Chapter 7 eco

Evan purchases a wall calendar for $9, and his consumer surplus is $1. How much is Evan willing to pay for the wall calendar?

$10

If you have a ticket that you sell to the group in an auction, who will buy the ticket?

Biyu

You want to hire a professional photographer to take pictures of your family. The table shows the costs of the four potential sellers in the local photography market. Which of the following graphs represents the market supply curve?

C

If the price of the product is $110, then who would be willing to purchase the product?

Calvin, Sam, and Andrew

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

Consumer and producer surplus

If the market equilibrium price is $120, how much is total consumer surplus?

Consumer surplus is $800.

When the price rises from P1 to P2 , which area represents the increase in producer surplus due to new producers entering the market?

DGH

If the price is $1,050, who would be willing to supply the product?

David and Codi

If the market equilibrium price rises from $25 to $35, how much is the increase in producer surplus to the producers supplying units at the initial $25 price?

The increase in producer surplus to the initial producers is $20.

If the market price of an apple increases from $0.80 to $1.05, then consumer surplus

decreases by $0.95

Producer surplus is

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

Area A represents

the increase in producer surplus to those producers already in the market when the price increases from P1 to P2 .

Efficiency in a market is achieved when

the sum of producer surplus and consumer surplus is maximized.

Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, consumer surplus will be

$36

All else equal, a decrease in demand will cause an increase in producer surplus.

False

Total surplus can be measured as the area

JNL

Which of the following statements is correct?

Neither Sasha's consumer surplus nor Ava's consumer surplus can exceed Bob's consumer surplus, for any price of an orange

Total surplus = Value to buyers - Costs to sellers.

True

A drought in Spain destroys many red grapes causing the prices of both red grapes and red wine to rise. As a result, the consumer surplus in the market for red grapes

decreases, and the consumer surplus in the market for red wine decreases.

If the government imposes a price ceiling of $55 in this market, then total surplus will be

$250.00

If there is only one unit of the good and if the buyers bid against each other for the right to purchase it, then the good will sell for

$21 or slightly more

If the market price is $1,000, the producer surplus in the market is

$400

On a graph, the area below a demand curve and above the price measures

. consumer surplus.

If the market price of an apple is $0.70, then the market quantity of apples demanded per day is

6

If the cost of producing tables increases causing the price of tables to increase, consumer surplus in the table market will

decrease

When the price falls from P2 to P1 , consumer surplus

increases by an amount equal to B+C

Welfare economics implies that the equilibrium price of a product is considered to be the best price because it

maximizes the combined welfare of buyers and sellers.

Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market

may increase, decrease, or remain unchanged.

Suppose televisions are a normal good and buyers of televisions experience a decrease in income. As a result, consumer surplus in the television market

may increase, decrease, or remain unchanged.

When the demand for a good increases and the supply of the good remains unchanged, consumer surplus

may increase, decrease, or remain unchanged.

As a result of a decrease in price,

new buyers enter the market, increasing consumer surplus

Cost is a measure of the

seller's willingness to sell.

Suppose the market demand curve for a good passes through the point (quantity demanded = 100, price = $25). If there are five buyers in the market, then

the marginal buyer's willingness to pay for the 100th unit of the good is $25.

A simultaneous increase in both the demand for tablets and the supply of tablets would imply that

the value of tablets to consumers has increased, and the cost of producing tablets has decreased.

A seller's opportunity cost measures the

value of everything she must give up to produce a good

The maximum price that a buyer will pay for a good is called

willingness to pay

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is

zero

Suppose market demand is given by the equation Q^D= 40-2P

Consumer surplus decreases by $75.

If the market equilibrium price falls from $120 to $80, how much is the change in total consumer surplus in the market?

Consumer surplus increases by $1,000

If the market equilibrium price falls from $10 to $5, what is the change in total consumer surplus in the market?

Consumer surplus increases by $125

If the government imposed a price ceiling at $20 in this market, how much are consumer surplus, producer surplus, and total surplus?

Consumer surplus is $400, producer surplus is $200, and total surplus is $600.

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

Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society.

.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

An increase in price increases consumer surplus

False

If Rosa is willing to pay $450 for hockey tickets and has consumer surplus of $175, the price of the tickets is $625

False

Suppose there is initially a price floor set at $10 in this market. If the government removed the price floor, by how much would total consumer surplus increase for those consumers who enter the market after the price floor is removed?

New consumers entering the market when the price floor is removed will receive total consumer surplus equal to $100.

The following table shows the willingness to pay for a good for the only four consumers in a market If the price of the good is $20, how many units will be demanded?

Three units will be demanded.

Suppose demand shifts such that consumers wish to purchase 12 fewer units at every price. How much is total consumer surplus in this market at the new equilibrium price?

Total consumer surplus at the new equilibrium price is $225.

Suppose a reduction in input prices shifts the market supply curve to Q^S=P How much total consumer surplus goes to new consumers who enter the market after the supply curve shifts?

Total consumer surplus increases by $2 for those consumers who enter the market after the supply curve shifts.

If the price of the good is $20, how much is the total consumer surplus?

Total consumer surplus is $35.

If Darby values a soccer ball at $50, and she pays $40 for it, her consumer surplus is $10

True

In a competitive market, sales go to those producers who are willing to supply the product at the lowest price.

