HOMEWORK 15

Refer to Figure 7-24. At equilibrium, total surplus is measured by the area a. ABD. b. FBD. c. ABF. d. HGCI.

a. ABD.

Refer to Figure 7-10. Which area represents producer surplus when the price is P1? a. BCG b. DGH c. ACH d. ABGD

a. BCG

All else equal, what happens to consumer surplus if the price of a good increases? a. Consumer surplus decreases. b. Consumer surplus increases. c. Consumer surplus is unchanged. d. Consumer surplus may increase, decrease, or remain unchanged.

a. Consumer surplus decreases.

Which of the following equations is valid? a. Total surplus = Value to buyers - Amount paid by buyers b. Total surplus = Amount received by sellers - Cost to sellers c. Consumer surplus = Total surplus - Cost to sellers d. Producer surplus = Total surplus - Consumer surplus

d. Producer surplus = Total surplus - Consumer surplus

Refer to Figure 7-19. At the equilibrium price, producer surplus is a. $150. b. $125. c. $450. d. $300.

a. $150.

Refer to Figure 7-19. At the equilibrium price, total surplus is a. $250. b. $500. c. $450. d. $125.

a. $250.

Refer to Table 7-1. If the price of the product is $122, then the total consumer surplus is a. $28. b. $41. c. $405. d. $43.

b. $41.

Economists tend to see ticket scalping as a. a way for a few to profit without producing anything of value. b. a way of increasing the efficiency of ticket distribution. c. an inequitable interference in the orderly process of ticket distribution. d. an unproductive activity which should be made illegal everywhere.

b. a way of increasing the efficiency of ticket distribution.

A demand curve reflects each of the following except the a. highest price buyers are willing to pay for each quantity. b. ability of buyers to obtain the quantity they desire. c. value each buyer in the market places on the good. d. willingness to pay of all buyers in the market.

b. ability of buyers to obtain the quantity they desire.

If the demand for leather decreases, producer surplus in the leather market a. increases. b. decreases. c. may increase, decrease, or remain the same. d. remains the same.

b. decreases.

Which of the following will cause a decrease in producer surplus? a. the price of a complement decreases b. the imposition of a binding price ceiling in the market c. income increases and buyers consider the good to be normal d. an increase in the number of buyers of the good

b. the imposition of a binding price ceiling in the market

Producer surplus directly measures a. the well-being of society as a whole. b. the well-being of sellers. c. sellers' willingness to sell. d. the well-being of buyers and sellers.

b. the well-being of sellers.

Refer to Figure 7-7. What is the consumer surplus if the price is $100? a. $10,000 b. $20,000 c. $2,500 d. $5,000

c. $2,500

Bob purchases a book, and his consumer surplus is $3. If Bob is willing to pay $8 for the book, then the price of the book must be a. $8. b. $11. c. $5. d. $3.

c. $5.

Refer to Table 7-9. If there is only one unit of the good available for purchase, and if the buyers bid against each other for the right to purchase it, then the consumer surplus will be a. $0 or slightly more. b. $4 or slightly more. c. $8 or slightly less. d. $3 or slightly less.

c. $8 or slightly less.

Refer to Figure 7-15. When the price is P2, producer surplus is a. A. b. D+G. c. A+B+C. d. A+C.

c. A+B+C.

Producer surplus measures the a. costs to sellers of participating in a market. b. price that buyers are willing to pay for sellers' output of a good or service. c. benefits to sellers of participating in a market. d. benefit to sellers of producing a greater quantity of a good or service than buyers demand.

c. benefits to sellers of participating in a market.

Refer to Figure 7-19. At the equilibrium price, consumer surplus is a. $50. b. $200. c. $450. d. $100.

d. $100.

At Nick's Bakery, the cost to make a cheese danish is $1.50 per danish. As a result of selling ten danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his danishes for a. $2.00 each. b. $5.00 each. c. $0.50 each. d. $3.50 each.

d. $3.50 each.

Refer to Figure 7-24. At equilibrium, total surplus is a. $108. b. $18. c. $36. d. $54.

d. $54.

Total surplus in a market is equal to a. value to buyers - amount paid by buyers. b. producer surplus - consumer surplus. c. amount received by sellers - costs of sellers. d. consumer surplus + producer surplus.

d. consumer surplus + producer surplus.

A supply curve can be used to measure producer surplus because it reflects a. quantity supplied. b. the actions of sellers. c. the amount that will be purchased by consumers in the market. d. sellers' costs.

d. sellers' costs.

Efficiency is attained when a. consumer surplus is maximized and producer surplus is minimized. b. total surplus is maximized. c. all resources are being used. d. producer surplus is maximized.

b. total surplus is maximized.

