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Assume there are three hardware stores,each willing to sell one standard model hammer in a given time period.House Depot can offer their hammer for a minimum of $7.Lace Hardware can offer the hammer for a minimum of $10.Bob's Hardware store can offer the hammer at a minimum price of $13. Given the scenario described,if the market price of hammers decreased from $15 to $13,which of the following can be said with certainty?


A) Bob's Hardware would no longer participate in the market.
B) Total producer surplus would decrease.
C) Only Bob's Hardware will experience a drop in producer surplus.
D) Bob's Hardware would continue to participate in the market.

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

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Surplus refers to:


A) a way of measuring who benefits from transactions and by how much.
B) the difference between the price the buyer would have paid and the actual price paid.
C) the difference between the price the seller would have accepted and the actual sell price.
D) All of these statements are true.

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

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In economics,the concept of surplus:


A) measures the benefit that people receive when they buy something for less than they would have been willing to pay.
B) measures the benefit that people receive when they sell something for more than they would have been willing to accept.
C) is the best way to look at the benefits people receive from successful transactions.
D) All of these are true.

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

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Assume a market that has an equilibrium price of $5.If the market price is set at $9,producer surplus:


A) rises for some producers because of the increased price.
B) decreases for some producers because of fewer transactions taking place.
C) Both A and B are true.
D) Neither of these statements is true.

E) A) and B)
F) A) and C)

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According to the graph shown,if the market price decreases (all else staying the same) : A) producer surplus would increase. B) producer surplus would decrease. C) total surplus would increase. D) quantity would increase. According to the graph shown,if the market price decreases (all else staying the same) :


A) producer surplus would increase.
B) producer surplus would decrease.
C) total surplus would increase.
D) quantity would increase.

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

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According to the graph shown,producer surplus is: A) $36. B) $48. C) $120. D) None of these. According to the graph shown,producer surplus is:


A) $36.
B) $48.
C) $120.
D) None of these.

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

Correct Answer

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When a perfectly competitive,well-functioning market is in equilibrium:


A) consumer surplus is minimized.
B) producer surplus is minimized.
C) total surplus is maximized.
D) total surplus is zero.

E) All of the above
F) None of the above

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A market has four individuals,each considering buying a grill for his backyard.Assume that grills come in only one size and model.Abe considers himself a grill-master,and finds a grill a necessity,so he is willing to pay $400 for a grill.Butch is a meat-lover,honing his grilling skills,and is willing to pay $350 for a grill.Collin just met the girl of his dreams,and she loves a good grilled steak,so in his effort to impress her he is willing to pay $320 for a grill.Daniel loves grilled shrimp and thinks it might be cheaper in the long run if he buys a grill instead of eating out every time he wants grilled shrimp,so he is willing to pay $200 for a grill. Given the scenario described,if the market price of grills falls from $395 to $340,then we can say:


A) Abe's consumer surplus increases from $5 to $60, and total consumer surplus increases from $5 to $70.
B) Abe's consumer surplus decreases from $60 to $5, and total consumer surplus decreases from $70 to $5.
C) Collin's consumer surplus increases from $0 to $20, and total consumer surplus increases from $5 to $70.
D) Butch's consumer surplus decreases from $10 to $0, and total consumer surplus increases from $10 to $80.

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

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Assume there are three hardware stores,each willing to sell one standard model hammer in a given time period.House Depot can offer their hammer for a minimum of $7.Lace Hardware can offer the hammer for a minimum of $10.Bob's Hardware store can offer the hammer at a minimum price of $13. Given the scenario described,if the market price of hammers increased from $8 to $12,producer surplus would:


A) increase from $8 to $12.
B) increase by $4 for each producer.
C) increase by $4 for House Depot.
D) increase by $7 in total.

E) A) and B)
F) A) and C)

Correct Answer

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According to the graph shown: A) consumer surplus is greater than producer surplus. B) producer surplus is greater than consumer surplus. C) total surplus is smaller than consumer surplus. D) total surplus is smaller than producer surplus. According to the graph shown:


A) consumer surplus is greater than producer surplus.
B) producer surplus is greater than consumer surplus.
C) total surplus is smaller than consumer surplus.
D) total surplus is smaller than producer surplus.

E) All of the above
F) B) and D)

Correct Answer

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Assume there are three hardware stores,each willing to sell one standard model hammer in a given time period.House Depot can offer their hammer for a minimum of $7.Lace Hardware can offer the hammer for a minimum of $10.Bob's Hardware store can offer the hammer at a minimum price of $13. Given the scenario described,if the market price of hammers increased from $8 to $14,total producer surplus would:


A) increase from $8 to $14.
B) increase from $1 to $12.
C) decrease from $14 to $8.
D) increase from $7 to $30.

