Question 1

Welfare economics is the study of the welfare system.

Accepted Answer

A) True 
 B)False

Question 2

Suppose Katie,Kendra,and Kristen each purchase a particular type of cell phone at a price of $80.Katie's willingness to pay was $100,Kendra's willingness to pay was $95,and Kristen's willingness to pay was $80.Which of the following statements is correct?

Accepted Answer

A)   For the three individuals together, consumer surplus amounts to $35.
B)   Having bought the cell phone, Kristen is better off than she would have been had she not bought it.
C)   Had the price of the cell phone been $95 rather than $80, Katie and Kendra definitely would have been buyers and Kristen definitely would not have been a buyer.
D)   The fact that all three individuals paid $80 for the same type of cell phone indicates that each one placed the same value on that cell phone.E) A) and B)
F) A) and C)

Question 3

Figure 7-5
 
-Refer to Figure 7-5.At the equilibrium price,consumer surplus is

Accepted Answer

A)   $200.
B)   $300.
C)   $500.
D)   $600.E) C) and D)
F) All of the above

Question 4

Figure 7-20
 
-Refer to Figure 7-20.If 6 units of the good are produced and sold,then

Accepted Answer

A)   efficiency is achieved in this market.
B)   the marginal value to buyers equals the marginal cost to sellers.
C)   the sum of consumer surplus and producer surplus is maximized.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 5

Table 7-11
 
-Refer to Table 7-11.At a price of $2.00,total surplus is

Accepted Answer

A)   larger than it would be at the equilibrium price.
B)   smaller than it would be at the equilibrium price.
C)   the same as it would be at the equilibrium price.
D)   There is insufficient information to make this determination.E) B) and C)
F) A) and B)

Question 6

Figure 7-20
 
-Refer to Figure 7-20.At equilibrium,producer surplus is

Accepted Answer

A)   $36.
B)   $72.
C)   $108.
D)   $144.E) All of the above
F) B) and C)

Question 7

Table 7-11
 
-Refer to Table 7-11.Both the demand curve and the supply curve are straight lines.At equilibrium,consumer surplus is

Accepted Answer

A)   $24.
B)   $36.
C)   $42.
D)   $48.E) None of the above
F) A) and D)

Question 8

Dallas buys strawberries,and he would be willing to pay more than he now pays.Suppose that Dallas has a change in his tastes such that he values strawberries more than before.If the market price is the same as before,then

Accepted Answer

A)   Dallas's consumer surplus would be unaffected.
B)   Dallas's consumer surplus would increase.
C)   Dallas's consumer surplus would decrease.
D)   Dallas would be wise to buy fewer strawberries than before.E) A) and B)
F) A) and C)

Question 9

Figure 7-13
 
-Refer to Figure 7-13.Suppose the price of the good is $450.Then,on the first unit of the good that is sold,producer surplus is

Accepted Answer

A)   $250, and on the second unit of the good that is sold, producer surplus is $100.
B)   $250, and on the second unit of the good that is sold, producer surplus is $150.
C)   $350, and on the second unit of the good that is sold, producer surplus is $100.
D)   $350, and on the second unit of the good that is sold, producer surplus is $150.E) A) and D)
F) None of the above

Question 10

Figure 7-10
 
-Refer to Figure 7-10.If the equilibrium price rises from $50 to $200,what is the additional producer surplus to initial producers?

Accepted Answer

A)   $625
B)   $3,750
C)   $5,625
D)   $10,000E) A) and B)
F) B) and C)

Question 11

Figure 7-18
 
-Refer to Figure 7-18.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

Accepted Answer

A)   $90.
B)   $210.
C)   $360.
D)   $480.E) A) and C)
F) A) and D)

Question 12

Five hundred units of good x are currently bought and sold.The marginal buyer is willing to pay $40 for the 500ᵗʰ unit,and the cost to the marginal seller is $35 for the 500ᵗʰ unit.We know that

Accepted Answer

A)   the equilibrium price of good x is somewhere between $35 and $40.
B)   the equilibrium quantity of good x exceeds 500 units.
C)   500 units is not an efficient quantity of good x.
D)   All of the above are correct.E) B) and C)
F) A) and B)

Question 13

Figure 7-13
 
-Refer to Figure 7-13.If the price of the good is $300,then producer surplus amounts to

Accepted Answer

A)   $100.
B)   $200.
C)   $300.
D)   $400.E) A) and B)
F) A) and C)

Question 14

Total surplus

Accepted Answer

A)   can be used to measure a market's efficiency.
B)   is the sum of consumer and producer surplus.
C)   is the to value to buyers minus the cost to sellers.
D)   All of the above are correct.E) B) and C)
F) None of the above

Question 15

If the United States changed its laws to allow for the legal sale of a kidney,which of the following is least likely to occur?

