Chap 7 -

Refer to Table 7-1. If the price of the product is $110, then who would be willing to purchase the product?

Calvin, Sam, and Andrew

Refer to Figure 7-25. Suppose the government imposes a price ceiling of $16 in this market. If the buyers with the highest willingness to pay purchase the good, then total surplus will be

$1,024

Refer to Figure 7-12. If the equilibrium price is $350, what is the producer surplus?

$30,000

Refer to Table 7-16. Both the demand curve and the supply curve are straight lines. At equilibrium, total surplus is

$72

Table 7-3The only four consumers in a market have the following willingness to pay for a good: Refer to Table 7-3. Who experiences the largest loss of consumer surplus when the price of the good increases from $20 to $22?

All three buyers experience the same loss of consumer surplus.

Connie can clean windows in large office buildings at a cost of $1 per window. The market price for window-cleaning services is $3 per window. If Connie cleans 100 windows, her producer surplus is $100.

False

Suppose the demand for peanuts increases. What will happen to producer surplus in the market for peanuts?

It increases

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 market price is $3.80,

Megan's consumer surplus is $1.70 and total consumer surplus for the five individuals is $9.80.

Refer to Figure 7-23. The equilibrium price is

P2

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

True

Which of the following is correct?

Total surplus is measured as the area below the demand curve and above the supply curve, up to the equilibrium quantity.

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

True

Consumer surplus is the amount a buyer is willing to pay for a good minus the amount the buyer actually has to pay for it.

True

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.

True

For any given quantity, the price on a demand curve represents the marginal buyer's willingness to pay.

True

If producing a soccer ball costs Jake $5, and he sells it for $40, his producer surplus is $35.

True

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.

True

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.

True

When demand increases so that market price increases, producer surplus increases because (1) producer surplus received by existing sellers increases, and (2) new sellers enter the market.

True

On a graph, consumer surplus is represented by the area

below the demand curve and above price.

Corn chips and potato chips are substitutes. Good weather that sharply increases the corn harvest would

increase consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips.

Refer to Figure 7-15. Area B represents

producer surplus to new producers entering the market as the result of an increase in the price from P1 to P2.

If the government allowed a free market for transplant organs such as kidneys to exist, the

shortage of organs would be eliminated, and there would be no surplus of organs.

Total surplus is

the total value of the good to buyers minus the cost to sellers of providing the good.

Total surplus in a market is equal to

value to buyers - costs of sellers.