E) All of the above
F) None of the above

Correct Answer

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According to the graph shown,producer surplus is: A) the area under the demand curve and above the market price. B) the area under the supply curve and above the price. C) the area above the supply curve and below the price. D) the area above the demand curve and below the price. According to the graph shown,producer surplus is:


A) the area under the demand curve and above the market price.
B) the area under the supply curve and above the price.
C) the area above the supply curve and below the price.
D) the area above the demand curve and below the price.

E) A) and B)
F) All of the above

Correct Answer

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According to the graph shown,if the market goes from equilibrium to having its price set at $10 then: A) producer surplus rises by area B,but falls by area E. B) producer surplus rises by area B,but falls by area D + E. C) producer surplus rises by area B + C,but falls by area D + E. D) producer surplus rises by area B + C,but falls by area E. According to the graph shown,if the market goes from equilibrium to having its price set at $10 then:


A) producer surplus rises by area B,but falls by area E.
B) producer surplus rises by area B,but falls by area D + E.
C) producer surplus rises by area B + C,but falls by area D + E.
D) producer surplus rises by area B + C,but falls by area E.

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

Correct Answer

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According to the graph shown,if the market is in equilibrium,total surplus is area(s) : A) A. B) A + B + C. C) A + B + C + D + E. D) D + E. According to the graph shown,if the market is in equilibrium,total surplus is area(s) :


A) A.
B) A + B + C.
C) A + B + C + D + E.
D) D + E.

E) All of the above
F) A) and C)

Correct Answer

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Assume the market is in equilibrium in the graph shown at demand D and supply S<sub>1</sub>.If the supply curve shifts to S<sub>2</sub>,and a new equilibrium is reached,which of the following is true? A) Consumer surplus increases, but producer surplus decreases. B) Consumer surplus decreases, but producer surplus increases. C) Both consumer and producer surplus increase. D) Both consumer and producer surplus decrease. Assume the market is in equilibrium in the graph shown at demand D and supply S1.If the supply curve shifts to S2,and a new equilibrium is reached,which of the following is true?


A) Consumer surplus increases, but producer surplus decreases.
B) Consumer surplus decreases, but producer surplus increases.
C) Both consumer and producer surplus increase.
D) Both consumer and producer surplus decrease.

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

Correct Answer

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According to the graph shown,total surplus is area: A) A + B + C. B) B. C) A. D) A + B. According to the graph shown,total surplus is area:


A) A + B + C.
B) B.
C) A.
D) A + B.

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

Correct Answer

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According to the graph shown,if the market goes from equilibrium to having its price set at $10: A) market transactions will decrease by 7. B) market transactions will decrease by 3. C) market transactions will decrease by 10. D) market transactions will not change, only price has changed. According to the graph shown,if the market goes from equilibrium to having its price set at $10:


A) market transactions will decrease by 7.
B) market transactions will decrease by 3.
C) market transactions will decrease by 10.
D) market transactions will not change, only price has changed.

E) B) and D)
F) B) and C)

Correct Answer

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A buyer always wants to:


A) buy for a price that is as high as possible, but never higher than his willingness to pay.
B) buy for a price that is as low as possible, but never lower than his willingness to pay.
C) buy for a price that is as low as possible, but never higher than his willingness to pay.
D) buy for a price that is as high as possible, but never lower than his willingness to pay.

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

Correct Answer

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Assume the market is in equilibrium in the graph shown at demand D and supply S1 (at a quantity of 5) .If the supply curve shifts to S2,and a new equilibrium is reached (at a quantity of 7) ,which of the following is true? A) Total surplus increases by $12.50. B) Total surplus decreases by $12.50. C) Total surplus increases by $15.50. D) Total surplus decreases by $15.50. Assume the market is in equilibrium in the graph shown at demand D and supply S1 (at a quantity of 5) .If the supply curve shifts to S2,and a new equilibrium is reached (at a quantity of 7) ,which of the following is true?


A) Total surplus increases by $12.50.
B) Total surplus decreases by $12.50.
C) Total surplus increases by $15.50.
D) Total surplus decreases by $15.50.

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

Correct Answer

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Assume an equilibrium price of $7 and equilibrium quantity of 8 units at demand D and supply S<sub>2</sub> in the graph shown.Total surplus is: A) $32. B) $12. C) $56. D) $16. Assume an equilibrium price of $7 and equilibrium quantity of 8 units at demand D and supply S2 in the graph shown.Total surplus is:


A) $32.
B) $12.
C) $56.
D) $16.

E) A) and B)
F) A) and C)

Correct Answer

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