True

In order to conclude that markets are efficient, we assume that they are perfectly competitive

True

Unless markets are perfectly competitive, they may fail to maximize the total benefits to buyers and sellers.

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

Suppose that the price falls from P2 to P1. Area B represents the

additional consumer surplus to initial consumers when the price falls.

Suppose producer surplus is larger than C but smaller than A+B+C. The price of the good must be

between P1 and P2

Who experiences the largest gain in consumer surplus when the price of an apple decreases from $1.05 to $0.75?

bob

Henry is willing to pay 45 cents, and Janine is willing to pay 55 cents, for 1 pound of bananas. When the price of bananas falls from 50 cents a pound to 40 cents a pound,

both Janine and Henry experience an increase in consumer surplus

If the price of the good is $12.00, then producer surplus is

$14.50

If the price is $17, then consumer surplus in the market is

$15, and Alexa, Erica, and Biyu purchase the good

If you have 2 (essentially) identical tickets that you sell to the group in an auction, assuming that each person can only buy one ticket, which of the following is closest to the selling price for each ticket?

$16

During the last two days, Harry purchased a latte from two different stores. The table below shows Harry's willingness to pay on each day and his consumer surplus from each purchase. The price that Harry paid for a latte on the first day is

$2.25

The equilibrium market price for 10 piano lessons is $400. What is the total producer surplus in the market?

$400

Both the demand curve and the supply curve are straight lines. At equilibrium, consumer surplus is

$48

Billie Jo values a stainless steel dishwasher for her new house at $500, but she succeeds in buying one for $425. Billie Jo's willingness to pay for the dishwasher is

$500

If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by

$600

If the supply curve is S and the demand curve shifts from D to D', what is the increase in producer surplus due to new producers entering the market?

$625

If the supply curve is S', the demand curve is D, and the equilibrium price is $150, what is the producer surplus?

$625

If the price were P3 , consumer surplus would be represented by the area

A

When the price is P2 , consumer surplus is

A

Which of the following will cause an increase in consumer surplus?

A technological improvement in the production of the good

At equilibrium, consumer surplus is represented by the area

A+B+C

When the price is P2 , producer surplus is

A+B+C

At equilibrium, total surplus is represented by the area

A+B+C+D+H+F

Suppose there is an early freeze in California that reduces the size of the lemon crop. As the price of lemons rises, what happens to consumer surplus in the market for lemons?

Consumer surplus decreases

What happens to consumer surplus in the cell phone market if cell phones are normal goods and income of the cell phone buyers rises?

Consumer surplus may increase, decrease, or remain unchanged.

At equilibrium, producer surplus is represented by the area

D+H+F

Suppose a reduction in input prices shifts the market supply curve to Q^S= P By how much does total consumer surplus increase as a result of this supply shift?

Total consumer surplus prior to the shift is $162, and total consumer surplus after the shift is $200. Therefore, total consumer surplus increases by $38 as a result of the supply shift.

Suppose market demand and market supply are given by the equations: Q^D=40-P Q^S= P-4 How much is total producer surplus at the equilibrium price in this market?

Total producer surplus at the equilibrium price is $162.

How much is total producer surplus in this market at the equilibrium price?

Total producer surplus at the equilibrium price is $324.

Steak and chicken are substitutes. A sharp reduction in the supply of steak would

decrease consumer surplus in the market for steak and increase producer surplus in the market for chicken

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

decreases, and producer surplus decreases

Tomato sauce and spaghetti noodles are complementary goods. A decrease in the price of tomatoes will

increase consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles

Moving production from a high-cost producer to a low-cost producer will

raise total surplus.

A supply curve can be used to measure producer surplus because it reflects

sellers' costs

At a price of $2.00, total surplus is

smaller than it would be at the equilibrium price.

You are selling extra tickets to the Midwest Regional Sweet 16 game in the men's NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. Which of the following graphs represents the market demand curve?

a

If the sellers bid against each other for the right to sell the good to a consumer, then the good will sell for

$100 or slightly less

At Sarah's Bakery, the cost of making one cake is $1.00. If Sarah sells 20 cakes and gains producer surplus of $40.00, then Sarah must be selling her cakes for

$3.00 each

At the equilibrium price, consumer surplus is

$800

Suppose each of the five sellers can supply at most one unit of the good. The market quantity supplied is exactly 2 if the price is

$950

If the market equilibrium price falls from $120 to $80, how much consumer surplus do consumers entering the market after the price drop receive?

Consumers entering the market after the price drop receive $200 in consumer surplus.

For each of the three potential buyers of apples, the table displays the willingness to pay for Bob, Sasha, and Ava, who are the only three buyers of apples. Assume that only three apples can be supplied per day.

The market quantity of apples demanded per day is exactly seven if the price of an

Suppose there is initially a price ceiling set at $4 in this market. How much is total producer surplus with the price ceiling in place?

Total producer surplus with a $4 price ceiling is $400.

Suppose demand shifts such that consumers wish to purchase 12 fewer units at every price. How much is total surplus in this market at the new equilibrium price?

Total surplus at the new equilibrium price is $450.

At what price will total surplus be maximized in this market?

Total surplus will be maximized at the market equilibrium price, $25

Let P represent price; let Q S represent quantity supplied; and assume the equation of the supply curve is P = 15 + (1/3) QS . If 90 units of the good are produced and sold, then producer surplus amounts to $1,350.

True

Producer surplus directly measures

the well-being of sellers.