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

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Question 41

Multiple Choice

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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

A) $150.
B) $200.
C) $350.
D) $550.

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

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Question 42

Multiple Choice

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Figure 7-24 -Refer to Figure 7-24. At equilibrium, total surplus is measured by the area

A) ABD.
B) ABF.
C) FBD.
D) HGCI.

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

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Question 43

Multiple Choice

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Figure 7-16 -Refer to Figure 7-16. If the price of the good is $600, then producer surplus amounts to

Figure 7-24 -Refer to Figure 7-24. If 4 units of the good are produced and sold, then

The area below the demand curve and above the supply curve measures the producer surplus in a market.

Oil is used to produce gasoline. If the price of oil increases, consumer surplus in the gasoline market

The Surgeon General announces that eating apples promotes healthy teeth. As a result, the equilibrium price of apples

Figure 7-34 -Refer to Figure 7-34. Suppose there is initially a price floor set at $10 in this market. If the government removed the price floor, by how much would total consumer surplus increase for those consumers who were purchasing the good when the price floor was in place?

Bob purchases a book, and his consumer surplus is $3. If Bob is willing to pay $8 for the book, then the price of the book must be

Table 7-16 -Refer to Table 7-16. 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

Which of the following will cause no change in producer surplus?

Producer surplus is the amount a seller is paid minus the cost of production.

Total surplus is

Answer each of the following questions about supply and producer surplus. a.What is producer surplus, and how is it measured? b.What is the relationship between the cost to sellers and the supply curve? c.Other things equal, what happens to producer surplus when the price of a good rises? Illustrate your answer on a supply curve.

Figure 7-32 -Refer to Figure 7-32. If the government imposed a price floor at $35 in this market, how much is consumer surplus?

If the current allocation of resources in the market for wallpaper is efficient, then it must be the case that

Table 7-15 The following table represents the costs of five possible sellers. -Refer to Table 7-15. If each producer has one unit available for sale, and if the market equilibrium price is $70, how much is the combined total cost of all participating sellers in the market?

Suppose there is an increase in supply that reduces market price. Consumer surplus increases because (1) consumer surplus received by existing buyers increases and (2) new buyers enter the market.

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 price of Vanilla Coke is $6.90, who will purchase the good?

All else equal, what happens to consumer surplus if the price of a good decreases?