econ quiz 7

Donald produces nails at a cost of $350 per ton. If he sells the nails for $500 per ton, his producer surplus is

$150.

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

Consumer surplus decreases.

If a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will

increase producer surplus.

Economists say that a market where goods are not consumed by those valuing the goods most highly is

inefficient.

If the United States changed its laws to allow for the legal sale of a kidney, which of the following is likely to occur?

a. The price of kidneys would rise to balance supply and demand. b. The gains from trade would make both buyers and sellers better off. c. Thousands of lives would be saved. d. All of the above are correct.

When a buyer's willingness to pay for a good is equal to the price of the good, the

buyer is indifferent between buying the good and not buying it.

The particular price that results in quantity supplied being equal to quantity demanded is the best price because it

maximizes the combined welfare of buyers and sellers.

Inefficiency exists in an economy when a good is

not being consumed by buyers who value it most highly.

If the current allocation of resources in the market for wallpaper is efficient, then it must be the case that

the market for wallpaper is in equilibrium.

If the current allocation of resources in the market for hammers is inefficient, then it must be the case that

the sum of consumer surplus and producer surplus could be increased by moving to a different allocation of resources.