Chapter 3

Alex and Tyler enjoy the food at a restaurant named China Star. Alex values a meal there at $15, and Tyler values it at $26. If the restaurant charges only $10 a meal, what is Alex and Tyler's joint consumer surplus from a meal at China Star?

$21

(Figure: Producer Surplus) In the diagram, if the market price of coffee is $6, how much producer surplus do suppliers earn?

$62.50

Nigeria receives $53 of producer surplus from each barrel of oil sold at $60. At that level of production, Nigeria's cost to produce a barrel of oil is:

$7.

(Figure: Bananas) Refer to the figure. If the price of bananas is $2 a pound, how many pounds of bananas will suppliers supply?

0

Refer to the figure. What is the maximum number of books that buyers are willing and able to pay at a price of $45 per book?

100

Recall the discussion in your textbook about the supply curve for oil. What explains why the supply curve for oil is positively sloped?

As the price of oil rises, more producers enter the market.

Which of the following statements is TRUE? -Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good or service and its market price. -Bill is willing to pay $10 for a pound of clay. If he buys a pound of clay at a market price per pound of $5, his consumer surplus is $2. -Total consumer surplus is represented graphically by the area beneath the demand curve. -Total consumer surplus is represented graphically by the area above the demand curve.

Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good or service and its market price.

What will happen to the supply of workers 18 to 21 years after a baby boom?

It will increase because of the influx of new adults into the labor market.

In the market for fertilizer, an:

advance in technology will increase the supply of fertilizer

Consumer surplus can be defined as the net benefit to consumers from participating in a market.

True

When the price of oil used for generating electricity increases, the demand for nuclear power will increase.

True

Which of the following statements is TRUE? -When the price of oil is high, consumers will use oil for both valuable and less valuable uses. -When the price of oil is low, consumers will use oil only for its most valuable uses. -When the price of oil rises, consumers tend to use oil for uses in which there are few substitutes for it. -When the price of oil falls, consumers start to conserve oil and use it only when there are no other options.

When the price of oil rises, consumers tend to use oil for uses in which there are few substitutes for it.

Which of the following factors would cause the change in the figure?

an increase in the price of a substitute good

A decrease in income causes demand for a normal good to ________, and an increase in income causes demand for an inferior good to ________.

decrease; decrease

An inferior good is one that:

experiences decreased demand when income increases.

A farmer can grow soy or sorghum. If the price of soy increases, the opportunity cost of growing sorghum ______, shifting the supply curve of sorghum ______.

increases; up and to the left

The average age in the United States is _____, causing the demand for prescription drugs to _____.

increasing; increase

Consider the (world) market supply curve for oil. Saudi oil production inhabits the _____ part of the curve, and Canadian oil production inhabits the _____ part of the curve.

lower; upper

The demand curve:

shows how much buyers are willing and able to buy at different prices.

When the price of inputs increases:

the supply curve shifts up and to the left.