Accepted Answer

A)   The supply of kidneys would increase.
B)   The shortage of kidneys would decrease.
C)   Many lives would be saved.
D)   The allocation of kidneys would be fair.E) None of the above
F) A) and B)

Question 16

Figure 7-3
 
-Refer to Figure 7-3.Which area represents consumer surplus at a price of P2?

Accepted Answer

A)   ABD
B)   ACG
C)   BCDF
D)   DFGE) B) and C)
F) A) and D)

Question 17

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

Question 18

Figure 7-3
 
-Refer to Figure 7-3.When the price falls from P1 to P2,which area represents the increase in consumer surplus to new buyers entering the market?

Accepted Answer

A)   ABD
B)   ACG
C)   BCDF
D)   DFGE) A) and C)
F) B) and D)

Question 19

The distinction between efficiency and equality can be described as follows:

Accepted Answer

A)   Efficiency refers to maximizing the number of trades among buyers and sellers; equality refers to maximizing the gains from trade among buyers and sellers.
B)   Efficiency refers to minimizing the price paid by buyers; equality refers to maximizing the gains from trade among buyers and sellers.
C)   Efficiency refers to maximizing the size of the pie; equality refers to producing a pie of a given size at the least possible cost.
D)   Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society.E) A) and B)
F) A) and C)

Question 20

Producer surplus equals the

Accepted Answer

A)   value to buyers minus the amount paid by buyers.
B)   value to buyers minus the cost to sellers.
C)   amount received by sellers minus the cost to sellers.
D)   amount received by sellers minus the amount paid by buyers.E) C) and D)
F) None of the above

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

Figure 7-5 -Refer to Figure 7-5.At the equilibrium price,consumer surplus is

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If the United States changed its laws to allow for the legal sale of a kidney,which of the following is least likely to occur?

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Table 7-11 -Refer to Table 7-11.At a price of $2.00,total surplus is

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Producer surplus equals the

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Figure 7-10 -Refer to Figure 7-10.If the equilibrium price rises from $50 to $200,what is the additional producer surplus to initial producers?

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The distinction between efficiency and equality can be described as follows:

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Figure 7-18 -Refer to Figure 7-18.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

Correct AnswerverifiedShow Answer

Five hundred units of good x are currently bought and sold.The marginal buyer is willing to pay $40 for the 500ᵗʰ unit,and the cost to the marginal seller is $35 for the 500ᵗʰ unit.We know that

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Welfare economics is the study of the welfare system.

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Figure 7-20 -Refer to Figure 7-20.At equilibrium,producer surplus is

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Figure 7-3 -Refer to Figure 7-3.Which area represents consumer surplus at a price of P2?

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Figure 7-13 -Refer to Figure 7-13.Suppose the price of the good is $450.Then,on the first unit of the good that is sold,producer surplus is

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Figure 7-13 -Refer to Figure 7-13.If the price of the good is $300,then producer surplus amounts to

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Suppose Katie,Kendra,and Kristen each purchase a particular type of cell phone at a price of $80.Katie's willingness to pay was $100,Kendra's willingness to pay was $95,and Kristen's willingness to pay was $80.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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

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Table 7-11 -Refer to Table 7-11.Both the demand curve and the supply curve are straight lines.At equilibrium,consumer surplus is

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Total surplus

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Figure 7-20 -Refer to Figure 7-20.If 6 units of the good are produced and sold,then

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Dallas buys strawberries,and he would be willing to pay more than he now pays.Suppose that Dallas has a change in his tastes such that he values strawberries more than before.If the market price is the same as before,then

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Figure 7-3 -Refer to Figure 7-3.When the price falls from P1 to P2,which area represents the increase in consumer surplus to new buyers entering the market?

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