Econ 2000 Chapter 7 Practice

At Nick's Bakery, the cost to make a cheese danish is $1.50 per danish. As a result of selling 10 danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his danishes for Select one: a. $0.50 each. b. $5.00 each. c. $3.50 each. d. $2.00 each.

$3.50 each.

Bob purchases a book for $6, and his consumer surplus is $2. How much is Bob willing to pay for the book? Select one: a. $6 b. $8 c. $2 d. $4

$8

Refer to Figure 7-2.At the equilibrium price, consumer surplus is Select one: a. $1,600. b. $800. c. $700. d. $1,400.

$800.

Refer to Figure 7-9. At equilibrium, total surplus is represented by the area Select one: a. A+B+C+D+H+F. b. A+B+D+F. c. A+B+C+D+H+F+G+I. d. A+B+C.

A+B+C+D+H+F.

Refer to Figure 7-1. When the price is P1, consumer surplus is Select one: a. A+B+C. b. A. c. A+B+D. d. A+B.

A+B+C.

Refer to Figure 7-5.If the demand curve is D and the supply curve shifts from S' to S, what is the change in producer surplus in equilibrium? Select one: a. Producer surplus increases by $1,875. b. Producer surplus increases by $625. c. Producer surplus decreases by $625. d. Producer surplus decreases by $1,875.

Producer surplus increases by $1,875.

We can say that the allocation of resources is efficient if Select one: a. consumer surplus is maximized. b. total surplus is maximized. c. producer surplus is maximized. d. sellers' costs are minimized.

total surplus is maximized.

A seller's opportunity cost measures the Select one: a. out-of-pocket expenses to produce a good but not the value of her time. b. amount she is paid for a good minus her cost of providing it. c. consumer surplus. d. value of everything she must give up to produce a good.

value of everything she must give up to produce a good.

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 Select one: a. There is not enough information given to answer this question. b. zero. c. positive, and the consumer would purchase the product. d. negative, and the consumer would not purchase the product.

zero

Refer to Table 7-1. If the price of the product is $110, then who would be willing to purchase the product? Select one: a. Calvin, Sam, Andrew, and Lori b. Calvin and Sam c. Calvin d. Calvin, Sam, and Andrew

Calvin, Sam, and Andrew

Dallas buys strawberries, and he would be willing to pay more than he now pays. Suppose that Dallas has a change in his tastes such that he values strawberries more than before. If the market price is the same as before, then Select one: a. Dallas would be wise to buy fewer strawberries than before. b. Dallas's consumer surplus would decrease. c. Dallas's consumer surplus would increase. d. Dallas's consumer surplus would be unaffected.

Dallas's consumer surplus would increase.

The distinction between efficiency and equality can be described as follows: Select one: a. Efficiency refers to minimizing the price paid by buyers; equality refers to maximizing the gains from trade among buyers and sellers. b. Efficiency refers to maximizing the size of the pie; equality refers to distributing the pie fairly among members of society. c. Efficiency refers to maximizing the size of the pie; equality refers to producing a pie of a given size at the least possible cost. d. Efficiency refers to maximizing the number of trades among buyers and sellers; equality refers to maximizing the gains from trade among buyers and sellers.

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

The Surgeon General announces that eating chocolate increases tooth decay. As a result, the equilibrium price of chocolate Select one: a. increases, and producer surplus increases. b. increases, and producer surplus decreases. c. decreases, and producer surplus increases. d. decreases, and producer surplus decreases.

decreases, and producer surplus decreases.

A drought in California 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 Select one: a. increases, and the consumer surplus in the market for red wine increases. b. decreases, and the consumer surplus in the market for red wine decreases. c. increases, and the consumer surplus in the market for red wine decreases. d. decreases, and the consumer surplus in the market for red wine increases.

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

Suppose televisions are a normal good and buyers of televisions experience a decrease in income. As a result, consumer surplus in the television market Select one: a. may increase, decrease, or remain unchanged. b. is unchanged. c. decreases. d. increases.

may increase, decrease, or remain unchanged.

Suppose that the equilibrium price in the market for widgets is $5. If a law increased the minimum legal price for widgets to $6, producer surplus Select one: a. would necessarily decrease because the higher price would create a surplus of widgets. b. would be unaffected. c. might increase or decrease. d. would necessarily increase even if the higher price resulted in a surplus of widgets.

might increase or decrease.

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

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