Question 1

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 2

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is

Accepted Answer

A)  $175.
B)  $575.
C)  $750.
D)  $1,325.E) A) and D)
F) B) and C)

Question 3

Figure 7-17 
-Refer to Figure 7-17. When the price is P1, area A represents

Accepted Answer

A)  total benefit.
B)  producer surplus.
C)  consumer surplus.
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 4

Figure 7-13 
-Refer to Figure 7-13. If the price of the good is $600, then

Accepted Answer

A)  consumer surplus is $800.
B)  consumer surplus is $900.
C)  producer surplus is $900.
D)  producer surplus is $1,000.E) B) and C)
F) A) and B)

Question 5

The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate

Accepted Answer

A)  increases, and producer surplus increases.
B)  increases, and producer surplus decreases.
C)  decreases, and producer surplus increases.
D)  decreases, and producer surplus decreases.E) B) and D)
F) None of the above

Question 6

Figure 7-18 
-Refer to Figure 7-18. If 110 units of the good are being bought and sold, then

Accepted Answer

A)  the marginal cost to sellers is equal to the marginal value to buyers.
B)  the marginal value to buyers is greater than the marginal cost to sellers.
C)  the marginal cost to sellers is greater than the marginal value to buyers.
D)  producer surplus is greater than consumer surplus.E) B) and D)
F) B) and C)

Question 7

Figure 7-13 
-Refer to Figure 7-13. Sellers will be unwilling to sell more than

Accepted Answer

A)  1 unit of the good if its price is below $200.
B)  2 units of the good if its price is below $450.
C)  3 units of the good if its price is below $700.
D)  All of the above are correct.E) B) and C)
F) A) and D)

Question 8

Figure 7-15 
-Refer to Figure 7-15. If the government imposes a price ceiling of $60 in this market, then total surplus will be

Accepted Answer

A)  $187.50.
B)  $212.50.
C)  $250.00.
D)  $266.67.E) A) and B)
F) A) and C)

Question 9

Figure 7-22 
-Refer to Figure 7-22. At the quantity Q2, the marginal value to buyers

Accepted Answer

A)  and the marginal cost to sellers are both P2.
B)  is P2, and the marginal cost to sellers is P3.
C)  and the marginal cost to sellers are both P3.
D)  is P3, and the marginal cost to sellers is P2.E) A) and C)
F) B) and C)

Question 10

Figure 7-9 
-Refer to Figure 7-9. If the demand curve is D and the supply curve shifts from S' to S, what is the change in producer surplus?

Accepted Answer

A)  Producer surplus increases by $625.
B)  Producer surplus increases by $1,875.
C)  Producer surplus decreases by $625.
D)  Producer surplus decreases by $1,875.E) A) and B)
F) A) and C)

Question 11

Alex is willing to pay $10, and Bella is willing to pay $8, for 1 pound of ribeye steak. When the price of ribeye steak increases from $9 to $11,

Accepted Answer

A)  Alex experiences a decrease in consumer surplus, but Bella does not.
B)  Bella experiences a decrease in consumer surplus, but Alex does not.
C)  both Bella and Alex experience a decrease in consumer surplus.
D)  neither Bella nor Alex experiences a decrease in consumer surplus.E) A) and C)
F) None of the above

Question 12

Tammy loves donuts. The table shown reflects the value Tammy places on each donut she eats:
$$\begin{array} { | l | l | } 
\hline \text { Value of first donut } & \$ 0.60 \
\hline \text { Value of second donut } & \$ 0.50 \
\hline \text { Value of third donut } & \$ 0.40 \
\hline \text { Value of fourth donut } & \$ 0.30 \
\hline \text { Value of fifth donut } & \$ 0.20 \
\hline \text { Value of sixth donut } & \$ 0.10 \
\hline
\end{array}$$
a.Use this information to construct Tammy's demand curve for donuts.
b.If the price of donuts is $0.20, how many donuts will Tammy buy?
c.Show Tammy's consumer surplus on your graph. How much consumer surplus would she have at a price of $0.20?
d.If the price of donuts rose to $0.40, how many donuts would she purchase now? What would happen to Tammy's consumer surplus? Show this change on your graph.

