wendy is willing to pay $50 for a concert ticket and Bruce would like to receive $25. If the market price is $40 for this transaction, then the total surplus would be $15.

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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.

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If John's willingness to pay for a good is $20 and the price of the good is $15, how much is John's consumer surplus from purchasing the good?

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Consumer s...

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Figure 7-21 Figure 7-21 -Refer to Figure 7-21. When the price is P1, area B represents A) total surplus. B) producer surplus. C) consumer surplus. D) profits. -Refer to Figure 7-21. When the price is P1, area B represents


A) total surplus.
B) producer surplus.
C) consumer surplus.
D) profits.

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Refer to Figure 7-14. If the market price increases to $130 due to an increase in demand, then producer surplus is


A) $1,800.
B) $900.
C) $975.
D) $1,950.

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Consumer surplus is


A) a concept that helps us make normative statements about the desirability of market outcomes.
B) represented on a graph by the area below the demand curve and above the price.
C) a good measure of economic welfare if buyers' preferences are the primary concern.
D) All of the above are correct.

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