Unit 4

d. All of the above are correct.

A seller's willingness to sell is: a. measured by the seller's cost of production. b. related to her supply curve, just as a buyer's willingness to buy is related to his demand curve. c. less than the price received if producer surplus is a positive number. d. All of the above are correct.

a. $64

Allen tutors in his spare time for extra income. Buyers of his service are willing to pay $40 per hour for as many hours Allen is willing to tutor. On a particular day, he is willing to tutor the first hour for $10, the second hour for $18, the third hour for $28, and the fourth hour for $40. Assume Allen is rational in deciding how many hours to tutor. His producer surplus is: a. $64. b. $40. c. $12. d. $56.

a. measures the benefit buyers receive from participating in a market.

Consumer surplus: a. measures the benefit buyers receive from participating in a market. b. is represented on a supply-demand graph by the area below the price and above the demand curve. c. is the amount a buyer pays for a good minus the amount the buyer is willing to pay for it. d. measures the benefit sellers receive from participating in a market.

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

Corn chips and potato chips are substitutes. Good weather that sharply increases the corn harvest would: a. increase consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips. b. increase consumer surplus in the market for corn chips and increase producer surplus in the market for potato chips. c. decrease consumer surplus in the market for corn chips and increase producer surplus in the market for potato chips. d. decrease consumer surplus in the market for corn chips and decrease producer surplus in the market for potato chips.

c. $150.

Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is: a. $550. b. $350. c. $150. d. $200.

b. increase consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games.

PlayStations and PlayStation games are complementary goods. A technological advance in the production of PlayStations will: a. increase consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games. b. increase consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. c. decrease consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. d. decrease consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games.

b. BCG

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

a. the marginal cost to sellers is greater than marginal value to buyers.

Refer to Figure 7-22. If 110 units of the good are bought and sold, then: a. the marginal cost to sellers is greater than marginal value to buyers. b. producer surplus is greater than consumer surplus. c. the marginal cost to sellers is equal to the marginal value to buyers. d. the marginal cost to buyers is greater than marginal value to sellers.

b. the marginal value to buyers is greater than the marginal cost to sellers.

Refer to Figure 7-22. If 40 units of the good are bought and sold, then: a. the marginal cost to sellers is equal to the marginal value to buyers. b. the marginal value to buyers is greater than the marginal cost to sellers. c. producer surplus would be greater than consumer surplus. d. the marginal cost to sellers is greater than the marginal value to buyers.

d. AFG

Refer to Figure 7-4. Which area represents consumer surplus at a price of P2? a. BDF b. ABC c. ABDG d. AFG

a. a + b.

Refer to the below diagram. Assuming equilibrium price P1, consumer surplus is represented by areas: a. a + b. b. a + b + c + d. c. c + d. d. a + c.

c. c + d.

Refer to the below diagram. Assuming equilibrium price P1, producer surplus is represented by areas: a. a + b. b. a + b + c + d. c. c + d. d. a + c.

a. maximum willingness to pay exceeds minimum acceptable price.

Refer to the below diagram. At quantity Q1: a. maximum willingness to pay exceeds minimum acceptable price. b. the sum of consumer and producer surplus is maximized. c. minimum acceptable price exceeds maximum willingness to pay. d. an efficiency loss (or deadweight loss) of a + b occurs.

b. the sum of consumer and producer surplus is maximized.

Refer to the below diagram. At quantity Q2: a. maximum willingness to pay exceeds minimum acceptable price. b. the sum of consumer and producer surplus is maximized. c. minimum acceptable price exceeds maximum willingness to pay. d. an efficiency loss (or deadweight loss) of b + d occurs.

c. minimum acceptable price exceeds maximum willingness to pay.

Refer to the below diagram. At quantity Q3: a. maximum willingness to pay exceeds minimum acceptable price. b. the sum of consumer and producer surplus is maximized. c. minimum acceptable price exceeds maximum willingness to pay. d. an efficiency loss (or deadweight loss) of a + b occurs.

c. a welfare loss (or deadweight loss) of b + d occurs

Refer to the below diagram. If actual production and consumption occur at Q1: a. efficiency is achieved. b. consumer surplus is maximized. c. a welfare loss (or deadweight loss) of b + d occurs. d. a welfare loss (or deadweight loss) of e + d occurs.

a. efficiency is achieved.

Refer to the below diagram. If actual production and consumption occur at Q2: a. efficiency is achieved. b. an efficiency loss (or deadweight loss) of a + b + c + d occurs. c. an efficiency loss (or deadweight loss) of a + c occurs. d. an efficiency loss (or deadweight loss) of e + f occurs.

b. an efficiency loss (or deadweight loss) of e + f occurs.

Refer to the below diagram. If actual production and consumption occur at Q3: a. efficiency is achieved. b. an efficiency loss (or deadweight loss) of e + f occurs. c. an efficiency loss (or deadweight loss) of a + b + c + d occurs. d. an efficiency loss (or deadweight loss) of a + c occurs.

d. a + b + c + d.

Refer to the below diagram. The area that identifies the maximum sum of consumer surplus and producer surplus is: a. a + b + c + d + e + f. b. c + d + f. c. a + b + e. d. a + b + c + d.

c. D+H+F.

Refer to the below figure. At equilibrium, producer surplus is represented by the area: ___ a. F. b. F+G. c. D+H+F. d. D+H+F+G+I.

b. is P2, and the marginal cost to sellers is P3.

Refer to the below figure. At the quantity Q2, the marginal benefit to buyers: a. and the marginal cost to sellers are both P2. b. is P2, and the marginal cost to sellers is P3. c. and the marginal cost to sellers are both P3. d. is P3, and the marginal cost to sellers is P2.

a. A

Refer to the below figure. If the price were P3, consumer surplus would be represented by the area: ___ a. A. b. A+B+C. c. D+H+F. d. A+B+C+D+H+F.

a. total surplus.

Refer to the below figure. When the price is P1, area B+C represents ________________ . a. total surplus. b. producer surplus. c. consumer surplus. d. None of the above is correct.

c. willingness to pay.

Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called: a. deadweight loss. b. consumer surplus. c. willingness to pay. d. producer surplus.

c. removes a binding price ceiling from that market.

Total surplus in a market will increase when the government: a. imposes a tax on that market. b. imposes a binding price floor on that market. c. removes a binding price ceiling from that market.