Accepted Answer

a.

b.At a price of $0.20, Tammy would bu...

Question 13

Consumer surplus can be measured as the area between the demand curve and the supply curve.

Accepted Answer

A) True 
 B)False

Question 14

Table 7-9
The numbers reveal the opportunity costs of providing 10 piano lessons of equal quality.   Sallar  Cast  Marcia $200 Jan $250 Cindy $350 Grea $400 Peter $700 Babby $800\begin{array} { | c | c | } \hline 	ext { Sallar } & 	ext { Cast } \\hline 	ext { Marcia } & \$ 200 \\hline 	ext { Jan } & \$ 250 \\hline 	ext { Cindy } & \$ 350 \\hline 	ext { Grea } & \$ 400 \\hline 	ext { Peter } & \$ 700 \\hline 	ext { Babby } & \$ 800 \\hline\end{array} Sallar  Marcia  Jan  Cindy  Grea  Peter  Babby ​ Cast $200$250$350$400$700$800​​ 
-Refer to Table 7-9. You wish to purchase 10 piano lessons, so you take bids from each of the sellers. The bids are required to be rounded to the nearest dollar. You will not accept a bid below a seller's cost because you are concerned that the seller will not provide all 10 lessons. Your parents have given you $450 to spend on piano lessons. You believe that the sellers with higher opportunity costs offer higher quality lessons. You want the highest quality lessons that you can afford, but you can spend any remaining money on dinner with friends. From whom will you take lessons, and how much money will you spend?

Accepted Answer

A)  Peter; $450
B)  Cindy; $450
C)  Greg; $401
D)  Cindy; $401 E) B) and C)
F) A) and C)

Question 15

Even though participants in the economy are motivated by self-interest, the "invisible hand" of the marketplace guides this self-interest into promoting general economic well-being.

Accepted Answer

A) True 
 B)False

Question 16

Table 7-7
The following table represents the costs of five possible sellers.   Seller  Cost  Abby $1,500 Babby $1,200 Carlos $1,000 Dianne $750 Evalina $500\begin{array} { | l | l | } \hline 	ext { Seller } & 	ext { Cost } \\hline 	ext { Abby } & \$ 1,500 \\hline 	ext { Babby } & \$ 1,200 \\hline 	ext { Carlos } & \$ 1,000 \\hline 	ext { Dianne } & \$ 750 \\hline 	ext { Evalina } & \$ 500 \\hline\end{array} Seller  Abby  Babby  Carlos  Dianne  Evalina ​ Cost $1,500$1,200$1,000$750$500​​ 
-Refer to Table 7-7. If the market price is $1,000, the producer surplus in the market is

Accepted Answer

A)  $700.
B)  $750.
C)  $2,250.
D)  $3,700. E) B) and C)
F) C) and D)

Question 17

Figure 7-16 
-Refer to Figure 7-16. For quantities greater than M, the value to the marginal buyer is

Accepted Answer

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.E) A) and B)
F) B) and D)

Question 18

When a buyer's willingness to pay for a good is equal to the price of the good, the

Accepted Answer

A)  buyer's consumer surplus for that good is maximized.
B)  buyer will buy as much of the good as the buyer's budget allows.
C)  price of the good exceeds the value that the buyer places on the good.
D)  buyer is indifferent between buying the good and not buying it.E) None of the above
F) C) and D)

Question 19

Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?

Accepted Answer

A)  profits and costs to firms
B)  consumer and producer surplus
C)  the equilibrium price and quantity
D)  incomes of and prices paid by buyersE) C) and D)
F) A) and D)

Question 20

Which of the following is correct?

Accepted Answer

A)  Efficiency deals with the size of the economic pie, and equality deals with how fairly the pie is sliced.
B)  Equality can be judged on positive grounds whereas efficiency requires normative judgments.
C)  Efficiency is more difficult to evaluate than equality.
D)  Equality and efficiency are both maximized in a society when total surplus is maximized.E) None of the above
F) A) and D)

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

Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?