Refer to Table 7-10. If the market price is $1,200, the producer surplus in the market is a. $500. b. $400. c. $800. d. $100.

c. $800.

Total surplus is represented by the area a. above the supply curve and up to the price. b. under the demand curve and above the price. c. between the demand and supply curves up to the point of equilibrium. d. under the supply curve and up to the price.

c. between the demand and supply curves up to the point of equilibrium.

On a graph, the area below a demand curve and above the price measures a. producer surplus .b. deadweight loss. c. consumer surplus. d. willingness to pay.

c. consumer surplus.

Welfare economics is the study of a. government welfare programs for needy people. b. how technology is best put to use in the production of goods and services. c. how the allocation of resources affects economic well-being. d. taxes and subsidies

c. how the allocation of resources affects economic well-being.

Refer to Figure 7-19. If the government imposes a price floor of $55 in this market, then total surplus will be a. $62.50 lower than it would be without the price floor. b. $100.00 higher than it would be without the price floor. c. $125.00 lower than it would be without the price floor. d. $50.00 lower than it would be without the price floor.

a. $62.50 lower than it would be without the price floor.

Refer to Figure 7-7. What happens to the consumer surplus if the price rises from $100 to $150? a. The new consumer surplus is 25 percent of the original consumer surplus. b. The new consumer surplus is half of the original consumer surplus. c. The new consumer surplus is triple the original consumer surplus. d. The new consumer surplus is double the original consumer surplus.

a. The new consumer surplus is 25 percent of the original consumer surplus.

If a consumer places a value of $20 on a particular good and if the price of the good is $25, then the a. consumer does not purchase the good. b. price of the good will rise due to market forces. c. consumer has consumer surplus of $5 if he buys the good. d. market is out of equilibrium.

a. consumer does not purchase the good.

Producer surplus is a. the amount a seller is paid minus the cost of production. b. the opportunity cost of production minus the cost of producing goods that go unsold. c. always a negative number for sellers in a competitive market. d. measured using the demand curve for a good.

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

Refer to Figure 7-3. When the price is P1, consumer surplus is a. A+B+D. b. A+B+C. c. A+B. d. A.

b. A+B+C.

Refer to Figure 7-10. Which area represents the increase in producer surplus when the price rises from P1 to P2? a. ABGD b. AHGB c. BCG d. ACH

b. AHGB

Producer surplus is the a. cost to sellers of participating in a market. b. amount a seller is paid minus the cost of production. c. area under the supply curve to the left of the amount sold. d. area between the supply and demand curves, above the equilibrium price.

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

A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it a. minimizes the level of welfare payments. b. maximizes the combined welfare of buyers and sellers. c. minimizes costs and maximizes output. d. maximizes both the total revenue for firms and the quantity supplied of the product.

b. maximizes the combined welfare of buyers and sellers.

Willingness to pay a. is the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. b. measures the value that a buyer places on a good. c. is the maximum amount a buyer is willing to pay minus the minimum amount a seller is willing to accept. d. is the amount a seller actually receives for a good minus the minimum amount the seller is willing to accept.

b. measures the value that a buyer places on a good.

Consumer surplus is a. a buyer's willingness to pay for a good plus the price of the good. b. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it. c. the amount a buyer is willing to pay for a good minus the cost of producing the good. d. the amount by which the quantity supplied of a good exceeds the quantity demanded of the good

b. the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it.

Suppose that the equilibrium price in the market for tomatoes is $3 per pound. If a law reduced the maximum legal price for tomatoes to $2 per pound, a. the resulting increase in producer surplus would be larger than any possible loss of consumer surplus. b. any possible increase in consumer surplus would be larger than the loss of producer surplus. c. the resulting increase in producer surplus would be smaller than any possible loss of consumer surplus. d. any possible increase in consumer surplus would be smaller than the loss of producer surplus.

d. any possible increase in consumer surplus would be smaller than the loss of producer surplus.

Refer to Figure 7-15. When the price falls from P2 to P1, producer surplus a. decreases by an amount equal to C. b. decreases by an amount equal to A+C. c. increases by an amount equal to A+B. d. decreases by an amount equal to A+B.

d. decreases by an amount equal to A+B.

Tomato sauce and spaghetti noodles are complementary goods. A decrease in the price of tomatoes will a. increase consumer surplus in the market for tomato sauce and decrease producer surplus in the market for spaghetti noodles. b. decrease consumer surplus in the market for tomato sauce and decrease producer surplus in the market for spaghetti noodles. b. decrease consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles. d. increase consumer surplus in the market for tomato sauce and increase producer surplus in the market for spaghetti noodles.

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