Correct Answer
verified

Correct Answer
verified
a.
b.At a price of $0.20, Tammy would bu...
View Answer

Figure 7-13 -Refer to Figure 7-13. Sellers will be unwilling to sell more than

Correct Answer
verified

Even though participants in the economy are motivated by self-interest, the "invisible hand" of the marketplace guides this self-interest into promoting general economic well-being.

Correct Answer
verified

Figure 7-9 -Refer to Figure 7-9. If the demand curve is D and the supply curve shifts from S' to S, what is the change in producer surplus?

Correct Answer
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Correct Answer
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Figure 7-17 -Refer to Figure 7-17. When the price is P1, area A represents

Correct Answer
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Which of the following is correct?

Correct Answer
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Figure 7-15 -Refer to Figure 7-15. If the government imposes a price ceiling of $60 in this market, then total surplus will be

Correct Answer
verified

The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate

Correct Answer
verified

Alex is willing to pay $10, and Bella is willing to pay $8, for 1 pound of ribeye steak. When the price of ribeye steak increases from $9 to $11,

Correct Answer
verified

Correct Answer
verified

Figure 7-13 -Refer to Figure 7-13. If the price of the good is $600, then

Correct Answer
verified

When a buyer's willingness to pay for a good is equal to the price of the good, the

Correct Answer
verified

Figure 7-16 -Refer to Figure 7-16. For quantities greater than M, the value to the marginal buyer is

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

Consumer surplus can be measured as the area between the demand curve and the supply curve.

Correct Answer
verified

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is

Correct Answer
verified

Figure 7-22 -Refer to Figure 7-22. At the quantity Q2, the marginal value to buyers

Correct Answer
verified

Figure 7-18 -Refer to Figure 7-18. If 110 units of the good are being bought and sold, then

Correct Answer
verified

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

Which tools allow economists to determine if the allocation of resources determined by free markets is desirable?

Correct AnswerverifiedShow Answer

Correct Answerverifieda.b.At a price of $0.20, Tammy would bu...View AnswerShow Answer

Figure 7-13 -Refer to Figure 7-13. Sellers will be unwilling to sell more than

Correct AnswerverifiedShow Answer

Even though participants in the economy are motivated by self-interest, the "invisible hand" of the marketplace guides this self-interest into promoting general economic well-being.

Correct AnswerverifiedShow Answer

Figure 7-9 -Refer to Figure 7-9. If the demand curve is D and the supply curve shifts from S' to S, what is the change in producer surplus?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 7-17 -Refer to Figure 7-17. When the price is P1, area A represents

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Figure 7-15 -Refer to Figure 7-15. If the government imposes a price ceiling of $60 in this market, then total surplus will be

Correct AnswerverifiedShow Answer

The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate

Correct AnswerverifiedShow Answer

Alex is willing to pay $10, and Bella is willing to pay $8, for 1 pound of ribeye steak. When the price of ribeye steak increases from $9 to $11,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 7-13 -Refer to Figure 7-13. If the price of the good is $600, then

Correct AnswerverifiedShow Answer

When a buyer's willingness to pay for a good is equal to the price of the good, the

Correct AnswerverifiedShow Answer

Figure 7-16 -Refer to Figure 7-16. For quantities greater than M, the value to the marginal buyer is

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

Consumer surplus can be measured as the area between the demand curve and the supply curve.

Correct AnswerverifiedShow Answer

Cameron visits a sporting goods store to buy a new set of golf clubs. He is willing to pay $750 for the clubs but buys them on sale for $575. Cameron's consumer surplus from the purchase is

Correct AnswerverifiedShow Answer

Figure 7-22 -Refer to Figure 7-22. At the quantity Q2, the marginal value to buyers

Correct AnswerverifiedShow Answer

Figure 7-18 -Refer to Figure 7-18. If 110 units of the good are being bought and sold, then

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
a.
b.At a price of $0.20, Tammy would bu...
View Answer

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